Supreme Court allows appeal to dismiss claim due to inordinate delay causing serious prejudice and loss of critical witness.

THE SUPREME COURT

Keane C.J.

Murphy J.

Fennelly J.

344 & 345/01

BETWEEN

ANGLO IRISH BEEF PROCESSORS LIMITED AND DJS MEATS LIMITED

PLAINTIFF/RESPONDENTS

AND

DEREK MONTGOMERY, SEAMUS HAND, NATIONAL COLD STORAGE LIMITED, NORDIC COLD STORAGE LIMITED

DEFENDANTS/APPELLANTS

AND

STOKES KENNEDY CROWLEY AND COMPANY (A FIRM)

THIRD PARTY

JUDGMENT delivered the 31st day of July 2002, by Keane C.J.

This is an appeal from a judgment and order of the High Court (Kelly J) in which he refused two applications on behalf of the

first and second named defendants and third and fourth named defendants respectively for orders dismissing the plaintiff’s claim

on the ground of inordinate and inexcusable delay in the prosecution of the claim against all four defendants.

The factual background to the case is as follows. On the 14th June 1989, the first named plaintiffs (hereafter “Anglo Irish”)

agreed to purchase from the four defendants their share holding in the second named plaintiff (hereafter “DJS”) for the sum of

£1. Clause 8 of the hand-written agreement provided that

“An audit of DJS shall be carried out by N. Cooke of SKC as at the 13th June 1989. The balance sheet shall be prepared

on the same basis as the BS in Schedule 2. If the net assets/liabilities which is IR£2,040,468 in the pro forma in Schedule

2 as at the 13/06/89 exceeds IR£2,540,468 then the excess shall be paid to DJS by the shareholders within 10 days of

being called upon to do so. The liability to do this shall be joint and several.”

Anglo Irish maintain that the balance sheet as ultimately prepared showed net liabilities which were £1,584,857 in excess of the

agreed amount of £2,540,468. The defendants say that clause 8 does not, in its terms, reflect the agreement of the parties

and that the indemnity intended to be provided for by clause 8 was confined to certain trading losses.

The proceedings began by way of summary summons on the 28th November 1989. The defendants having resisted a motion for

final judgment on the ground that the terms of clause 8 did not represent the actual agreement entered into between the

parties, the matter was sent for plenary hearing. In an amended statement of claim delivered on the 10th March, 1993, Anglo

Irish advanced an additional claim, namely, that they had also suffered loss and damage arising from alleged breach of

warranties on the part of the defendants. This related to export refund provisions and PAYE provisions. By a letter of 15th

March 2001, the defendants were informed that by virtue of a settlement entered into by DJS with the Department of

Agriculture in November 1995, the claim in respect of PAYE provisions was being abandoned and that the claim under the

heading of Export Refund Provisions had been reduced to the sum of £666,298.39.

The defence delivered on behalf of the defendants in the agreement included a counterclaim for rectification of the written

agreement of 14th June 1989. The defendants also issued and served with the leave of the court third party proceedings

against the third party (hereafter “SKC”) claiming damages for negligence, breach of contract and breach of trust while acting

as their accountants and financial advisors in relation to the disposal of their share holding in DJS. The pleadings in the main

action were not closed until the 7th April 1994. Thereafter, Anglo Irish took no further steps until the 2nd April 1996 when a

notice of intention to proceed was served. Again, however, the action remained dormant until a further notice of intention to

proceed was served on 2nd October 1998. Anglo Irish again took no further steps until the 13th December 2000 when a third

notice of intention to proceed was served. On the 30th March 2001 Anglo Irish served a notice of motion seeking leave to

amend their reply in defence to the counterclaim. Shortly thereafter, the present motions to dismiss the plaintiffs claim were

served on behalf of the defendants.

In an extempore judgment, Kelly J refused to grant the reliefs sought. While he was satisfied that the delay was indeed

inordinate and inexcusable, he was also of the view that, applying the principles laid down by this court in Primor Plc -v- Stokes

Kennedy Crowley [1996] 2IR 459, the balance of justice was in favour of allowing the action to proceed. From that judgment

and order, the defendants have now appealed to this court. There has been no cross appeal by Anglo Irish in respect of the

finding by the learned High Court judge that there was inordinate and inexcusable delay in the prosecution of the claim.

It is not in dispute that the negotiations which led to the agreement of the 14th June 1989 were conducted on behalf of the

defendants with the plaintiffs by Declan Collins of SKC. It is also not in dispute that the defendants were assisted by Brendan

Devine, formerly a partner in Ernst and Whinny, the auditors to the defendants and to which firm Mr. Devine was a consultant.

While Mr. Devine did not have any direct dealings with the plaintiffs, he took part in a number of discussions between the

defendants on the one hand and Mr. Collins on the other hand, including one that took place on the afternoon of the 13th June

1989, i.e., the day before the signing of the agreement.

In an affidavit sworn in these proceedings, Mr. Thomas Butler, a director of the third and fourth defendants, deposed that

during the course of that discussion, Mr. Collins made it clear that the indemnity to be provided by clause 8 related to trading

losses to be computed by reference to accounts prepared on the same basis as previous years, that he had examined the

management accounts for DJS and that the trading losses disclosed were in the order of £400,000. Mr. Butler deposed that it

was on the basis of this representation that the selling shareholders felt it acceptable to underwrite trading losses in excess of

£500,000.

Mr. Devine died on the 10th November 2000. While Mr. Butler accepted that there were other persons present, including the

first and second named defendants and himself, he said that the significance of Mr. Devine’s evidence would have been that,

like Mr. Collins, he was a chartered accountant and, accordingly, his evidence as to what was said by Mr. Collins on the issue of

trading losses and in relation to the accounts of DJS would have been particularly important. Those factual averments, although

not the legal significance to be attached to them, were not contested on behalf of Anglo Irish.

In the course of his extempore judgment, the learned High Court judge concluded that the crucial factor, so far as the role of

Mr. Devine was concerned, was that he had no face to face dealings with Anglo Irish or their representatives: those

negotiations were solely carried on by Mr. Collins who, although retired, would be available as a witness. He accordingly

concluded that, on balance, the absence of Mr. Devine would not imperil a fair trial. At that stage of his judgment, the learned

trial judge does not appear to have adverted to the fact that, in the light of the averments of Mr. Butler, Mr. Devine’s evidence

would have been of considerable significance in relation to the claim against the third party.

It is acknowledged in this case that the applicable legal principles are as set out in the judgment of Hamilton CJ in Primor Plc -v-

Stokes Kennedy Crowley [1996] 2IR 463 at p. 475 as follows:-

“(a) the courts have an inherent jurisdiction to control their own procedure and to dismiss a claim when the interests of

justice require them to do so;

(b) it must, in the first instance, be established by the party seeking a dismissal of proceedings for want of prosecution

on a ground of delay in the prosecution thereof, that the delay was inordinate and inexcusable;

(c) even where the delay has been both inordinate and inexcusable the court must exercise a judgment on whether, in

its discretion, on the facts the balance of justice is in favour of or against the proceeding of the case;

(e) in considering this latter obligation the court is entitled to take into consideration and have regard to

‘(i) the implied constitutional principles of basic fairness of procedures,

(ii) whether the delay and consequent prejudice in the special facts of the case are such as to make it unfair to

the defendant to allow the action to proceed and to make it just to strike out the plaintiff’s action

(iii) any delay on the part of the defendant - because litigation is a two party operation, the conduct of both

parties should be looked at

(iv) whether any delay or conduct of the defendant amounts to acquiescence on the part of the defendant in the

plaintiff’s delay,

(v) the fact that conduct by the defendant which induces the plaintiff to incur further expense in pursuing the

action does not, in law, constitute an absolute bar preventing the defendant from obtaining a striking out order

but is a relevant factor to be taken into account by the judge in exercising his discretion whether or not to strike

out the claim, the weight to be attached to such conduct depending upon all the circumstances of the particular

case, (vi) whether the delay gives rise to a substantial risk that it is not possible to have a fair trial or is likely to

cause or have caused serious prejudice to the defendant,

(vii) the fact that the prejudice to the defendant referred to in (vi) may arise in many ways and be other than

that merely caused by the delay, including damage to a defendant’s reputation and business.”

Since the delay in this case is acknowledged to have been both inordinate and inexcusable, one can proceed at once to

consider whether, in accordance with those principles, the balance of justice is in favour of or against permitting the action to

proceed.

The trial judge was undoubtedly entitled to take into account in favour of Anglo Irish the fact that they had asserted their claim

against the defendants at an early stage, and that the defendants were aware of the claim that was being made against them.

In addition, to some extent at least, the case was one based on documents, i.e., the true construction of the agreement of

14th June 1989. As against that, there is the remarkable fact, that, although Anglo Irish are acknowledged to be a wealthy

trading corporation with access to first class professional advice, no explanation whatever was given for the quite staggering

lethargy with which these proceedings were pursued. Nor can it be said that the defendants in any way acquiesced in the

inaction of Anglo Irish.

If those were the only factors to be considered, they would, suggest, in my view, that, contrary to what the learned High Court

concluded, the balance of justice was in favour of striking out the proceedings. There is, however, another factor to which, in

my view, the trial judge, although conscious of it, unarguably gave insufficient weight, i.e., the fact that Mr. Devine is now

dead and will be unable to confirm the defendants’ understanding of the advice being tendered to them by Mr. Collins as to the

nature and effect of clause 8 of the agreement.

That evidence was critical to the defendant in maintaining their claim for an indemnity or contribution from the third party.

Since, in accordance with the requirements of the Civil Liability Act 1961 and the relevant provisions of the Rules of the

Superior Courts, all these issues would be tried together, it follows inevitably that, in relation to an issue of central importance,

i.e., whether, assuming the claim of Anglo Irish is well founded, the defendants are entitled to contribution or an indemnity from

the third party, the defendants will be deprived of a witness of critical importance as a result of the inordinate and inexcusable

delay on the part of Anglo Irish in prosecuting the claim.

I am satisfied that, in the result, applying the principles laid down by the learned Chief Justice in Primor Plc, the delay in this

case has given rise to a substantial risk that it is not possible to have a fair trial and that it has caused serious prejudice to the

defendants. I am further satisfied that that was the only inference which could have been drawn by the High Court from the

evidence before him on affidavit, and that, accordingly, the conclusion of the learned High Court judge that the balance of

justice required the action to proceed was erroneous in point of law.

I would allow the appeal and substitute for the order of the High Court an order dismissing the claim as against all four

defendants.