Harrahill v Swaine
 IECA 36
THE COURT OF APPEAL
1228/2014 - Peart Irvine Mahon - Court of Appeal - 13/2/2015 - 2015 IECA 36
Appeal against judgment and order of the High Court – Application for summary judgment – Whether defendant had demonstrated a reasonable probability of having a real or bona fide defence to the plaintiff”s claim – Taxation – Arrears – Repayment agreement
Judgment of the Court delivered on the 13th February 2015 by Ms Justice Mary Irvine
1. This is the plaintiff/appellant's appeal against the judgment and order of the High Court (Barrett J.) made on 28 th February 2014.
2. On the aforementioned date, the learned trial judge adjourned the within summary summons proceedings for plenary hearing. He did so in circumstances where he expressed himself satisfied that the defendant, in his various affidavits filed in the matter, had demonstrated a reasonable probability of having a real or bona fide defence to the plaintiffs claim, that being the test advised in many decisions including that of McKechnie J. in Harrisrange Limited v. Duncan  4I.R., when a court is faced with an application for summary judgment.
3. The background to the proceedings is that in April 2012 the Revenue Commissioners ("the Commissioners") through their nominee, Mr. Harrahill, commenced proceedings against Mr. Swaine, a solicitor, seeking to recover a sum of €1,692,849.12. That sum was later reduced to a claim for €1,662,288 having regard to a number of revised assessments submitted by the defendant and which were made subsequent to the issue of the proceedings.
4. The sum claimed by The Commissioners is in respect of arrears of income tax, PAYE, PRSI, VAT, CGT and CT together with interest allegedly due in respect of the period 2004 to 2012.
5. The plaintiff's motion seeking liberty to enter final judgment, which was issued in January 2014, spawned several affidavits which were sworn on behalf of the parties.
6. From the outset, Mr. Swaine maintained that as a result of a meeting between himself and two Revenue officials on 20 th June 2011 that the Commissioners had agreed to forebear in issuing proceedings to recover his then outstanding tax liabilities on the terms set out at para. 7 of his first replying affidavit. That paragraph reads as follows:-
2 "7. I say that however, discussions were had with the said Christina O'Toole and Jimmy Dillon and an agreement was reached with them to the effect that:-
(a) I would rearrange my affairs so that my tax liabilities (that had been agreed with the Revenue Commissioners) would cease to increase by virtue of my restructuring my affairs into the future including, in particular:-
(i) the restructuring of the practice so that I would form a partnership and
(ii) restructuring of my affairs so that the public house would be incorporated and operated through a company.
(b) The tax refund of €186,617 would be set off against the company's liabilities and not my own liabilities.
(c) In consideration for the above the Revenue Commissioners would not pursue the outstanding tax liabilities (the subject matter of the proceedings herein) until such time as the above mentioned nursing home cases had resolved and the legal fees had been paid and then at that stage the liabilities to the Revenue Commissioners would be fully or significantly discharged out of the legal fees expected to arise."
I will refer to this agreement as the "repayment agreement" as that is how it is described by the trial judge in his judgment.
7. As may be inferred from the aforementioned averment, at the time that the Commissioners were seeking to recover the sums claimed in these proceedings, the defendant was handling approximately one hundred and forty cases in which his clients were seeking repayment of what were alleged to have been illegal charges made in respect of nursing home care. It was anticipated that all of these claims would be successful and that he would receive substantial fees when the litigation was concluded.
8. Mr. Swaine, in his affidavits, maintained that the repayment agreement referred to at para. 7 of his affidavit was supported by a letter of undertaking which he furnished to the Commissioners dated 21 st June 2011 which referenced the meeting at which the agreement had allegedly being concluded and a letter in reply from the Commissioners dated 14 th July 2011.
9. Mr. Swaine also maintained that that he had fully complied with the repayment agreement in that he:-
(a) had restructured his practice and formed a partnership and had further rearranged his affairs so as to ensure that his tax liabilities did not continue to increase;
(b) had allowed a sum of €186,617.00, which was due to him personally as a tax refund, to be set off against the liability due to the Revenue Commissioners by a company under his control, and
(c) had transferred a particular licensed premises, as required, to operate as a limited liability company.
10. While the defendant had hoped that the nursing home litigation would have been concluded and his liabilities discharged to the Commissioners by October 2011, he maintained that this did not matter given that there had been no deadline for the settlement of these cases as a term of the repayment agreement. Accordingly, in light of his compliance with the terms of that agreement he maintained that the Commissioners in issuing the within proceedings, were in breach of their obligations to forebear from doing so and that he had a bona fide and credible defence to the claim.
11. Mr. Swaine also made a number of complaints in his affidavits regarding the computation of the sums claimed. However, it appears that he did not pursue these complaints in the course of the High Court hearing. It was also accepted on this appeal that the effect of S.933 of the Taxes Consolidation Act 1997 is that the sums the subject matter of this claim became final and conclusive against the defendant given that he had not appealed the underlying assessments. Further, Mr. Swaine did not file a supplemental affidavit to contest the schedule of his indebtedness exhibited in Mr. Dillon's affidavit of 13 th October 2013. Accordingly, there is no need to consider the validity of the sum claimed as forming a possible basis upon which these proceedings could be defended.
12. The plaintiffs' position vis-à-vis the repayment agreement contended for by Mr. Swaine was dealt with by Ms. Scanlon in her affidavit of 16 th April 2013 and Mr. Dillon in his affidavit of the 13 th October 2013. Those affidavits accept that the Commissioners agreed to postpone issuing proceedings against the defendant on two conditions, namely:-
(i) that all of his fees arising from the nursing home litigation would be paid over to them by October 2011, and
(ii) that he would remain fully tax compliant thereafter and would file all future returns with the appropriate payment by their due date.
13. In her submission on the plaintiff's behalf, Ms Moorhead S.C conceded that in the light of Mr Dillon's affidavit, which referred to the defendant's hope that the nursing home litigation would be settled by October 2011 rather than to any specific commitment to make the payment by the end of that month, it would be difficult to contend for a strict application of the first of these conditions. However, she submitted that the court could ignore this condition given that the defendant had clearly been in breach of the other term of the agreement.
14. In this regard, Mr Dillon, at para. 6 of the final affidavit sworn in the proceedings drew the courts attention to the fact that the defendant had failed to to keep his tax affairs up to date. He backed up that assertion by referring to four examples of what he maintained were clear examples of his non compliance.
15. Mr. Swaine did not file any supplemental affidavit seeking to dispute the matters last desposed to by Mr. Dillon.
16. The conclusions of the learned High Court judge can be summarised as follows. Firstly, he appears to have accepted that the defendant was lawfully indebted to the plaintiff in the sum of €1,662,288.01 together with interest thereon. No argument was apparently made to dispute the Commissioners submission that in the absence of any appeal by the defendant against the assessments underlying the proceedings, that the same had become binding and conclusive by reason of s. 933 of the Taxes Consolidation Act 1997.
17. Secondly, the trial judge concluded that the defendant had made out a case that he had entered into a binding repayment agreement with the Commissioner in June 2011 whereby they agreed to forbear in issuing proceedings against him in respect of his then outstanding liabilities on terms which included a requirement that he would arrange his tax affairs such that his liabilities would cease to increase...
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