THE SUPREME COURT
[Appeal No. 308/2010]
[High Court Record No. 2005/272 S]
McKechnie J.
MacMenamin J.
Dunne J.
FIRST ACTIVE PLC
Plaintiff/Respondent
-and-
BRIAN CUNNINGHAM
Defendant/Appellant
JUDGMENT of Mr. Justice William M. McKechnie delivered on the 22nd day of February, 2018
Introduction
1. This appeal raises three distinct and relatively net points for determination by this Court. The first relates to the transfer of the business of First Active plc to Ulster Bank Ireland Limited, and the effect of that transfer on these proceedings; the second arises out of the awarding of Courts Act interest by the trial judge; and the third concerns the issue of a non-suit/direction and the principle of res judicata. Though the issues on the appeal can be simply stated, the lengthy litigation between the parties to this appeal has been anything but straightforward. In order to contextualise the submissions made, it is necessary first to set out a brief overview of the history of these complex proceedings. Each of the three issues raised will then be dealt with in turn.
Background and Procedural History
2. The within appeal arises out of a series of proceedings brought by Mr Brian Cunningham (referred to in this judgment as “the appellant”) and companies which he effectively controlled, either as a director, shareholder or otherwise (“the Cunningham Group”), against a number of parties, including First Active plc (“the respondent”), Mr Ray Jackson, the receiver appointed to various Cunningham Group companies, and Mr Bernard Duffy, who purchased certain property formerly owned by the Cunningham Group from First Active as mortgagee in possession. The proceedings raise a multiplicity of issues and claims, but in short they have their origin in a banking relationship in the course of which the respondent advanced money to the Cunningham Group over a period of time, principally for the acquisition and development of certain properties. This relationship deteriorated over time, resulting in the appointment of Mr Jackson as receiver in 2003. The Cunningham Group companies are grossly insolvent.
The Main Proceedings
3. It would unduly burden the reader if I were to set out comprehensively the entire procedural history of these cases. It will suffice at this juncture to say that the main proceedings were at trial before Clarke J. (as he then was) in the High Court for 66 days. At the end of the Cunningham Group’s evidence, First Active applied for a non-suit/direction in respect of all of the claims; I say “non-suit/direction” because Mr Cunningham submits to the Court that there is a distinction of substance between the two procedures which is of direct relevance to the third point of appeal (see paras. 65-84, infra). The Court allowed this application, subject to some limited exceptions, with the learned judge’s reasons being contained in a comprehensive written judgment delivered on the 6th March, 2009 (Moorview Developments Ltd & ors v. First Active Plc & ors [2009] IEHC 214) (“the main proceedings”).
4. Much more litigation was to follow. The respondent obtained judgment against certain of the Cunningham Group companies on foot of a counterclaim, and also a judgment against Mr Cunningham personally on foot of his capped personal guarantee for the debts of the Companies. The present appeal, and the issues outlined in para. 1, supra, arise out of those counterclaim and guarantee proceedings (referred to in this judgment as “the guarantee proceedings”), the details of which are set out at paras. 7-8, infra.
5. In a separate judgment delivered on the 5th February, 2010 (Moorview Developments Ltd & ors v. First Active Plc & ors [2010] IEHC 34), Clarke J. had determined that Mr Cunningham and the Cunningham Group were not entitled to raise, during the guarantee proceedings, those matters which had already been determined in the main proceedings; the learned judge held that such matters were res judicata and that the appellant could not therefore rely on them.
6. The appellant and the Cunningham Group brought numerous appeals against these decisions. Security for costs was granted against the appellants in respect of all bar one of the appeals, including the res judicata appeal. Such security was paid in respect of the present appeal only, and thus all others have been dismissed. No order for security for costs was made in respect of Mr Cunningham’s appeal against the subsequent decision to make him personally liable to the respondent for the costs liability of the Cunningham Group in respect of the proceedings, which appeal was heard together with the instant appeal and will be the subject of a separate judgment.
Judgment under Appeal
7. The instant appeal is against a judgment of Clarke J. dated the 9th July, 2010, (Moorview Developments Ltd & ors v. First Active Plc & ors [2010] IEHC 275, referred to as “the Guarantee Judgment”), and consequential rulings and orders dated the 29th and 30th July, 2010. Incidentally this was the thirteenth judgment arising out of the collapse of the Cunningham Group, which gives some flavour of the breadth and complexity of the procedural history to date. The learned judge found that the respondent had made out its claim on the guarantee against the appellant, and granted judgment in the sum of €1,900,000 in favour of First Active. By a subsequent order he awarded interest pursuant to the Courts Act in the sum of €824,548.20. The judgment also dealt with a counterclaim by First Active against certain of the Cunningham Group companies related to monies alleged to be due by those companies arising out of loans advanced to them by First Active; this issue was also decided in favour of the respondent.
8. Curiously, as explored below, none of the grounds of appeal before this Court arise directly out of the written judgment itself, although the point relating to Courts Act interest flows from a subsequent and related ex tempore judgment. The judgment of the 9th July, 2010, dealt in the main with the adequacy of the evidence presented on behalf of First Active as to the indebtedness of the companies in the Cunningham Group, with an issue regarding a typographical error in respect of one of the companies named in the relevant guarantee, and with other specific points urged by the appellant. All were decided in favour of the respondent. However, because those points have not been pursued by the appellant, it is not necessary to say anything further about them.
Issues on this Appeal
9. The appellant has raised three discrete issues on this appeal:
i. The first concerns the transfer in February, 2010 of part of the banking business of First Active plc to Ulster Bank Ireland Limited pursuant to the Central Bank Act 1971; it is claimed that the net effect of the resulting transfer of rights and the respondent’s failure to disclose same is that the judgment obtained in this case ought to be set aside, because the party that obtained said judgment had no interest in the matter.
ii. The second relates to the awarding by the High Court of Courts Act interest, pursuant to section 22 of the Courts Act 1981, backdated to the date of initiation of the proceedings. The appellant argues, first, that the Court had no right to award said interest, and, secondly and in the alternative, that if the Court did have such a right, it should not have exercised its discretion to do so in this case.
iii. The third issue concerns res judicata and/or issue estoppel. The appellant argues that at the hearing of the guarantee proceedings, he was precluded from raising matters that were the subject of a non-suit in the main proceedings. He contends that he has never had a chance to challenge certain evidence of the respondent and that as a non-suit does not prevent the same issue from being litigated again, he should now be afforded that chance.
10. Each of these unrelated points of appeal will be addressed individually in this judgment. As noted, only one of these issues, that relating to the awarding of Courts Act interest, can truly be said to arise out of the judgment and resulting orders under appeal. As such the respondent has contested the appellant’s right to argue the other listed matters on this appeal. These objections are addressed below, together with the respondent’s submissions on the merits of the respective points.
I. The Transfer of Part of the Business of First Active to Ulster Bank Ireland Limited
Background
11. Part III of the Central Bank Act 1971 (“the 1971 Act”) deals with “Transfers of Banks.” It sets out a special statutory mechanism for the transfer of the business and assets of a licensed bank or other financial institution. This is necessary as the same could not be achieved under a regular business/asset transfer agreement as the liabilities could not be transferred without entering into a novation with every individual customer. Thus Part III of the 1971 Act ensures the continuity of banking relationships. At the time of the transfer, section 33 of the1971 Act, which governs the approval by the Minister for Finance of the transfer of a bank, provided as follows:
“(1) Whenever the holder of a licence (in this Part referred to as the transferor) agrees to transfer, in whole or in part, to another holder of a licence (in this Part referred to as the transferee) the business to which the licence relates—
(a) the transferor and transferee may, not less than four months before the date on which the transfer is intended to take effect (in this Part referred to as the transfer date), submit to the Minister for his approval a scheme for the transfer,
(b) the transferor and transferee shall, not less than one month before the transfer date, publish notice of the transfer in at least one daily newspaper published in the State,
(c) the Minister, after consultation with the Bank, may, not less than two months before the transfer date, either approve of or decline to approve of the scheme by order,
(d) if the Minister approves of the scheme under this section, the provisions of sections 34 to 39 and 42 of this Act shall, if, and to the extent only that, the scheme so provides, have effect in relation to the transfer,
(e) the Minister may, at the request of the transferor and transferee, include in an order approving of the scheme under paragraph (c) of this subsection such incidental, consequential and supplemental provisions as he thinks appropriate for facilitating and implementing the transfer and securing that it shall be fully and effectively carried out, including provisions for substituting the name of the transferee for the transferor or otherwise adapting references to the transferor in any statute or instrument made under statute.
(2) An order under subsection (1) of this section or under this subsection may, after consultation with the Bank and with the consent of the transferor and the transferee to whom it relates, be amended by the Minister by order.”
12. On the 15th February, 2010, there was a transfer of the banking business of First Active plc to Ulster Bank Ireland Limited (referred to in the rest of this judgment as “Ulster Bank”), a related company within the Ulster Bank Group, pursuant to a scheme under section 33 of the 1971 Act. Whether all of First Active’s banking business was transferred, or only part thereof, is an issue of contention between the parties. The transfer was approved by an order of the Minister for Finance contained in S.I. 481 of 2009, on foot of a transfer arrangement entered into between First Active and Ulster Bank on the 8th October, 2009. As a consequence, Ulster Bank assumed all of the rights and obligations of First Active in respect of litigation in which First Active was involved. This transfer took place prior to the hearing in the High Court which resulted in the judgment under appeal. It is accepted by the respondent that no notification of this transfer was made to the High Court.
13. The appellant claims that the result of this transfer of rights, and the failure to disclose same, is that the judgment obtained in this case should be set aside as irregularly obtained, as the party that obtained it had no interest in the matter and the proceedings were never regularised to reflect the correct parties. The respondent, on the other hand, maintains that a mandatory and automatic substitution has been effected by section 41 of the 1971 Act and that the judgment obtained against the appellant is, as a matter of law, a judgment in favour of Ulster Bank. A summary of the parties’ submissions in support of their respective positions is set out below.
Submissions of the Appellant
14. The bulk of the appellant’s written submissions relate to this point. It is submitted in the first instance that it is clear from the terms of S.I. 481/2009 that part but not all of the business of First Active was transferred to Ulster Bank. Neither First Active nor Ulster Bank notified Mr Cunningham of the transfer, nor did they bring it to the attention of the High Court. First Active has continued to be the plaintiff/respondent for the entirety of these proceedings. No explanation of any kind has ever been given for this state of affairs, which was only discovered after the trial of the action. The S.I. was specifically addressed to First Active and Ulster Bank and they cannot claim to have been unaware of it. It is submitted that a defendant has a right to know who is claiming a right against him and on what basis; failure to disclose same can affect both the Court’s ability to determine the matter correctly and the defendant’s right to defend it effectively. The appellant points to the case of Meek v. Fleming [1961] 2 Q.B. 366 (“Meek v. Fleming”) as being illustrative of the consequences of a failure to disclose.
15. It is submitted that no application to have Ulster Bank substituted as the plaintiff was made to the High Court before or at the hearing. Such could be effected pursuant to the provisions of Order 17 of the Rules of the Superior Courts (“RSC”), or, alternatively, Order 15, Rule 13 RSC. However, this vital procedural step was never taken. It is clear from Order 15, Rule 14 that no such application can be made once judgment has been given. The appellant claims that he has a good defence to First Active’s claim, in that it lost any right to sue him under the guarantee after the transfer. The consequence of this failure to substitute is that the proceedings were, and remain, improperly constituted: it is of deep significance that the parties are correctly named and have an interest in the subject matter of the litigation. The proceedings must therefore be reconstituted and regularised before any further steps are taken. Moreover, Mr Cunningham objects to the averment in one of the respondent’s affidavits which states that both First Active and Ulster Bank are the respondents to the appeal: he maintains that the former is the sole respondent, and that the latter is not a party to the proceedings. The judgment under appeal is solely in favour of First Active.
16. The appellant refers to the respondent’s “very convenient” interpretation of section 41 of the 1971 Act (see para. 20, infra) and queries why Ulster Bank was never named as the plaintiff. Section 41 does not contain the words “as a matter of law” or “by operation of law”. Insofar as the section substitutes rights and liabilities, it is accepted that it does so by operation of law, but the appellant disputes that the procedural substitution of a party can occur “as a matter of law”: that is a matter that can only be done before a Court, in accordance with Order 17 RSC. An automatic substitution without recourse to a Court would be unworkable; for example, in the instant case affidavit evidence would be required to demonstrate whether the subject matter of the proceedings related to assets and/or liabilities that had been transferred under the agreement. If the respondent’s position is accepted, it means that litigation could be carried on for years without the other party or the Court knowing who the plaintiff or defendant was. This would have consequences for, inter alia, discovery applications, applications for security for costs, and the giving of undertakings.
17. The appellant points to the case of Ulster Bank Ireland Limited v. O’Neill (Record No. 2010/469S, reported in the Irish Times on the 23rd March, 2010) (“Ulster Bank v. O’Neill”), where proceedings originally issued in the name of First Active plc as plaintiff, but where the Commercial Court was made aware of the transfer of rights and Ulster Bank was substituted as the correct plaintiff. It is submitted that this is the correct approach and should have been adopted in this case. Moreover, it confirms that First Active and Ulster Bank were aware of the necessity of regularising such proceedings and seeking judgments in the name of Ulster Bank.
18. Mr Cunningham points out a number of alleged consequences of the failure to substitute: first, that the hearing was irregular; second, that the case was prosecuted by a party with no interest in the outcome; third, that a decree was obtained by a party with no entitlement to same; fourth, that a stay was refused on the basis of undertakings given by First Active, thereby rendering the undertaking meaningless as First Active was not in fact a party; and, fifth, that no evidence was put before the Court to confirm whether or not the within proceedings were the subject of the transfer – this is relevant as the appellant maintains that only some of the business of First Active was transferred. Finally, the appellant draws on a number of cases to illustrate the effect of a failure to substitute; those cited include Foster v. Ward [LRI] 446 Vol IX, M.R. 1881, IBRC v. Lavelle [2015] IEHC 321, IBRC v. Comer [2014] IEHC 671, Hughes v. Pump House Hotel Company Limited [1902] 2 KB 190 and Lazard Brothers and Co v. Midland Bank Limited [1933] A.C. 289. Ultimately, the appellant asks that the judgment under appeal be set aside as irregular.
Submissions of the Respondent
19. The respondent submits that the appellant’s submissions are inaccurate, meritless and cannot avail him in his attempt to avoid the consequences of the guarantee. It contests the appellant’s claim that there was only a ‘partial’ transfer, stating that there is unchallenged affidavit evidence that all of First Active’s banking business and assets did in fact transfer to Ulster Bank, as did all the rights and obligations of First Active in respect of litigation in which it was involved. Moreover, it is submitted that Mr Cunningham has been aware of the transfer since September or October, 2010 (as evidenced by email correspondence from that time) and that he has had ample time to raise any issues arising out of same. The respondent distinguishes the case of Meek v. Fleming, which concerned the deliberate concealment of the demotion of a police officer; it is claimed that there can be no suggestion of concealment in the instant case.
20. The crux of the respondent’s arguments relates to the impact of section 41 of the 1971 Act, which is quoted in full below (para. 25, infra). It is submitted that this section clearly and unambiguously provided for the immediate substitution of Ulster Bank for First Active in these proceedings. It is submitted that this automatic substitution occurred on the transfer date, notwithstanding that its effect on the proceedings was not fully adverted to until 2016. The mandatory, non-discretionary and automatic operation of section 41 supersedes any of the rules for substitution set out in the Rules of the Superior Courts, and consequently the substitution did not require any application to the Court. Moreover, any conflict between the Rules and the statutory provision would clearly require to be resolved in favour of the latter. Thus in light of the transfer and the provisions of sections 33 and 41 of the 1971 Act, it is clear that the judgments and orders obtained in these proceedings are, as a matter of law, judgments and orders made in favour of Ulster Bank.
21. The respondent disputes the appellant’s claim that it has been caused prejudice by the fact that the substitution was not brought to the Court’s attention until 2016. It is claimed that the “contrived and theoretical” consequences alleged in respect of, inter alia, discovery, security for costs and undertakings do not have any basis in reality. As regards the case of Ulster Bank v. O’Neill, it is submitted that the inadvertence which resulted in the Court not being informed of the transfer in the present case in no way impacts on the automatic substitution of Ulster Bank into these proceedings and its entitlement to judgment. Moreover, should the Court consider that an order for substitution is procedurally appropriate, the same can and should be done at this stage and would cause no prejudice to Mr Cunningham.
22. The respondent refutes the appellant’s submissions on the consequences of the failure to substitute (paras. 16 and 18, supra) and states that they demonstrate a continuing misunderstanding of the effect of the transfer and the 1971 Act. None of the propositions advanced by the appellant can assist him in avoiding his responsibilities under the guarantee. Similarly, it is submitted that the case law on the topic of substitution cannot avail the appellant and that the cases in question are distinguishable or simply have no bearing on the present proceedings.
23. In summary, the respondent submits that the appellant has requested this Court to set aside a judgment in circumstances where he had a clear liability to First Active, which liability has clearly transferred to Ulster Bank. There is no basis in law, equity or commercial logic for such an approach, nor is there any basis for impugning the judgment under appeal. Even if there were any technical merit to the appellant’s submissions, the appropriate course would be to permit a substitution at this juncture, rather than to set aside the judgment. Even if the judgment was set aside, it would then be proper to remit the matter to the High Court, where substitution would follow as a matter of course.
Decision
24. As is evident from the above summary, the appellant has deployed a great many arguments and authorities in support of his point concerning the transfer. Despite the breadth of the submissions and the number of subsidiary points made, it seems clear that section 41 of the 1971 Act is at the core of this argument. The respondent submits that this section provides for the automatic and immediate substitution of Ulster Bank for First Active in these proceedings, and consequently that no application to the High Court was required in order to complete this substitution. If this position be correct, it follows that the proceedings are properly constituted and that none of the adverse consequences alleged by the appellant would in fact apply. The appellant, for his part, denies that section 41 operates automatically, insisting that an application for a substitution would have to have been made pursuant to the Rules of the Superior Courts. As this was not done, the proceedings were improperly pursued and the judgment was irregularly obtained.
25. It is apparent, therefore, that much will turn on the proper interpretation of the statutory provision in question. Section 41 of the 1971 Act, said in the marginal note to concern the continuance of pending legal proceedings, provides as follows:
“41.—Where, immediately before the transfer date, any legal proceedings are pending to which the transferor is a party and the proceedings have reference to the business agreed to be transferred, the name of the transferee shall on the transfer date be substituted for that of the transferor and the proceedings shall not abate by reason of such substitution.” (Emphasis added)
26. The different constructions, it seems to be me, centre on the proper interpretation of the emphasised portion of the text. Undoubtedly there are different meanings that may be attributed to the word “shall”. For the respondent, the use of this word means that the process is mandatory and automatic. It leaves no uncertainty as to what is to occur or when it is to occur: no application under the Rules is necessary because the substitution has already occurred automatically as a result of the operation of the section. However, the appellant disputes that this is so, maintaining that an application for substitution under the Rules is required. Under this reading, “shall” is to be construed as a command to the parties to take action to effect the substitution, rather than indicating an unavoidable and inevitable substitution that operates independent of the taking of any procedural step by the parties.
27. This section must be viewed as being ancillary to the substantive provisions of section 33 of the 1971 Act, and in this case S.I. 481/2009, by which the business transfer was effected. Section 41 does not disturb or affect the underlying rights and/or obligations of the parties to the relevant proceedings. Its single aim is to regularise the title of extant legal proceedings for administrative purposes. In my view, effect is given to the intended purpose of the section by permitting such change to be brought about in as procedurally straightforward and simple a manner as the provision itself permits. Accordingly, despite the appellant’s arguments to the contrary, I am of the view that the proper construction of the section is that the substitution of the title of the proceedings occurs automatically. Thus without more, i.e. by automatic process, at least for the purpose of the business transaction, the substitution in respect of legal proceedings is concluded. Indeed it is not clear that the appellant disputes this interpretation, but rather maintains that an application to the Court is nonetheless required to regularise the proceedings. I cannot agree. As the substitution occurs pursuant to statute, it obviates the need for a formal application under the Rules of the Superior Courts, for of course the 1971 Act cannot be subordinated to the Rules (see, for example, Luby v. McMahon [2003] 4 I.R. 133). Thus, as a matter of substantive law the name of Ulster Bank was substituted for that of First Active as of the date of the transfer, and accordingly the subsequent judgments and orders stand to be read in favour of Ulster Bank. This is plain meaning of the section and the natural consequence of the statutory process therein described.
28. However, even if as a matter of substantive law the transfer was effected automatically by operation of section 41, it is undoubtedly the case that a situation such as occurred in this case could give rise to potential difficulties such as those outlined in paras. 16 and 18, supra, if the same is not brought to the attention of the trial judge and the record altered to reflect the new circumstances. The step which I have in mind would not require a formal application under the Rules; I am entirely satisfied that had the respondent simply notified the trial judge of the transfer, the requisite name change to the title of the proceedings could, and would have had to, have been made there and then. This ought to have been done and of itself would have been sufficient to bring the identity of the party seeking to recover on foot of the guarantee to the attention of the judge, the court registry, the appellant and those members of the public with an interest. However, this course was not followed, with the respondent attributing its failure to do so to inadvertence. Whilst acknowledging that this fact is “unfortunate”, it maintains that such failure has no consequences for the judgment so obtained.
29. As to the consequences alleged by the appellant to follow from the lack of notification (see paras. 16 and 18, supra), I would note that none of them came to pass in the instant case. The undertakings given remained fully effective and enforceable, and in any event no steps have ever been taken to rely upon their terms. No relevant issue regarding discovery or security for costs arose which was in any way affected by the transfer, much less did the appellant suffer any prejudice by reason thereof. There was a continuity of legal representation on behalf of the respondent and there is nothing to suggest that the matter would have been prosecuted differently in the name of Ulster Bank. In sum, the appellant is in no worse a position by reason of the transfer and cannot claim to have been adversely affected by it. As a result, I would not permit the appellant to rely on these theoretical but not realised consequences of the transfer as a method to set aside the Guarantee Judgment. Given this conclusion, it is quite unnecessary to consider the potentially complex question of what might legally have followed if in fact any one or more of the examples given had in fact occurred.
30. Finally, in relation to the suggestion that the within proceedings may not have been included within the transfer, the affidavit evidence put before this Court on behalf of the respondent was to the effect that all of the banking business and assets of First Active did in fact transfer to Ulster Bank, which latter entity also “assumed all of the rights and obligations of First Active in respect of litigation in which First Active was involved.” This, naturally, included the instant proceedings. Such evidence has been put in issue by the appellant but not otherwise challenged; in the absence of a challenge by contrary evidence, the Court must proceed as though it is correct. Accordingly, there is no substance to the submission that these proceedings may not have been captured by the transfer, and thus this does not enable the appellant to escape the consequences of the Guarantee Judgment.
31. The issue remains as to what, if anything, can or should now be done so that the title of the proceedings may reflect the correct name of the plaintiff/respondent on the public record.
32. At the hearing of this appeal, counsel for the respondent repeated a submission first made in writing, which was that any required substitution could be made by this Court. It is true, as pointed out by the appellant, that Order 15, Rule 14 RSC permits the substitution of a plaintiff only before or at the trial of the action, and therefore the same cannot be done when judgment has been delivered. However, as stated above (para. 27, supra), the automatic statutory substitution envisaged by section 41 of the 1971 Act operates external to the Rules and does not require any formal application to be made thereunder; indeed, as also pointed out, the requisite change should be effected by the trial judge simply upon notification of the transfer. If this be correct, as I believe it to be, it follows that any necessary amendment to the title of the proceedings to reflect the provisions of that section can also be made by this Court: the powers of the Supreme Court on appeal are set out in Order 58, Rule 29 RSC, which provides that, subject to the provisions of the Constitution and of statute, this Court (a) has on appeal and may exercise or perform all the powers and duties of the court below, and (b) may give any judgment and make any order which ought to have been made and may make any further or other order as the case requires. Accordingly, I will substitute the name of Ulster Bank for First Active. For the reasons above explained, the failure to make this procedural amendment prior to this stage does not have the consequences claimed by the appellant, and this ground of appeal must be dismissed.
II. The Awarding of Courts Act Interest in this Case
33. Section 22 of the Courts Act 1981 (“the 1981 Act”) gives a court discretion to award interest in respect of the period between the accrual of a cause of action and the date of judgment. It reads as follows:
(a) shall authorise the giving of interest on interest, or
(b) shall apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise, or
(c) shall affect any damages recoverable for the dishonour of a bill of exchange, or
(d) shall authorise the giving of interest in respect of a period before the passing of this Act, or
(e) shall authorise the giving of interest on damages for personal injuries, or in respect of a person’s death, in so far as the damages are in respect of—
“damages for personal injuries” includes damages for personal injuries arising out of a contract;
“pecuniary loss” means loss in money or money’s worth, whether by parting with what one has or by not getting what one might get;
“personal injuries” includes any disease and any impairment of a person's physical or mental condition;
“proceedings” includes proceedings to which the State or a State authority (within the meaning of the Act of 1961) is a party.”
34. This issue arises not from the judgment of the 9th July, 2010, but instead from an application for interest which was made on the 29th July, 2010. An email setting out the interest claimed had been sent to the appellant on the 28th July. Although the appellant sought an adjournment (see paras. 38, 44, 48 and 49, infra), the learned judge refused that application and proceeded to award €824,548.20 in Courts Act interest against the appellant, being the interest due at the rate of 8% on the principal sum of €1.9 million from the date of institution of proceedings to the date of judgment. The relevant ex tempore decision was made on the 29th July, 2010, with the resulting orders being dated the 29th and 30th July, 2010.
Submissions of the Appellant
35. The appellant contests the awarding by the trial judge of Courts Act interest backdated to the date of institution of the proceedings. He submits that it is apparent from the wording of section 22(2)(b) of the 1981 Act that the Court had no right to award Courts Act interest against him. The appellant guaranteed the debts of some companies in the Cunningham Group. He is not being pursued for personal debt that he borrowed, but rather as guarantor for the companies. The debt of those companies accrued interest by contractual agreement. Section 22(2)(b) provides that nothing in section 22(1) shall apply “in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise”. It is submitted that the fact that no interest accrued as part of the recourse available against the appellant is irrelevant; the Court must look to the debt itself to determine whether it is eligible for Courts Act interest, and here it is not. Moreover, the appellant’s guarantee was explicitly capped at a fixed sum.
36. Without prejudice to the aforegoing argument, the appellant submits that if the trial court did have the right to impose interest, then its discretion should not have been so exercised in this case. Courts Act interest does not follow as of right, and the decision of whether or not to apply it is a delicate balancing act, given that it can amount to a punitive measure. Although the Court cannot alter the rate at which interest accrues, it does have discretion as to the portion of the sum on which interest is awarded, and the period for which it is awarded. Here, it is submitted that the rate of 8% is a punitive one, that it is utterly unrealistic relative to the marketplace, and that it can result in windfall profits for the recipient. The appellant points to the decision in Barry v. HSE [2015] IEHC 791, where at paras. 139-140 Barr J. declined to award Courts Act interest on special damages. It is submitted that the courts must be alive to the possibility of unjustly enriching a plaintiff.
37. The appellant submits that if the companies in the Cunningham Group had won their proceedings, it is unlikely that the guarantee would ever have been called on, as the primary debt would have been obviated by the result. That guarantee could not properly be enforced until these proceedings had been decided. As there was litigation in being which could have absolved the primary debtor of liability, the High Court ought to have exercised its discretion not to award interest from the date of the beginning of proceedings but instead, at worst, from the date of the determination of the proceedings.
38. Mr Cunningham also makes an argument based on the lack of opportunity to make a proper submission on the awarding of Courts Act interest. On the 29th July, 2010, Junior Counsel for the appellant requested a two-week adjournment of the interest matter, stating that he was not prepared to address the issue, that he would like to make more substantive submissions on the point, and that the appellant intended to oppose the awarding of interest from the initiation of proceedings. As above noted, this application was refused. The appellant points to a number of circumstances which he says render this refusal to grant an adjournment a breach of fair procedures; these include the quantum of the interest relative to the initial judgment, the fact that relevant matters were already assigned further court time, and the fact that his Senior Counsel was an English Queen’s Counsel living abroad and that he was therefore deprived of the opportunity of said counsel making submissions on the matter. In light of those and other nominated circumstances, the appellant submits that the trial judge improperly exercised his discretion to refuse the adjournment and that the interest awarded should be set aside.
39. Finally, the appellant disputes Clarke J.’s interpretation of Mellowhide Products Ltd v. Barry Agencies Ltd [1983] I.L.R.M. 152 (“Mellowhide”) to the effect that there is a presumption in commercial cases that Courts Act interest will be applied. The appellant submits that the Mellowhide position is more nuanced and distinguishes that case on a number of bases: both parties in Mellowhide were limited companies; the debt arose in the ordinary course of business between the actual debtor and the actual creditor; it was a default judgment, and the company in question effectively ignored the court; and there were very high interest rates at the time, which do not apply to the present case. The appellant points out that although he was a substantial shareholder and director of the companies in the Cunningham Group, he came before the court as a natural person and should have been treated as such rather than as a commercial entity.
Submissions of the Respondent
40. As regards the appellant’s submissions in respect of section 22(2)(b) of the 1981 Act and the High Court’s entitlement to award interest in this case, the respondent submits that no such argument was contained in the grounds of appeal, nor was it raised at the hearing of the action. Accordingly, it is submitted that this Court should not entertain such submission at this stage.
41. Without prejudice to that objection, the respondent submits that section 22(2)(b) cannot have the consequences claimed by the appellant. It is directed towards ensuring that a pre-existing right to interest is not supplanted by an award of discretionary interest. The reference in section 22(1) to “the payment by any person” can only mean the Order for judgment against the appellant on foot of the guarantee; there is no other interest payable as of right arising vis-à-vis the guarantee. The interest arrangements in the loan agreements between the respondent and Mr Cunningham’s companies are not relevant. It is further submitted that the fact that the appellant’s guarantee was explicitly capped at a fixed sum is not relevant to this issue. If the same was accepted, it would undermine the ability of a court to make provision for the delay experienced in securing judgment, which is a central purpose of section 22.
42. In relation to the exercise of the Court’s discretion in awarding interest, the respondent relies on the fundamental principle that this Court should not interfere with a High Court decision provided it is within the limits of reasonable discretion. That principle resonates particularly strongly here, as the trial judge was in a unique position to exercise his discretion given that he had heard and determined all of the Cunningham proceedings and dealt with virtually all of the associated case management. It is submitted that the learned judge’s approach was in line with common practice in the High Court, and especially apt in light of the fact that the appellant was both guarantor of the debts and the driving force behind the litigation which led to the delay in the respondent securing judgment on foot of the guarantee. The trial judge expressly acknowledged the relevance of the appellant having had carriage and control of the proceedings on the decision to award interest from the commencement of the proceedings.
43. It is submitted that although the learned judge did refer to the presumption arising out of Mellowhide, he also expressly stated that an award of interest should not be automatic, but rather that it is a matter of discretion to be exercised based on the particular facts and context of the case; here, Clarke J. was uniquely well placed to assess the overall nature of the litigation for such purposes. Moreover, his characterisation of the proceedings as commercial in nature is unimpeachable. It is also submitted that any argument based on unjust enrichment is unsustainable in light of, inter alia, the fact that the interest rate is set out in statute and the fact that the respondent is owed large, irrecoverable sums by the Cunningham Group.
44. Finally, it is submitted that it was entirely proper for the Court to deal with the question of Courts Act interest at the hearing of the 29th July, 2010. On the 26th July, counsel for the respondent had requested that the matter be listed for hearing. Interest pursuant to statute had been sought in the summons and the figure itself was not the subject of any controversy. The appellant received clear notice by email that an application would be made for such interest for the period from the commencement of the proceedings. The appellant had an opportunity to respond and was represented by counsel, who not only sought an adjournment but also made submissions on the merits. The High Court specifically addressed the matter of alleged procedural unfairness, explaining that it is common practice for parties to apply for interest and that it is something which the other side should be in a position to deal with. It is submitted that the learned judge acted within the limits of his discretion and that the decision should not be interfered with.
Decision
45. Prior to the enactment of section 22 of the Courts Act 1981, the only statutory provisions which dealt with the question of interest were those contained in section 26 of the Debtors (Ireland) Act 1840 (“the 1840 Act”). That section applied, by operation of law, a rate of interest which attached to any judgment, and, under section 27 of that Act, inter alia, to any decree or order of the Court of Equity. The rate was that as standing from time to time in the section, which, incidentally, at the date of is enactment, was four pounds, per centum per annum. There were no other provisions of relevance, nor were there any equitable principles of general application governing the award of court interest. That statutory position continues to apply, with the rate now under the statutory control of the Minister for Justice, pursuant to section 22 of the 1981 Act.
46. As will be noted these measures deal with interest on a ‘judgment debt’. They have no application to the awarding of interest for any period prior to the date of pronouncement, nor did the common law make any provision for this period. In the realisation that considerable delay could arise between the date upon which a cause of action accrued and the date of judgment, the Oireachtas intervened in the form of section 22 of the Courts Act 1981. It is that provision which is at the centre of the appellant’s argument on this aspect of his appeal.
47. Section 22 of the 1981 Act is set out in full at para. 33, supra. As can be seen therefrom, the provision would appear to cover any proceedings which have as their subject matter the obtaining of a monetary judgment. As such, at least presumptively, it covers the chose-in-action which First Active sought to enforce in the guarantee proceedings. Such a conclusion, however, is subject to the exceptions outlined in subsection (2) of the section, with that set out at subsection (2)(b) being the only circumstance of potential relevance. This is because the appellant asserts that these proceedings come within this exception and, consequently, at the level of principle, section 22 has no application to the judgment debt so obtained.
48. Before dealing with the substance of this submission it would be convenient at this stage to dispose of a related argument made by Mr Cunningham. I refer to the point concerning the alleged breach of fair procedures, namely, that the appellant was denied an adjournment and therefore deprived of the opportunity to make full submissions on the awarding of interest. I cannot accept that there was any procedural unfairness in the manner in which the matter of interest, or the adjournment application, was dealt with by Clarke J. Courts Act interest was prayed for in the respondent’s summary summons, and so the matter cannot seriously be claimed to have taken the appellant by surprise – all the more so given that an application for interest frequently, but not inevitably, follows as a matter of routine when judgment is awarded in a case of this nature. It is true that Mr Cunningham received only one day’s notice of the amount claimed, was deprived of the opportunity of having his Queen’s Counsel, based in England, make submissions, and that time had already been set aside in November, 2010 to address residual matters in the case. Such factors certainly could have supported an adjournment. However, it is also fair to point out that the appellant was represented at the hearing by his Junior Counsel, who did make submissions on the merits of the point. The matter was considered by Clarke J., who took into account all of the circumstances of the case, said circumstances being uniquely familiar to the learned judge, and gave a reasoned ruling for his decision not to accede to the application. That decision was plainly heavily influenced by the duration of the proceedings up to that point, and by his desire to avoid putting a further matter back to yet another date.
49. As accepted by the appellant, it was a matter for the exercise of the trial judge’s discretion whether or not to grant the requested adjournment. Even if some of the factors urged by the appellant would suggest that an adjournment may have been appropriate, this alone would not be sufficient for this Court to interfere with the judge’s discretion. An appellate court will not intervene merely because its members might have been minded to exercise their discretion differently; such will follow only if the judge exceeds the permissible limits of his discretion. For the reasons given in the preceding paragraph, the trial judge could have exercised his discretion either way; the decision to refuse the adjournment was one which he was entitled to make, and certainly it does not require correction by this Court. In any event, I do not believe that the decision not to grant the adjournment caused any prejudice to the appellant as, for the reasons outlined below, I am satisfied that he cannot prevail on the substance of any of his arguments on the point regarding Courts Act interest.
50. Returning to appellant’s submissions regarding section 22(2)(b) of the 1981 Act, it is not altogether easy to fully understand the basis of his assertion in this regard. If one should be guided, in the first instance, by the wording of the statutory exclusion relied upon, it seems to be said, first, that interest is payable on the guaranteed amount as of right, sourced on a basis external to section 22 of the 1981 Act. Secondly, it is suggested that the judgment entered was in respect of the company’s debts and not those of Mr. Cunningham personally. Thirdly, it is submitted that the guarantor’s liability has been capped under the parties’ arrangements. I will deal with each of these points in turn.
51. The grounds so advanced involve a consideration as to whether interest could be imposed on the capped level of the guarantee liability of €1.9m. Paragraph 104 of the appellant’s submissions states that “Mr Cunningham guaranteed the debts of some of the Companies. He is not being pursued for personal debt that he borrowed, but as guarantor for the companies. The debt of the companies accrued interest by contractual agreement.” It is further stated at para. 106 that “the fact that no interest accrued as part of the recourse available against Mr. Cunningham is irrelevant. The court must look to the debt itself to determine whether it is eligible for Courts Act interest. In this case it is not”. From the respondent’s viewpoint, it is said at para. 69 of their submissions that “Courts Act interest is a discretionary measure that is made available where interest has not already been provided for. The reference in section 22(1) to the court ordering ‘the payment by any person’ can only mean in this case the order for judgment against Mr. Cunningham and further the guarantee. In this case there is no interest payable as of right arising vis-à-vis the guarantee. The interest arrangements in the loan agreements between the respondent and Mr. Cunningham’s companies are simply not relevant”.
52. In any surety situation there are at least three parties involved, and most probably at least two contractual arrangements. The first such contract is that between the creditor and the principal debtor, on whom the primary obligation rests to discharge the incurred liability and to perform and fulfil any terms and conditions attendant on the facilities given. In the vast majority of cases it is only where default has been made on these obligations that recourse becomes necessary to the second contractual arrangement, which, although part of the overall transaction, is legally separate and distinct from the arrangements first mentioned. When demand is made under a guarantee, the rights of the creditor and the obligations of the guarantor are to be found solely within that contractual setting. In such circumstances, the terms and conditions of the provisions first mentioned are not relevant. Accordingly, whatever may have been the requirement of the principal debtor, including any obligation for the payment of interest, such cannot be imputed to the guarantor unless the same or comparable provisions are contained in the guarantee document.
53. It is true in one sense that if the companies had not defaulted on their contractual relationship with First Active, or, more accurately, if they had fulfilled the conditions of that arrangement, there could not have been any call on the guarantee executed by Mr. Cunningham. It therefore goes without saying that his liability could only have been triggered by the act or omission, in this case the default, by the company in its repayment obligations. That, however, is the only extent to which it can be said that that company’s debts feed into the guarantee proceedings. Thus the interest provisions in the underlying loan arrangement between the companies and the respondent cannot be said to be of continuing relevance in respect of the guarantee.
54. Once such default had taken place, in respect of which there is no dispute, Mr. Cunningham had a personal liability, independent of that of the companies, to First Active to honour the terms of his guarantee. The Summary Summons taken to that end was not in relation to the company’s debts but rather in relation to Mr. Cunningham’s commitment to pay up to €1.9m if in fact there was a default, and if the amount thereof was equal to or exceeded that sum. This was a primary liability, personal to Mr. Cunningham, and in the relevant legal sense was entirely individual to him as a guarantor. Consequently, this point advanced in support of this aspect of the appeal cannot succeed.
55. Finally, the fact that his liability under the guarantee was capped has no legal bearing whatsoever on the application of section 22 of the Courts Act 1981 or otherwise. Consequently, none of these matters have any disabling effect on the availability of interest under that section.
56. The real essence of the submission on this point relates to the exercise of the court’s discretion under section 22 of the 1981 Act. In this regard Mr. Cunningham has made several points, but in reality all can be condensed into a general argument, which can be described as follows: the rate of 8% as applying to section 22 of the 1981 Act is penal or punitive in nature and results in over compensation to First Active or, as was also put, creates a windfall or unjust enrichment in favour of the respondent or otherwise confers on it an unjustified profit. Moreover, he says it is designed to penalise him, and certainly has that effect. With respect, I believe that the submission regarding penalty clauses is misconceived.
57. The purpose of section 22 of the 1981 Act was to remedy a void which had the capacity of creating a major injustice to a successful plaintiff who, as the law stood prior to its enactment, may not have been be in a position to recover his full loss even if completely successful at trial. As indicated, there was no mechanism by which he could have been compensated for being out of his money between the cause of action and the date of judgment. That period inevitably would vary from case to case, but in virtually all situations it had the potential of being substantial. Therefore, awarding interest on the judgment debt only would fall significantly short of satisfying the full loss, the recovery of which should be inherent or intrinsic in a successful judgment decree. As the discretionary nature of the section shows, it was never intended to over-compensate a plaintiff or provide him with a sum in excess of the true loss; equally, it was never intended to punish or penalise a defendant or be “oppressive” to him, in a legal sense. Its simple purpose was to equalise the position as if the default, howsoever arising, had not occurred. Whilst the rate is fixed, I am satisfied that the other elements of the section are such that in any given case the court can, by way of adjustment, ensure that neither side is affected by its operation in any of the ways above described.
58. There is no doubt but that the courts have both the power and the jurisdiction to refuse to enforce clauses which, by the appropriate principles of law, are accurately described as penalty clauses. In the recent case of Launceston Property Finance Limited v. Burke [2017] IESC 62, I reviewed these principles at some length. A brief reference to a few salient points made in that judgment will be sufficient. These are as follows:
(i) The starting position in any assessment of the law relating to penalty clauses remain the principles set out in a speech of Lord Dunedin in Dunlop Pneumatic Tyre Company Ltd v. New Garage & Motor Company Ltd [1915] AC 79, which have been endorsed on many occasions in this jurisdiction. One such case is Irish Telephone Rentals v. I.C.S. Building Society [1992] 2 I.R. 525, where reference was made to the various rules which have been established so as to decide what sum is truly a penalty, and therefore unenforceable, and what is a genuine pre-estimate, which is enforceable. See also Durkan New Homes v. The Minister for the Environment, Heritage & Local Government [2014] 2 I.R. 440, and ACC Bank Plc v. Friends First Managed Pensions Fund Limited & Ors [2012] IEHC 435.
(ii) In the recent past the test or yardstick for distinguishing clauses which are penal, on the one hand, and compensatory, on the other, has been reformulated by the UK Supreme Court in its judgment in Cavendish Square Holding BV v. Talal El Makdessi; ParkingEye Ltd. v. Beavis [2016] AC 1172. That reformulation was subsequently considered in this jurisdiction by Haughton J. in Sheehan v. Breccia & Ors [2016] IEHC 67. For reasons which the learned judge described as being based on “judicial comity”, he did not find it necessary to definitively state his position on this reformulation. Whilst he saw some merit in what the UK Supreme Court had stated, he preferred to leave the re-examination of the historical approach in this jurisdiction to an appellate court.
(iii) Accordingly, subject to that caveat, the law in this jurisdiction would appear to continue to be principally based on the Dunlop Pneumatic Tyre Company case.
59. These principles, however, apply only to contractual settings, typically by way of obligations accepted by parties as part of some arrangement, transaction, or business or commercial dealings. That is not the situation with regard to the rate as applying to court interest. The rate, in whatever amount it might stand at any given time, is set by ministerial order made by statutory instrument under delegated power conferred by the Oireachtas, i.e. section 22 of the 1981 Act. It is entirely external to personal arrangements between private parties. Accordingly, the principles as set out in Launceston could not apply. It seems therefore that in the absence of any ultra vires or indeed constitutional challenge to the S.I. in question, or the parent statutory provision, the section is presumptively constitutionally compliant and, accordingly, the court is obliged, if it is otherwise minded to exercise its discretion under the section, to apply that rate. It had no discretion in such regard. It was either 8% or not at all. Whilst the invocation of the section is in an overall sense said to be “discretionary”, a term I will come back to in a moment, and whilst many aspects of its detail are capable of judicial control, the one fixed element of its operation is the rate. Therefore, in these circumstances I cannot accept that any grounds have been advanced to suggest that the rate, as such, and of itself, is capable of being characterised in the manner which Mr. Cunningham has suggested. This point therefore has no substance.
60. Before leaving this issue, however, I should also refer to an assertion by Mr. Cunningham that the rate as specified bears no relationship to the price or cost of credit. This may or may not be so, and in the absence of evidence I would not be in a position to comment. However, it is noteworthy that in perhaps the first case of significance dealing with section 22 of the 1981 Act, namely Mellowhide Products Ltd v. Barry Agencies Ltd [1983] I.L.R.M. 152 (“Mellowhide”), Finlay P. noted that at the time invested money could attract interest rates higher than the figure of 11% which was then standing in section 26 of the 1840 Act. Incidentally, as of 2017 that figure stands at 2%. As the Minister is given a discretion to alter that rate, it must be presumed that he keeps abreast of market conditions and prevailing trends, as he is statutorily obliged to do, and that he will alter or change that rate, either upwards or downwards, when he considers it appropriate to do so.
61. Whilst there have been a number of cases dealing with section 22, very little has been written about how or in what circumstances the discretionary aspect of the section should be applied. The most recent attempt to address this deficit is the decision of the Court of Appeal in Reaney & Ors v. Interlink Ireland Limited [2016] IECA 238. That judgment is presently under appeal to this Court and therefore I do not propose to discuss it at any length, save to point out that Finlay Geoghegan J., in her judgment for the Court, referred to her earlier judgment in ESL Consulting Services Limited v. Verizon (Ireland) Limited [2010] 2 IR 426 and to the decision of McCracken J., then in the High Court, in Concorde Engineering Company Limited v. Bus Átha Cliath [1995] 3 I.R. 212. Before drawing on those cases and suggesting some of the factors which may influence the exercise of that discretion, could I refer back once more to Mellowhide, where Finlay P., made the following general remark at p. 155:
This comment probably formed the basis for the statement of McCracken J. in Concorde to the effect that “[t]here is authority that in what I might call a purely commercial case, interest should as a general rule be awarded”. It should not be thought, however, that section 22 is confined to such cases. By its clear and express wording, that is not the situation. Subject to the correct exercise of the court’s discretion, it can apply, as I have previously stated, to any monetary proceedings.
62. The following factors may be relevant to the exercise of the court’s discretion, either in the granting of interest per se or in respect of the period for which interest may be appropriate:
• The nature of the case
• The reasons why the debt was not discharged at an earlier date
• The conduct of each party to the litigation
• The reason for the passage of time or delay in the processing of the litigation
• The absence of any contractual clause dealing with interest in circumstances where its existence might be expected
• The desire to achieve full restoration, but no more, for the judgment creditor
• The avoidance of penalising the judgment debtor
These are but examples of matters that may be relevant in determining how the section may be appropriately utilised so as to achieve just compensation for the successful party. As the issue does not arise on the facts and was therefore not argued, I make no comment on what the situation might be regarding Courts Act interest where there is an express clause ruling out contractual interest.
63. In this case the learned judge was uniquely well placed to assess the entirety of the circumstances of these complicated and protracted proceedings. Whilst his familiarity with this litigation does not place his exercise of discretion beyond reproach, it nonetheless rightly means that it must be accorded significant weight. In any event, the learned judge did not award interest automatically or as of right, but only did so after careful analysis, having heard both parties and having outlined his reasons therefor. Evidently he was unimpressed with the respondent’s conduct of the overall litigation and the reasons advanced as to why the debt had not been discharged earlier. Whilst it is undoubtedly true that even having decided to operate section 22, Clarke J. could have specified a later commencement date or a different period or periods for which the rate would apply, nonetheless it cannot be said that what was ultimately ordered was outside the parameters of the undoubted discretion vested in the trial judge with regard to the operation of this section.
64. I would moreover reject the appellant’s submission that the interest awarded amounts to overcompensation of the respondent. The respondent has for many years now been owed large sums by companies in the Cunningham Group and has been unsuccessful in recovering same. Furthermore, the sum of €824,548.20 was not arrived at by chance; such is simply the amount that results when the statutory interest rate is applied from the date of the initiation of the proceedings, something which, as just analysed, the trial judge was well within his rights to do. I therefore cannot accept that it in any way constitutes an unreasonable windfall for the respondent. Consequently, this ground of appeal must be rejected.
III. The Non-Suit/Res Judicata Issue
65. Some further background, beyond that set out above, is needed in order to contextualise the manner in which this ground of appeal was advanced, as it does not arise out of the judgment and consequential orders which are the direct subject matter of this appeal (the guarantee proceedings), but rather from the judgment in the main proceedings delivered on the 6th March, 2009 ([2009] IEHC 214). In that judgment, Clarke J. concluded, following a sixty-five day trial, that, with certain exceptions not relevant, each of the questions which were then at trial was properly the subject of a non-suit/direction. Some of the issues in the linked proceedings, including the within matter, were left over for a further hearing.
66. During preparation for the trial of these linked proceedings, it became apparent that the appellant wished to revisit certain of the matters dealt with in the judgment of the 6th March, 2009. The respondent raised a preliminary objection questioning whether this was permissible. In a judgment delivered on the 5th February, 2010, Clarke J. agreed with the respondent’s objection. The High Court thus made an order to the effect that the matters which were the subject of the non-suit were binding on the parties in the linked proceedings, including these proceedings. The appellant brought an appeal against that decision to this Court. That appeal, however, was dismissed in circumstances where security for costs was ordered but not provided. Accordingly, at the hearing of the guarantee proceedings, the appellant was precluded from raising matters that were the subject of a non-suit in the main proceedings. That issue, which was decided against Mr Cunningham, is the subject of the present appeal. However, as part of this appeal, the appellant is trying to re-litigate those issues which the February, 2010 judgment had precluded him from arguing in the guarantee proceedings; in effect, he is attempting to further appeal from the February, 2010 decision, notwithstanding that his original appeal against such decision was dismissed.
Submissions of the Appellant
67. The appellant submits that Irish law continues to recognise a difference between a direction and a non-suit, in that the latter does not prevent the same issue from being litigated again. The appellant does not seek to bring a new action in relation to the issues in question, but merely to raise them in his defence; it is his case that he was never permitted to cross-examine the respondent’s witnesses on those issues, and that he now wishes to challenge their evidence. Denying him this opportunity was a breach of natural justice and fair procedures.
68. It is submitted, per O’Donovan v. Southern Health Board [2001] 3 I.R. 385 (“O’Donovan v. Southern Health Board”) that the courts strongly resist any attempt to intermeddle the concepts of a non-suit and a direction. The distinction is still evident in the differing tests used where, at the end of the plaintiff’s case, the defendant wishes to go into evidence, and where he does not. There were two species of non-suit: one was a right of a plaintiff to withdraw his claim, and the other a right of a court to order the withdrawal of a claim. Traditionally, a non-suit did not give rise to res judicata, and the claim could be brought again. A non-suit was withdrawn from the jury, whereas a direction went to the jury, but with a fixed outcome. It is submitted that this distinction exists to the present day; whilst a plaintiff’s right to discontinue his claim has been replaced and codified by the Rules of the Superior Courts, the courts’ right to order a withdrawal remains extant.
69. The appellant refers to Posner v. Moynes (1881) 7 QBD 329, where it was said that a non-suit at common law “decided nothing as regard the matters in dispute, but merely got rid of the pending action, leaving the plaintiff at liberty to begin de novo”. R. v. Machen [1849] 14 Q.B. 74 and McGregor v. Telford [1915] 3 K.B. 237 are said to be to the same effect. By contrast, where a matter has been dismissed it cannot be brought again. Although it is accepted that the right of a plaintiff to elect for a non-suit has been replaced by discontinuance, it is submitted that the effect of non-suit in Ireland is the same as it was in England under the common law before the Judicature Act 1873: there is no res judicata and a plaintiff may bring fresh proceedings. This in turn must mean that he is free to raise such issues as a defence in separate proceedings.
70. The appellant points out that it was the respondent that requested a non-suit, and presumably for tactical reasons. It must now accept the consequences of that move, one of which is that there is no res judicata; otherwise, it seeks the advantages of both a non-suit and a direction, without the disadvantages of either. Moreover, it is pointed out that it was the primary debtor that was non-suited, but it is a guarantor seeking to re-litigate the same issues. To deny him this opportunity would be entirely unfair.
Submissions of the Respondent
71. The respondent raises a preliminary point regarding the appellant’s right to argue this point. Although the Notice of Appeal does refer to the res judicata issue, properly speaking it does not form part of the within appeal, which is against the judgment and orders of the 29th and 30th July, 2010, in which the res judicata point was not raised. That issue arises out of the judgment and order of the 5th February, 2010; that was the subject of a separate appeal which has since been dismissed. Accordingly, the appellant is not entitled to raise the res judicata issue and his appeal on this ground must fail.
72. Notwithstanding this preliminary objection, the respondent has also made submissions on the merits of the res judicata point. It describes Mr Cunningham’s central argument as “a remarkable one [which] essentially seeks to set at nought sixty-five days of hearing before the High Court, during which time the plaintiff called evidence from a large number of witnesses and made lengthy submissions, pursuing every legal avenue open to it, and that Court’s detailed and reasoned decision on the merits.”
73. The respondent notes that the appellant’s submissions contain virtually no engagement with the detailed and reasoned judgment of Clarke J. on this very issue, delivered on the 5th February, 2010. First Active’s submissions on this point not surprisingly rely in the main on that same judgment of Clarke J., with the respondent content to echo the reasoning and conclusions reached by the learned judge. This analysis is further explored below. It is noted that in addition to dismissing the argument that there is a distinction between a dismissal and a direction, the learned judge also went further and held that the appellant was not entitled to rely on any such purported distinction in circumstances where no submission regarding any such distinction was made at the time of the respondent’s application. Finally, although the appellant claims to be in a different position to the companies in the Cunningham Group as regards the res judicata issue, the respondent disputes that this is so. There is no basis for claiming that the decision should not equally bind Mr Cunningham, who was the prime instructing and moving party behind each of the corporate plaintiffs in the main proceedings. Thus, as the judgment of the 6th March, 2009, is a judgment on the merits, the principle of res judicata applies and, accordingly, the appellant’s appeal on this point should be dismissed.
Decision
74. Although this point was not pressed in oral argument, the Court will nonetheless address it in brief in light of the parties’ written submissions on the issue. It is clear that this ground of appeal must fail. There are several reasons why this is so. As pointed out by the respondent, it is not clear that this point can be entertained on this appeal at all. The res judicata issue arises out of the judgment of the 5th February, 2010; it is the judgment of the 9th July, 2010, and consequential rulings and orders which are presently under appeal. Moreover, an appeal against the decision of the 5th February, 2010, was in fact lodged, but was dismissed for failure to provide security for costs. It does not therefore seem to me to be appropriate that the within appeal should be used as a backdoor by which the appellant can mount an appeal against the earlier decision, when said appeal has already been dismissed by the Court. That of itself would dispose of this point of appeal.
75. In any event, even if the Court were minded to address the issue on the merits, its correct resolution could not avail the appellant. It is worth noting that the appellant’s written submissions contain practically no engagement with the comprehensive and detailed judgment of Clarke J. of the 5th February, 2010 ([2010] IEHC 34). The learned judge addressed at length the history and origins of the distinct procedural tools of non-suit and direction; their development and the subsequent abolition of the non-suit as originally understood; and their meaning in the modern context. He then went further and addressed the inherent illogicality underlying the submission by the appellant that such a distinction remains extant. The appellant’s submissions on this appeal are just a rehash of the various points that were rejected by the High Court, without any attempt to dispute the reasoning deployed to do so. The authorities that have been cited to this Court are virtually the same as those that were considered in the court below; no attempt has been made to draw attention to different case law or to highlight additional materials. In sum, the appellant has relied entirely on the same arguments that were comprehensively examined and found to be incorrect, without in any way demonstrating, or even attempting to demonstrate, how the learned judge could be said to have fallen into error.
76. It seems to me that Clarke J. was correct in his analysis. As stated by the learned judge, whilst it appears that there was once a distinction between a non-suit and a direction, it is now the case that the right of a plaintiff to be non-suited has been abolished and that a discontinuance represents a complete code (see, for example, Smyth v. Tunney [2009] 3 IR 322). Indeed this particular point seems to be accepted by both parties. Where the appellant disagrees with the trial judge is in respect of the other form of court-ordered non-suit. However, as emerges from the judgment of the High Court, this “compulsory” non-suit has likewise been abolished (see White v. Spendlove [1942] I.R. 224, following Fox v. Star Newspaper Co. [1898]1 Q.B. 636). In White, Murnaghan J., who was in the majority, stated as follows at p. 239 of the report:
“[C]ounsel for the defendant raise in this Court, and apparently raised in the Court below, the legal point that, as Mrs. White sued for this same sum of £702 by counterclaim in the first action and allowed the counterclaim to be dismissed, she cannot again sue for the same sum. In support of this legal argument the case of Fox v. The Star Newspaper Company has been cited, and in my opinion it fully supports the contention made. The Earl of Halsbury said at p. 20:—‘The substance is that when it once comes to Court and when the plaintiff offers no support to his action there must be a verdict for the defendant.’ In our long established practice, in my opinion, the dismissal of Mrs. White's counterclaim is a judgment against her on the matters arising upon the facts pleaded.” (Emphasis added).
77. Also in Fox, A.L. Smith L. J. in the Court of Appeal stated at p. 637 of the report that “in my opinion there is now no such thing as a non-suit in the proper sense of the term”, and at p. 638 that “there is really no such thing now as a judgment of non-suit.” In his February, 2010 judgment in this case, Clarke J. took the view that such decisions unequivocally show that the court-ordered non-suit has also been abolished. Commenting on the prevailing situation, he stated at para. 7.7 of his judgment that:
“[I]t is clear that, in its modern sense, there is no meaningful distinction between a non-suit, a direction, or a dismissal of the plaintiff’s case at the close of the plaintiff’s evidence. An analysis of the many judgments referred to in the course of the hearing before me suggests that the terms are used interchangeably.”
78. The learned judge concluded at para. 7.12 that “the term non-suit has come to be used to refer to an ordinary application made at the end of the plaintiffs’ case for what is, in substance, a dismissal on the merits on the basis that the plaintiff has failed to discharge the onus of proof on it.”
79. One of the few cases cited by Mr Cunningham that was not referred to by Clarke J. is O’Donovan v. Southern Health Board, which the appellant has submitted as authority for the proposition that the courts “strongly resist any attempt to intermeddle the concepts of non-suit and a direction”. On my reading of that case, it does not support the argument pressed on behalf of Mr Cunningham. This was a case where an application for a non-suit (also referred to in the judgment as an application for a direction) was made at the close of the plaintiff’s case. As is well known, a different test is applied at that stage depending on whether the defendant has indicated that he intends to go into evidence: if not, the plaintiff must prove his case on the balance of probabilities, whereas if so, the plaintiff need only meet a lower threshold of showing that, when the plaintiff’s evidence is taken at its highest, the defendant has a case to meet (see O’Toole v. Heavy [1993] 2 I.R. 544). The issue in O’Donovan was that, with the defendant having reserved its right to go into evidence, the trial judge indicated at the direction/non-suit stage that there was a case to meet, but that at that stage he would have found for the defendant on the higher ‘balance of probabilities’ threshold had the defendant indicated that it would not go into evidence. This presented counsel for the defendant with a dilemma, for now to call evidence could only possibly detract from his winning position: the less evidence he called, the better. This led to the possibility that evidence which should have been called might not have been before the Court, although in fairness to counsel for the defendant, it seems that more than token evidence was called on its behalf. Nonetheless, this Court deemed that the trial judge’s comments rendered the trial unsatisfactory. As can be seen, nothing in that short judgment supports the proposition urged by the appellant.
80. Indeed, as just alluded to, the words “non-suit” and “direction” are used co-terminously in the O’Donovan judgment. At p. 386 Keane C.J. states that “counsel for the defendant applied to the High Court … for a non-suit”; this terminology is repeated at pp. 388 and 389 of the report. However, at p. 387 the Chief Justice refers to the relevant application as an “application for a direction”, and again at p. 388 refers to “a trial judge dealing with the application for a direction …” It is clear that the terms were being used interchangeably throughout that judgment. Far from aiding the appellant’s position, O’Donovan illustrates the merging of the concepts of non-suit and direction. Moreover, the judgment does not in any way speak to the principle of res judicata and its application to a non-suit and/or a direction, and thus does not enhance the appellant’s central argument on this ground of the appeal.
81. As an aside, one might have thought from practice at the Bar that the term “non-suit” is more typically used in a trial held before a judge only, with a “direction” being the more suitable terminology in a jury trial. Such, however, is but a colloquial use of language by counsel; any practitioner would be surprised to find that there is a distinction of substance between the two, certainly for the purposes of res judicata, and I agree with Clarke J. that they are identical in effect.
82. Nothing urged upon this Court by the appellant in any way undermines or weakens the learned judge’s comprehensive analysis of the issue. I am therefore entirely satisfied that the conclusion of Clarke J. on this matter is unimpeachable and, in circumstances where it has not seriously been put into dispute, does not require to be revisited.
83. Finally, as is clear from paragraphs 9.3 and 9.4 of the judgment of the 5th February, 2010, no point was made on behalf of the appellant at the main hearing which sought to make the alleged distinction between a non-suit and a direction. In the circumstances, to have sought to rely on this distinction in the guarantee proceedings was, in the view of Clarke J., either “an impermissible act of opportunism” or an abuse of process, depending on whether the appellant had adverted to the possibility of such a distinction at the time that the respondent made its application. Thus the appellant’s silence debarred him from placing any reliance on the distinction. Not alone am I satisfied that the learned judge was correct in his analysis that there is no distinction for the appellant to rely on in the first place, but I have also concluded that Clarke J. was correct on this subsidiary point also.
84. For each and every one of these reasons, the appellant’s res judicata arguments cannot succeed on this appeal.
Conclusion
85. In light of the above analysis, it is clear that each of the appellant’s three points of appeal must fail. The appeal is dismissed.
