City Pharmacy Ltd and Others v Roche and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Siobhán Phelan
• Judgment Date: 19 May 2023
• Neutral Citation: [2023] IEHC 265
• Court: High Court
• Docket Number: [Record No.: 2006/1814 P]

City Pharmacy Limited, Corrigan Pharmacy Holdings Limited and Eileen Corrigan

Plaintiffs

and

James Roche, Irene Fehily, Hilary Hayden T/A Hilary Hayden and Company, Fiona Cottell T/A Hillary Hayden & Company and Pembroke Equity Partners Limited

Defendants

[2023] IEHC 265

[Record No.: 2006/1814 P]

THE HIGH COURT

Breach of duty – Negligence – Delay – Fifth defendant seeking to dismiss the proceedings – Whether the plaintiffs were guilty of inordinate and inexcusable delay

Facts: The claim of the plaintiffs, City Pharmacy Ltd, Corrigan Pharmacy Holdings Ltd and Ms Corrigan, against the third, fourth and fifth defendants, Mr Hayden, Ms Cottell and Pembroke Equity Partners Ltd, was a claim based on their alleged positions as "advisors, accountants and corporate financiers" to the plaintiffs and was a claim for damages for alleged negligence and misrepresentation in the course of acting as advisors. As against the fifth defendant, it was alleged that it advanced a loan of €300,000 to the third plaintiff which it should not have advanced in light of the knowledge of its directors of the true financial position of the first plaintiff. The plaintiffs’ case extended inter alia to concealed and/or misrepresented poor financial performance, breach of duty and negligence. The fifth defendant applied to the High Court to dismiss the proceedings on two separate grounds, namely: (i) inordinate and inexcusable delay by the plaintiffs in progressing the proceedings in line with the principles enunciated in Primor PLC v Stokes Kennedy Crowley [1996] 2 IR 459; and (ii) discontinuance by the plaintiffs of their claim against the third and fourth defendants which has the effect that the claim of the third plaintiff against the fifth defendant cannot proceed in accordance with an order made in the proceedings on 21st of March, 2011.

Held by Phelan J that while the fifth defendant complained of difficulties in defending the proceedings because of the passage of time, it was clear that it wished for its own part to maintain its own proceedings but undermine the third plaintiff’s defence of those proceedings by ensuring that the proceedings in which her claims of wrongdoing against the fifth defendant are not determined. Phelan J held that to accede to the fifth defendant’s application would result in an unfair and one-sided prejudice to the third plaintiff as party to both proceedings in circumstances where both plaintiffs and defendants (including the fifth defendant) had contributed to delay in these proceedings and where the fifth defendant had failed to identify a proper evidential basis for specific or concrete prejudice but relied on general assertions. Phelan J held that the general assertions made on behalf of the fifth defendant could not outweigh the risk of injustice to the plaintiffs in dismissing the proceedings. Phelan J held that dismissing the claim would create a serious and real risk of causing injustice rather than preventing it given the extent to which these proceedings were connected with the loan proceedings which the fifth defendant remained intent on prosecuting. Phelan J held that, in making the order in the terms in which Quirke J did, he did no more than recognise that the claim against the newly joined defendant was of a different nature to that against the other defendants such that it was appropriate to deal with them separately but given the overlapping nature of the claims and the evidence to be adduced, it made sense that duplication which would result from separate proceedings should be avoided. Phelan J held that Quirke J’s clear intention was that all issues be determined by the same judge thereby avoiding the additional burden on resources (including court resources) that would arise from presenting the case as against the fifth defendant in separate proceedings and before a different judge. Phelan J held that this was a sensible order which did not purport to prohibit the further conduct of the proceedings if there was a narrowing of issues between the parties.

Phelan J refused the application to dismiss on both grounds advanced.

Application refused.

JUDGMENT of Ms. Justice Siobhán Phelan, delivered on the 19 ^th day of May, 2023

INTRODUCTION

1 . This is an application by the Fifth Named Defendant to dismiss the within proceedings on two separate grounds, namely:

• (i) inordinate and inexcusable delay by the plaintiffs in progressing these proceedings in line with the principles enunciated in Primor PLC v. Stokes Kennedy Crowley [1996] 2 IR 459; and

• (ii) discontinuance by the plaintiffs of their claim against the third and fourth named defendants which has the effect that the claim of the third named plaintiff against the fifth named defendant cannot proceed in accordance with an order made in these proceedings on 21 ^st of March, 2011.

2 . A Chronology exhibited on behalf of the Fifth Named Defendant is appended at Appendix 1 hereto by way of summary overview of developments in both these proceedings and separate but related proceedings entitled Pembroke Equity Partners Limited v. Eileen Corrigan and JP Galligan [Record No. 2012 No. 1866S] (hereinafter “the loan proceedings”).

BACKGROUND

3 . These proceedings arise out of a transaction in April, 2005 whereby the First and Second Named Defendants sold all their shares in the First Named Plaintiff (City Pharmacy Limited (the “Company”)) to the Second Named Plaintiff. It appears that the Company was established as a vehicle by which the business of an existing pharmacy business previously operated by the First and Second Named Defendants would be sold to the Second Named Plaintiff. The Second Named Plaintiff in turn was a company established to acquire the interest of the transferred pharmacy and the Third Named Plaintiff (Ms Corrigan) was, at all material times, the principal shareholder of the acquiring company. The Third and Fourth Named Defendants were the accountants and auditors for the pharmacy business prior to its sale by the Vendors and remained in that role post-sale transaction for a period. The said accountants were also the directors and sole shareholders of the Fifth Named Defendant, a company which advanced a loan to the Third Named Plaintiff in connection with the pharmacy transfer.

4 . The within proceedings commenced in 2006 (hereinafter “pharmacy acquisition proceedings”). Initially (on the 26 ^th of April, 2006), the proceedings were instituted by the Company and the Second Named Plaintiff against the First and Second Named Defendants only. It is clear from the General Endorsement of Claim to the plenary summons as issued that when proceedings commenced, they were directed to issues arising in relation to the transfer of interests in a pharmacy business. At the time these proceedings were instituted, the Third and Fourth Named Defendants continued as auditors and accountants for the pharmacy business. Subsequently, a new firm of accountants was appointed. The breakdown in the relationship with the previous accountants and auditors appears linked to a claim that they had sought to qualify accounts for the business for the period of time up to the date of completion of purchase in a manner which differed from information presented at the time of purchase of the pharmacy business.

5 . It appears from papers grounding an application to join additional parties that following the retainer of the new accountants and auditors, a cause of action as against the Third, Fourth and Fifth Named Defendants was identified. An order joining additional parties (namely the Third Named Plaintiff and the Third, Fourth and Fifth Named Defendants) was made by Quirke J. in March, 2011 whereby the issues in the proceedings enlarged to encompass claims in relation to the investment advice provided by the Third, Fourth and Fifth Named Defendants in circumstances where the Fifth Named Defendant, controlled by the Third and Fourth Named Defendants and existing accountants and auditors to the pharmacy business had advanced funds by way of loan in respect of the pharmacy transfer.

6 . In joining additional parties, Quirke J. directed a partition in the sequencing and hearing of issues with the apparent intention that the issues between the purchaser and vendor be determined before the issues with the advisors and funders. He directed, however, that all matters would proceed before the same judge.

7 . As is apparent from the General Endorsement of Claim to the amended Plenary Summons, the claim of the Company and the Second Named Plaintiff against the First and Second Named Defendants is separate from the claim of all three Plaintiffs against the Third, Fourth and Fifth Named Defendants. The claim against the First and Second Named Defendants is based on those Defendants' positions as vendors of the Company and is, in essence, a claim for damages and related reliefs arising out of breach of contract and misrepresentation by reason of the alleged provision by them of inaccurate financial information relating to the Company.

8 . The claim against the Third, Fourth and Fifth Named Defendants is a claim based on their alleged positions as “ advisors, accountants and corporate financiers” to all Plaintiffs and is, in essence, a claim for damages for alleged negligence and misrepresentation in the course of acting as advisors. As against the Fifth Named Defendant, it is, in addition, alleged that it advanced a loan of €300,000 to the Third Named Plaintiff which it should not have advanced in tight of the knowledge of its directors of the true financial position of the Company. Accordingly, from the amended pleadings it appears that the Plaintiffs' case extends inter alia to concealed and/or misrepresented poor financial performance, breach of duty and negligence.

9 . Comprehensive defences have been filed on behalf of all Defendants in which all material claims have been put in issue. In...