Allied Irish Banks Plc v Ernst & Whinney

• Jurisdiction: Ireland
• Judge: McCarthy J.,O'FLAHERTY J.,FINLAY C.J.
• Judgment Date: 01 January 1993
• Date: 01 January 1993
• Docket Number: [1985 No. 5813P]
• Court: Supreme Court

AIB v. ERNST & WHINNEY

ALLIED IRISH BANKS PLC AND ANOTHER

Plaintiffs

and

ERNST & WHINNEY

Defendants/

Appellants

and

THE MINISTER FOR INDUSTRY AND COMMERCE

Notice Party

AND BETWEEN

ICAROM PLC

Plaintiff

and

GRIFFIN, LYNCH & COMPANY and ERNST &WHINNEY

Defendants/

Appellants

and

THE MINISTER FOR INDUSTRY AND COMMERCE

Notice party

1992 WJSC-SC 1347

Finlay C.J.

Hederman J.

McCarthy J.

O'Flaherty J.

Egan J.

THE SUPREME COURT

Synopsis:

MINISTER OF STATE

Litigation

Stranger - Discovery - Issues - Identification - Numerous Depart mental files - Discovery ordered - (35/92 - Supreme Court - 17/7/92) - [1993] 1 I.R. 384

|Allied Irish Banks Plc. v. Ernst & Whinney|

ORDER

Form

Discovery - Stranger - Issues - Identification - Issues to be disclosed in order - (35/92 - Supreme Court - 17/7/92)1993 1 IR 384

|Allied Irish Banks Plc. v. Ernst & Whinney|

PRACTICE

Documents

Discovery - Application - Objection - Stranger to action - Applicant party - Onus of proof - Identification of issues - Likelihood of stranger's possession of relevant documents - Form of order - Rules of the Superior Courts, 1986, order 31, r. 29 - (35/92 - Supreme Court - 17/7/92) - [1993] 1 I.R. 384

|Allied Irish Banks Plc. v. Ernst & Whinney|

PRACTICE

Order

Form - Discovery - Stranger - Issues - Identification - Issues to be disclosed in order - (35/92 - Supreme Court - 17/7/92)

|Allied Irish Banks Plc. v. Ernst & Whinney|

Citations:

RSC O.31 r29

RSC O.31 r12(1)

RSC O.31 r12(3)

AMBIORIX LTD V MIN ENVIRONMENT 1992 ILRM 209

SIMPSON BAILEY & EVANS, DISCOVERY & INTERROGATORIES 2ED 2

MURPHY V MIN DEFENCE 1991 2 IR 161

RSC O.99

RSC O.31 r12

JUDGMENT OF FINLAY C.J.

[HEDERMAN, EGAN CONC]

1 JUDGMENT delivered on the 17th day of July 1992by FINLAY C.J.

2 This is an appeal brought by the Defendants in each of these two actions against the order made by Costello J. in the High Court on the 22nd January 1992, on appeal from the Master of the High Court refusing an application for an order, pursuant to Order 31, Rules 29 of the Rules of the Superior Courts, directing discovery by the Notice Party to the Defendants of certain categories of documents alleged to be relevant to issues arising or likely to arise in these two actions.

3 The two actions arise out of the virtual financial collapse of the Insurance Corporation of Ireland Plc (now ICAROM Plc) the Plaintiffs in the second of these two actions (the Insurance Corporation). The two Defendants in that action were, successively, statutory auditors of the Plaintiffs for the years 1978 to 1980, in the case of the first-named Defendant, and 1980 to1983, in the case of the second-named Defendant. They are sued by the Insurance Corporation on an allegation that they were guilty of negligence at common law under statute, and in breach of duty to the Plaintiff in providing the accounts and information concerning the financial affairs of the Company, and thus caused the collapse of theCompany.

4 In the other action, the second-named Plaintiff is a wholly-owned subsidiary of the first named Plaintiff (the Bank). Its claim, which is against the Defendant Ernst & Whinney, only, is that it purchased shares in the Insurance Corporation upon reliance of the information afforded by Ernst & Whinney as its statutory auditors and accountants, and that having purchased a particular proportion of shares, proceeded on, placing reliance on the same information to acquire the entire equity in the Insurance Corporation. It is alleged in that case that due to the same acts of negligence, breach of duty and breach of statutory duty as arerelied upon by the Plaintiffs in the second action, that the Bank suffered a total loss of its investments in the Insurance Corporation, and was put to loss and expense under a number of other headings, and continues to lose money under obligations incurred by reason of thatnegligence.

5 The Defendants in each action deny any breach of duty, whether at common law or under statute, or otherwise, and deny the fact that any act or conduct on their part caused or contributed to the financial collapse of the Insurance Corporation, and further deny the claim by the Bank that the Bank placed any reliance on any representations or statements or accounts supplied by them (the Defendants) in purchasing shares, or in its other transactions concerning the Insurance Corporation. They assert in their defence, which denies in detail the headings of loss and damage in each case, that the Plaintiffs" loss and damage was caused by their own negligence or, in the alternative,that they were guilty of contributory negligence.

6 At the time this motion for discovery by the Minister for Industry and Commerce as a notice party came before the High Court, the Plaintiffs in these actions had already made discovery to the Defendants pursuant to orders of the Court, and three other notice parties had, on consent, made discovery of certain documents to the Defendants.

7 This application is made pursuant to order 31, Rule 29, which was first inserted on the last comprehensive amendment of the Superior Court Rules in 1986. That Rule provides for the making of an order for discovery, for the making of an order for interrogatories, or for the making of an order for the inspection or documents against any person not a party to the cause or matter before the Court.

8 Its terms, abbreviated so as to include only such terms as are relevant to discovery, are as follows:

"Any person not a party to the cause or matter before the Court, who appears to the Court to be likely to have or to have had in his possession, custody or power any documents which are relevant to an issue arising or likely to arise out of the cause or matter ....... may by leave of the Court, upon the application of any party to the said cause or matter, be directed by order of the Court....... to make discovery of such documents ....... The provisions of this Order shall apply mutatismutandis as if the said order of the Court had been directed to a party to the said cause or matter, provided always that the party seeking such order shall indemnify such person in respect of all costs thereby reasonably incurred by such person, and such costs borne by the said party shall be deemed to be costs of that party for the purposes or Order 99."

9 It is, I am satisfied, relevant to the construction of this Rule, which was raised as an issue on the hearing of this appeal, to set beside it the provisions or Order 31, Rule 12 (1) dealing with discovery by a party to an action. That sub-rule reads as follows:

"Any party may, without filing any affidavit, apply to the Court for an order directing any other party to any cause or matter to make discovery on oath of the documents which are or have been in his possession or power, relating to any matter in question therein. On the hearing of such application the Court may either refuse or adjourn the same, if satisfied that such discovery is not necessary, or not necessary at that stage of the cause or matter, or make such order on such terms as to security for the costs of discovery, or otherwise, and either generally or limited to certain classes of documents as may be thought fit."

10 Subsection (3) of Rule 12 provides as follows:

"An order shall not be made under this Rule if and so far as the Court shall be of opinion that it is not necessary either for disposing fairly of the cause or matter, or for saving costs."

11 It seems clear that, comparing the terms of these two Rules, a major distinction between them is that in the event of an application for discovery by a party to an action, made pursuant to Order 31, Rule 12, it would appear that the Court should only adjourn or refuse suchan application if it is satisfied that it is not necessary, either at all or at the time at which it is made, either for disposing fairly of the cause or matter or for saving costs. The onus of establishing that would appear, prima facie, to lie upon the party against whom discovery is sought and who resists it. In the case of an order for discovery pursuant to Rule 29, however, where application is made for an order against a person not a party, I am satisfied, as has been held by Costello J. in this case, that the onus is on the applicant to establish, firstly, that the party named is likely to have had in his possession, custody or power documents, and, secondly, to establish that they are documents which are relevant to an issue arising or likely to arise out of the cause or matter.

12 The second significant difference between Rule 29 and Rule 12, in order 31, is that the proper construction of Rule 12, dealing with discovery by a party, is that the Court's discretion of refuse it isconfined to its being satisfied that either in the form of the application itself or in respect of the time at which it is made, it is not necessary either for disposing fairly of the cause or matter, or for saving costs.

13 The provisions of Rule, 29, on the other hand, create a situation in which after it has been established to the satisfaction of the Court that a person not a party has, or is likely to have, in his possession documents which are relevant to an issue arising, the Court still has a further discretion. This arises from the fact that the rule provides that, upon that being established, the leave of the Court to make the order for discovery still is required.

14 I take the view that the further discretion thus arising must relate, even where documents may be in the custody or procurement of a stranger to the action, and where they may have some relevance to the issues arising in the action, to a consideration of particularoppression or prejudice which will be caused to the person called upon to discover such documents, not capable of being adequately compensated by the payment by the party seeking it of the costs of making suchdiscovery.

15 I do not, however, consider that...