Supreme Court allows appeal to strike out proceedings as res judicata due to prior determination of same issues.

THE SUPREME COURT

Denham J.

Murray J.

McGuinness J.

RECORD NO: 4815P/2001

APPEAL NO: 243/01

BETWEEN/

JAMES J. BEHAN

PLAINTIFF/RESPONDENT

and

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

DEFENDANT/APPELLANT

Judgment delivered on the 19th day of March, 2002 by Denham J.

1. Motion to High Court

The Governor and Company of the Bank of Ireland, the defendant/appellant, hereinafter referred to as ‘the bank’, applied to the

High Court for an order striking out the proceedings herein of James J. Behan, the plaintiff/respondent, hereinafter referred to as

the ‘plaintiff’, in the absence of any reasonable cause of action, by reason of the action as against the bank herein being

frivolous or vexatious, and being res judicata. The motion is brought pursuant to the inherent jurisdiction of this court and/or

pursuant to the provisions of Order 19, Rule 28 of the Rules of the Superior Courts. The plaintiff sought an order for judgment in

default of defence.

2. Counsel’s note of the decision of the High Court (Kinlen J.), adopted by the learned trial judge, states:

“Following having heard the contentions made on behalf of Esmonde Keane BL, Counsel for the Defendant, and the

Plaintiff who appeared in person, and having considered the contents of the Affidavit of Patrick Monahan, Sworn on behalf

of the Defendant, dated the 17th of May 2001 and the Affidavit of Niall Browne, sworn on the 29th day of May 2001, His

Honour Mr. Justice Kinlen stated that the application made on behalf of the Defendant herein was to strike out the

proceedings in the absence of same disclosing any reasonable cause of action and in particular by reason of the action

brought against the Defendant herein, being res judicata. His Honour Mr. Justice Kinlen stated that Mr. Browne in his

Affidavit had stated that the matter relating to the credit obtained by the Defendant had only come to light after a

number of days into the hearing of the matter before the High Court. The issue, accordingly, only came to light in that

case and has only recently been launched in the proceedings herein. Accordingly, His Honour Mr. Justice Kinlen determined

to dismiss the application and granted the Defendant the costs of attending before the High Court to argue same. In

relation to the Plaintiff’s Motion for Judgment in Default of Defence, three weeks was allowed to the Defendant for the

filing of its Defence and reserved costs of that motion to trial judge.”

3. Appeal

Against that decision of the High Court the bank has appealed. The grounds of appeal, as they appear on the Notice of Appeal,

are as follows:-

“1. That the learned High Court Judge erred both in law and in fact in holding that the Pleadings herein disclosed any

reasonable cause of action.

2. That the learned High Court Judge erred both in law and in fact in holding that any cause of action in the pleadings

herein was not res judicata.

3. That the learned High Court Judge erred in law in holding that the inclusion of the issue (relating to the claim by the

Plaintiff arising out of the receipt by the Defendant of credit of the farm rescue package) following the commencement of

the hearing before the High Court in the proceedings between the parties herein entitled “the High Court, 1990, No.

9665P, Between : James J. Behan Plaintiff and The Governor and Company of the Bank of Ireland, Defendant” (hereinafter

referred to as “the earlier proceedings”), accompanied as it was by the granting of liberty to amend the Statement of

Claim and the subsequent amendment of same (including general and consequential damages arising from same) and

further hearing the Judgement (sic) concerning same in the earlier proceedings, prevented the said issue and the other

issues herein from being res judicata.

4. That the learned High Court Judge erred both in law and in fact in holding that there are any new issues disclosed in

the present proceedings which have not already been determined upon in the earlier proceedings.

5. That the learned High Court Judge erred both in law and in fact in failing to hold that the action as shown by the

Plaintiff’s Pleadings herein was not frivolous or vexatious as against the Defendant herein.

6. That the learned High Court Judge erred both in law and in fact in failing to dismiss the proceedings and/or in failing to

strike out the Pleadings herein.

7. That the learned High Court Judge erred both in law and in fact in holding that there is any issue disclosed in the

current proceedings that is not res judicata by reason of the decision in the earlier proceedings.”

4. Submissions

Full submissions were made on behalf of both the parties. Oral submissions were made on behalf of the bank by Mr. Daniel

O’Keefe, S.C. and the plaintiff himself made submissions.

Counsel for the bank submitted that the proceedings should be struck out on the grounds that no reasonable cause of action

was disclosed, that the proceedings were vexatious and that the matters were res judicata. Counsel also requested the court

to apply the principle of estoppel.

Mr. Behan submitted, inter alia that there had been probable fraud by the bank related to the concealment of their use of the

farm scheme money. He argued that the fraud had been concealed by the bank, that the bank had misled him. He referred to

the judgment of

Barron J. in James Behan v Governor and Company of the Bank of Ireland, (Unreported, Supreme Court, 20th July, 1998). Mr.

Behan submitted that he was pleading fraud in this case. Further, he submitted, the consequences had not been dealt with by

Morris J. previously.

5. Facts

The original case of the plaintiff commenced by summons dated 5th July, 1990. That case was 18 days at hearing before the

High Court. There was a very detailed Statement of Claim. The Statement of Claim was amended with permission of the trial

judge, in mid-trial.

6. The amended Statement of Claim was as follows:

“Amendment to Statement of Claim:

a) Pursuant to the Order of the Learned Trial Judge Mr. Justice Morris, the Statement of Claim is hereby amended by

the inclusion of paragraphs P.Q.R.S. and in the Particulars of Negligence, Breach of Duty, and Breach of Contract.

b) That the Defendant failed to enter the Plaintiff in the Farm Rescue Package Scheme at a time or at all when money

under the Scheme could have been used to his advantage.

c) In failing to credit the Plaintiff’s account with money payable under the Reduced Interest Subsidy Scheme on due

dates the Plaintiff was deprived of interest and obliged to pay interest at full prevailing Bank rates on the whole of his

borrowings over the entire period at compound interest which considerably reduced his working capital.

d) Despite his being approved for the Scheme the Plaintiff’s account was never credited with any subsidy in the relevant

period 1st April, 1982, to 31st March, 1985 and the Defendant having called in the debt in April, 1985, effectively

excluded him from achieving any benefit from the Scheme.

e) That the Defendant in drawing down the entire amount due to the Plaintiff under the said Scheme on 30th September,

1985, which was the last day when the Scheme was in operation for his purposes and converting that amount to its own

use and benefit deprived the Plaintiff of its use.

f) That the Defendant in relation to the Plaintiff did not use the said Scheme for the purpose for which it was intended.”

7. The High Court (Morris J.) delivered a reserved judgment on the 15th day of August, 1997. The learned trial judge dealt

specifically with the Reduced Interest Subsidy Scheme for Farmers in Severe Financial Distress. Of this scheme Morris J. stated:

“It remains now to consider the claim that arises under the introduction of the ‘Reduced Interest Scheme for Farmers in

Severe Financial Distress’, (referred to as ‘the scheme’).

This scheme was introduced by the Minister for Agriculture on the 1st April, 1982. The scheme had as its objective the

provision of some relief from high interest rates for certain classes of farmers. It is, in my view, unnecessary to set out in

detail the conditions of the scheme. All that is required is that it be understood that the scheme provided that a

beneficial rate of interest would be enjoyed by certain types of farmers on certain bank borrowings. The interest rate on

the relevant loans was reduced by 8¾% providing that in no circumstances would the rate to a farmer go below 10½%.

The scheme operated for 3 years from the 1st April, 1982. The scheme was operated by banking institutions and the ACC.

Mr. Behan completed the appropriate forms for inclusion in the scheme on the 28th May, 1982. However, the admission

into the scheme depended, inter alia, upon obtaining a Farm Viability Plan which Mr. Behan obtained from ACOT on the

28th July, 1983. On the 17th January, 1984 authority was given by the Bank of Ireland to the Carlow Branch to ‘draw

down’ on Mr. Behan’s account.

The case is made on Mr. Behan’s behalf that there was unreasonable and improper delay on the part of the bank in

permitting Mr. Behan to enter and enjoy the benefits of the scheme.

In my view, entry into the scheme was not available to Mr. Behan until he had obtained the Farm Viability Plan and it

appears to me that the matter was processed with all due diligence up to the 17th January, 1984. However, thereafter I

am of the view that the bank acted in an arbitrary and improper manner. I am satisfied from the evidence that one had

the position that on the one hand the bank were adopting the attitude towards Mr. Behan which deprived him of further

finances with which to run his farming business and yet on the other hand were critical of him when he devised

alternative methods of obtaining finance as, for instance, by opening an account with the AIB. The bank were using Mr.

Behan’s lack of resources as a reason for depriving him of the benefits of inclusion in the scheme. I am satisfied that the

bank were attempting to achieve benefits for themselves by depriving or withholding Mr. Behan’s entry into the scheme.

From a practical point of view, Mr. Behan was never entered into the scheme in the sense that he never received the

benefit of the favourable interest rates. On the 30th September, 1985 the outstanding elements of the scheme were

being wound-up. What occurred at this stage was that the bank, notwithstanding that Mr. Behan had entered into an

agreement on the 22nd July, 1985 whereby he agreed to pay and the bank agreed to accept £165,000 in full and final

settlement, entered the three credits to which he was entitled under the scheme, namely £6,466.35, £6,023.15 and

£5,965.68 as credits on his account and on the closure of the account on the 1st April, 1986 applied these amounts

towards a reduction of his indebtedness to the Bank. It is clear that having made the agreement to accept the reduced

amount, the bank were not entitled to apply these monies in the manner in which they did. Moreover on the winding up of

the scheme the bank would have been credited by the Revenue Commissioners with an equivalent amount against its

corporation tax liabilities.

I am of the view that Mr. Behan is entitled to receive these amounts as money had and received to his use. They total,

on my calculation, £18,455.18.

The question arises as to whether Mr. Behan suffered any consequential loss as a result of the bank’s failure to include

him in the scheme. No evidence has been offered to me to support any such claim and I accept the evidence of Mr.

Laurence Power that given the amount of Mr. Behan’s indebtedness at the relevant time the relief which he would have

obtained from immediate admission into the scheme was of no overall consequence.

He is, in addition to the foregoing sum, entitled to interest thereon. In this regard I accept Mr. Devlin’s evidence that the

amount of interest of which he was deprived was £2,437, making a total claim of £20,892.18.

During the course of Mr. Devlin’s evidence he referred to the fact that he was unable to identify the rate of interest at

which the bank were making their calculations and he concluded that two different rates of interest were necessary if the

figures were to be found correct. I do not think that this gives rise to any element of claim.

Accordingly, there will be Judgment for the Plaintiff in the above amount and I will hear Counsel as to the question of

costs.”

8. The order and decision of Morris J. was appealed to the Supreme Court. The Supreme Court heard the appeal by the plaintiff

and cross appeal by the bank over two days on 25th and 26th March, 1998 and reserved judgment. On 20th July, 1998 it was

ordered that the plaintiff’s appeal be dismissed, that the defendant’s cross appeal be allowed in regard to the Statute of

Limitations point and dismissed in regard to the award of £20,892.18 and the High Court order was varied accordingly. It was

ordered in relation to costs that the plaintiff do recover from the bank the costs of three days in the High Court and that the

bank do recover from the plaintiff the costs of ten days in the High Court all when taxed and ascertained and that no order be

made as to costs for five days. It was ordered that the sum payable by the plaintiff for costs be set off against the sum

payable by the bank for the award of £20,892.18 and costs and that the party to whom the excess (if any) shall be due be at

liberty to issue execution against the party to whom such excess shall be due. No order was made as to costs in the Supreme

Court.

9. In a minority judgment Keane J. agreed with the conclusion of the trial judge that an arrangement of the sort relied on by the

plaintiff as having been entered into at the meeting in May, 1981 was so vague and uncertain in its terms as to be incapable of

enforcement as a legal contract. However, he then went on to analyse the scheme, which he did in considerable detail. Keane

J. did not agree with the trial judge, he stated:

“I fear I cannot agree. The reason the plaintiff was not admitted to the farm rescue scheme was because he failed to

comply with the conditions for entry, including the production of an acceptable farm viability plan. However, altogether

apart from that consideration, there is no question of monies having been paid to the bank to which the plaintiff was

entitled. The entry by the bank in their books of the three sums totalling £18,455.18 represented in arithmetical terms the

difference between the commercial rate payable by the plaintiff and the reduced interest rate payable on the farm rescue

loan. A corresponding debit appeared in an internal bank suspense account. No money was paid by any third party to the

bank to the benefit of which the plaintiff was entitled and which was wrongfully withheld from him by the bank.

Had the plaintiff discharged his total liabilities to the bank, he would have paid the sum of £213,891.43 and - assuming

that he had met the other conditions for eligibility - would have been entitled to be refunded by the bank the sum of

£18,455.18 because of his participation in the farm rescue scheme. Nothing of the sort happened. The proposition that a

debtor who owes the sum of £48,891.43 has suffered a wrong because his unpaid creditor hopes to recoup part of the

sum - £18,455.18 - from a third party is wholly unsustainable in law or, for that matter, in simple equity.

No doubt the bank hoped to satisfy the revenue that, since they would clearly have been entitled to set off the

£18,455.18 against their liability to corporation tax in the event of the plaintiff having met all his outstanding liabilities to

them, they should hardly be in any worse position where, on the contrary, he ended up owing them £48,891.43. However,

neither the High Court nor this court was or is concerned in any way with the rights inter se of the bank and the Revenue

Commissioners.

Counsel for the bank also submitted that this part of the plaintiff’s claim was in any event statute barred, since it did not

appear in the plenary summons or statement of claim: the trial judge allowed an amendment of the statement of claim

during the course of the trial on the ground that, as claimed on behalf of the plaintiff, he or his legal advisers had not

been fully aware of the manner in which the interest refunds had been dealt with at the time the proceedings were

issued. It was urged that the trial judge’s discretion to allow amendments to the pleadings could not be exercised in such

a way as to deprive a defendant of a defence which would otherwise be open to him under the Statute of Limitations

1957.

In the judgment which he is about to deliver, Barron J. refers to a number of English decisions to the effect that a

defendant may be deprived of a defence which would otherwise be open to him under the Statute of Limitations 1957

where his conduct was ‘unconscionable’ or ‘inequitable’. On the view I take of the plaintiff’s claim, those authorities are of

no relevance. I would in any event express no opinion on whether they correctly state the law or their applicability to the

facts in the present case, since they were not cited at any stage by counsel for the plaintiff and counsel for the bank

had no opportunity of dealing with them.”

10. Barron J. agreed with Keane J. that the appeal of the plaintiff should be dismissed. In a written judgment, Barron J. set out

his different reasons for dismissing the plaintiff’s appeal. O’Flaherty J. agreed with Barron J.

Barron J. stated:

“I agree with the judgment of Keane J. that the appeal of the plaintiff should be dismissed.

It is unfortunate that the learned trial judge was mistaken as to the document which showed through the copy of the

farm loan analysis. As a result, he did not accept the evidence adduced on behalf of the plaintiff.

However, an analysis of this evidence on the basis that it is accepted in full does not support a case entitling the plaintiff

to damages.

The plaintiff’s case lay both in contract and in tort. The farm loan analysis is significant in relation to the claim for

damages for negligent advice. It supports the allegation of a representation that the Bank thought highly of the plaintiff

and by inference would be prepared to back him financially through the bad days. But even upon that representation,

there is nothing to suggest that the final decision was not to be that of the plaintiff himself.

In relation to the claim in contract, there is nothing in the evidence to suggest that any discussion in relation to detail

which would have been expected to have taken place did take place nor were the terms alleged of sufficient precision to

found an agreement.

Of equal difficulty for the plaintiff was the delay in bringing proceedings. It was clear from an early date and well before

the six-year period prior to the issue of proceedings that not only was the advice of the Bank poor but that it was not

abiding by its obligations towards the plaintiff. Admittedly, customers of banks are in different positions from many debtors

in that by contesting a claim against the Bank they may find themselves without the finance necessary to pursue their

commercial interests. That may have been the case in 1983 when it was clear that the Bank did not consider itself bound

by any agreement. But once the settlement was reached in 1985, there was no longer any such impediment.

As regards the plaintiff’s case that in July 1985 cheques were dishonoured in breach of a specific and temporary

arrangement for an overdraft, there was no evidence adduced that the dates of dishonour were within the statutory

limitation period. Counsel asserted this fact and subsequently indicated to a specific portion of the transcript of evidence.

That however also was an assertion by counsel in the course of submissions to the learned trial judge. Accordingly, there

remains no evidence to establish the dates of dishonour.

In relation to the defendant’s cross-appeal, it seems to me that the following is an appropriate analysis of the relevant

facts.

1. In 1995, the plaintiff’s total indebtedness to the Bank stood at the sum of £215,000 approximately. An agreement was

arrived at whereby the Bank would accept £165,000 in full satisfaction to be paid in unequal instalments.

2. At the time that that agreement was entered into the Bank maintained, as it was entitled to do, that the plaintiff,

though eligible for the farm rescue package, was not entitled to its benefit.

Accordingly, the debt of £215,000 approximately did not take into account the benefit which would have accrued to the

plaintiff if he had been so entitled.

3. The agreement was concluded on this basis. The Bank however did so on the understanding, not communicated to the

plaintiff, that it could obtain the fiscal advantage associated with the allowance of the benefit to the scheme to a

customer.

4. Accordingly, the Bank subsequently made various bookkeeping entries not communicated to the plaintiff as a result of

which an account of the plaintiff with the Bank was credited with the benefit of the farm rescue package. This amounted

to the sum of £18,000 approximately.

5. That sum was not paid to the plaintiff but taken against the unsatisfied liabilities of the plaintiff which by the

agreement had amounted to some £50,000 thereby reducing them to some £30,000.

6. The fact of the payment by the Bank to the plaintiff of a sum of £18,000 approximately in accordance with the

provisions of the farm rescue package was returned to the Revenue so as to obtain a fiscal advantage upon which the

scheme was based.

7. Until the hearing of this case was several days at hearing, the plaintiff was unaware that his account had been dealt

with in the manner indicated.

It is the legal effect of these facts which is in issue. The Bank submits that it was a bookkeeping transaction and no

more. I do not accept this submission. At the date of the crediting of the plaintiff’s account, the relationship between the

plaintiff and the Bank was governed by an agreement entered into two months before. This was silent on the issue of the

farm rescue package.

Prima facie therefore the Bank by crediting the benefit of the scheme to the plaintiff’s account acknowledge the plaintiff’s

right to that sum. By seeking the fiscal advantage, the Bank represented to the Revenue that the sum of £18,000

approximately had been paid to the plaintiff.

Clearly, the Bank did not intend that this should be paid to the plaintiff. The plaintiff has no merits to receive this sum

since he settled with the Bank in full knowledge that he was not getting the benefit of the farm rescue package. But

neither did he think that the Bank was in effect writing off less than it appeared to be doing.

In the final analysis, it seems to me that the legal position must be that the Bank having credited the plaintiff’s account

at a time when the plaintiff’s liability to the Bank had been agreed is now estopped from saying that it was entitled to

recoup itself of that amount because a larger sum owed by the plaintiff to the Bank was waived in the course of previous

settlement negotiations. I would hold the Bank estopped from making any such claim.

It is submitted that in any event this claim is barred by the provisions of the Statute of Limitations, 1957. The answer to

that, if there is an answer, lies in the provisions of s. 71(1)(b) of the same Act.

The provision is as follows:

‘(1) Where, in the case of an action for which a period of limitation is fixed by this Act,

(b) the right of action is concealed by the fraud of any such person, the period of limitation shall not begin to run

until the plaintiff has discovered the fraud or could with reasonable diligence have discovered it’

The identical provisions in the English Act - s.26(a) and (b) of Limitation Act, 1939 - was considered in Beaman v A.R.T.S.

Limited 1949 1 All ER p. 465”

Barron J. then considered a number of decisions of England and Wales concluding:

“Accordingly, in my view a defence of the Statute of Limitations would not avail the defendant.

I would accordingly affirm the judgment of the learned President on this issue.”

11. The statement of claim of the plaintiff in this action was delivered on 30th March, 2001. I am satisfied that it is essentially

the same as the amended statement of claim in the plaintiff’s previous action. This can be illustrated by the particulars of

special damages/losses claimed.

12. In the Statement of Claim delivered on 6th day of November, 1995 it is claimed:

“PARTICULARS OF SPECIAL DAMAGES/LOSSES

1. Estimated Loss of Lands at Dollardstown and Grangerosnolvin: £960,000.00

2. Estimated Loss of Profits: £770,000.00

3. Estimated Loss of Mill and Profits: £200,000.00

4. Interest charged by the Defendant on money borrowed: £440,000.00

5. Estimated Aggregate of total sums borrowed from the Defendant: £200,000.00

6. Estimated Other Losses: £290,000.00

TOTAL ESTIMATED: £2.860,000.00”

13. In the Statement of Claim delivered on 30th March, 2001 in this, the second action of the plaintiff, the claim as to special

damage and losses is:

Estimated loss of lands at Dollardstown and Grangerosnolvin IR£2,530,000

Estimated loss of profit 8 years @ £10,000 IR£ 80,000

11 years @ £15,000 IR£ 165,000

Interest on loss of profits @ 10% 19 years IR£ 465,500

Loss of Mill and Milling Business IR£ 200,000

Loss of machinery and equipment IR£ 200,000

Damage to farm buildings IR£ 50,000

Damage and neglect to domestic dwelling IR£ 50,000

Sale of furniture and antiques from home IR£ 40,000

TOTAL: IR£ 3,780,500

14. It is clear that the claim in this case is similar to the claim heard and determined before Morris J. It is quite clear that the

scheme was at issue in that case and that a determination was made in relation to it in the High Court and Supreme Court,

previously.

15. The issues have been litigated already. Morris J. took care to include the issues raised by the plaintiff. The fact that all the

evidence the plaintiff would now wish to present to the court was not presented then does not mean that the matter can be

reopened. This is not closing out the applicant on a technical point. It is clear that the consequences were the same, whether

they flowed from alleged fraud or alleged negligence. The issue of the consequences was before Morris J.

16. The High Court erred in determining that the matter was not res judicata. The issue of the scheme was litigated previously

by the parties. Further, the consequences for the Applicant were the same whether being considered under an allegation of

negligence or fraud. The damages were the same.

17. The proceedings are res judicata, the issues have been determined. Once, as here, substantially the same cause of action

has been determined the matter is res judicata: White v Spendlove [1942] I.R. 224. The point has been litigated: D v C [1994]

I.L.R.M. 173. The applicant is attempting to relitigate the issue which has already been determined against him: McCauley v

McDermot [1997] 2 I.L.R.M. 486.

18. It is impossible not to have sympathy at a personal level for the plaintiff. He spoke to the court of the plan drawn up by

ACOT on his behalf - that it was a viable plan - that it was accepted. That money was paid to the bank. That the bank had

given him the impression that he was not in the scheme and when he sold out monies were paid to the bank. The plaintiff has a

strong sense of grievance against the bank, he spoke of his success in developing farm related projects. However, sympathy is

not sufficient to ground success for the plaintiff’s case.

19. Whilst I can understand the plaintiff’s wish to continue to pursue the bank he may not do so in law. Whilst it may be of

concern that monies were given so freely to him in circumstances that are of doubtful economic merit (as originally done by the

bank) the issues have already been litigated. The plaintiff may not reopen the matter. There must be finality in litigation.

20. I would allow the appeal and strike out the plaintiff’s proceedings.