Kennedy v Law Society of Ireland (No 4)

JurisdictionIreland
CourtSupreme Court
JudgeMr. Justice Geoghegan
Judgment Date21 April 2005
Neutral Citation[2005] IESC 23
Date21 April 2005
Docket Number[1996 No. 155 JR; S.C. Nos. 423 and 434 of

[2005] IESC 23

THE SUPREME COURT

Denham J.

McGuinness J.

Hardiman J.

Geoghegan J.

Fennelly J.

423/03
434/03
KENNEDY T/A GILES J KENNEDY & CO v LAW SOCIETY OF IRELAND & ORS
BETWEEN/
GILES J. KENNEDY CARRYING ON PRACTICE UNDER THE STYLE OF GILES J.KENNEDY AND COMPANY
Applicant

and

THE LAW SOCIETY OF IRELAND, PATRICK JOSEPH CONNOLLY AND AISLING FOLEY
Respondents

SOLICITORS ACCOUNTS REGS 1984 SI 204/1984

GLENCAR EXPLORATION PLC & ANDAMAN RESOURCES PLC v MAYO CO COUNCIL 2002 1 IR 112 2002 1 ILRM 481

ANNS v MERTON LONDON BOROUGH COUNCIL 1978 AC 728

WARD v MCMASTER 1988 IR 337 1989 ILRM 400

CAPARO INDUSTRIES PLC v DICKMAN 1990 2 AC 605

MCDONNELL v IRELAND 1998 1 IR 134

THREE RIVERS DISTRICT COUNCIL & ORS v BANK OF ENGLAND 2000 3 ALL ER 1

DONOGHUE v STEVENSON 1932 AC 562AG v O'BRIEN 1965 IR 142

TORT

Misfeasance in public office

Scope of tort - Unlawful investigation - Whether respondents acted mala fides - Whether respondents guilty of reckless indifference - Negligence - Duty of care - Scope of respondents' duty of care - Entitlement to damages - Three Rivers DC v Bank of England (No 3) [2000] 2 WLR 1220 approved - Solicitors Accounts Regulations (No 2) 1984 (SI 304/1984) - Solicitors Act 1954 (No 36) - Solicitors (Amendment) Act 1994 (No 27) - Claim for damages dismissed (423/2003 & 434/2003 - Supreme - 21/4/2005) [2005] IESC 23

Kennedy t/a Giles J Kennedy & Co v Law Society of Ireland & Ors

This appeal had a long history which included two substantive judgments of the Supreme Court. The Court had held that the Law Society had appointed an accountant for two purposes, one of which was ultra vires and the other intra vires. The Court reserved to the High Court any question of damages flowing from the invalidity in the appointing decision. The High Court (Kearns J.) held that the applicant had fallen short on the balance of probablities of establishing a case of misfeasance in public office.

Held by the Supreme Court (Denham, McGuinness, Hardiman, Geoghegan and Fennelly JJ) in dismissing the appeal that the High Court had held that there was no evidence of bad faith on the part of the Law Society which would support an allegation of deliberate or reckless behaviour. These primary findings of fact could not be interfered with. In so far as the High Court had drawn inferences, it would seem that they were legitimate inferences.

Reporter: R.W.

1

JUDGMENT of Mr. Justice Geoghegan delivered the 21st day of April 2005

2

This appeal has a long history which includes two substantive judgments of this court delivered by Murphy J. and Fennelly J. on the 4th April, 2001 and the 20th December, 2001 respectively. The issues of fact in the dispute between the parties have long been finally determined and I do not intend to review them in any detail in this judgment. What is at issue in this appeal can be shortly explained by reference to the two previous decisions of this court already referred to. Originally, the third- named respondent, as an investigating accountant on behalf of the first-named respondent ( "the Law Society"), had been entrusted by the Society with what has been described as a "two-pronged investigation". One prong of the investigation was the ascertainment by her of whether the appellant had complied with the Accounts Regulations. That was the only disclosed purpose of the investigation. The other prong, however, which was not originally disclosed, was the investigation of suspect litigation processed by the appellant.

3

For the purposes of these investigations, the Law Society instituted proceedings by way of plenary summons seeking injunctions against the appellant in relation to his files. In those proceedings there was an application for interlocutory injunctions against the appellant which came on for hearing before Costello J. and which feature quite prominently in this appeal. At this stage of the judgment it is sufficient to note that, as of that stage, the appellant had become aware of the second purpose of the investigation.

4

The appellant delivered a defence and counterclaim in those proceedings. In the prayer part of the counterclaim he sought damages. In the body of the counterclaim taken in conjunction with the pleas in the Defence which of course were repeated for the purposes of the counterclaim the case pleaded for the purposes of the damages claim was essentially confined to an allegation that the Law Society and its officers, the two other respondents had acted ultra vires in authorising and carrying out the second prong of the investigation.

5

The appellant also instituted judicial review proceedings which were, in due course, consolidated with the plenary action to which I have already referred. For all practical purposes the issues raised by the judicial review proceedings were similar to the issues involved in the counterclaim to the plenary proceedings. In the statement grounding the judicial review application there was also a claim for damages as well as various judicial review type reliefs but in this instance the actual claim for damages was worded as "damages for breach of statutory and public duty". Nothing, however, turns on this in my view.

6

Murphy J. in his said judgment of the 4th April, 2001 with whom the other members of the Supreme Court agreed concluded that the investigation of fraudulent claims is not an authorised purpose under the Solicitors Accounts Regulations, 1984. Murphy J. went on to observe:

"As an investigating accountant is not empowered by the Regulations to investigate fraudulent claims processed by a solicitor he may not be appointed for that purpose."

7

On that occasion this court left over for further consideration the question of the legal consequences of these findings. A resumed hearing took place for that purpose and, as already mentioned, a secondary judgment was delivered by Fennelly J. on the 20th December, 2001 with which again all the other members of the court agreed. In that judgment, Fennelly J. pointed out that the issue then before the court flowed from the following passage in the earlier judgment of Murphy J.:

"In the present case it would seem that Ms Foley was appointed for a duality of purposes or on the basis of an ulterior motive. As the learned trial judge held, Ms Foley was required to undertake a “two-pronged investigation”. One prong of the investigation, that is to say, the ascertainment by her of whether Mr. Kennedy had complied with the Accounts Regulations was fully and properly disclosed; the other prong, the investigation of suspect litigation processed by Mr. Kennedy's firm, was concealed initially though quickly became apparent.

Both investigations proceeded and were completed in spite of the objection by Mr. Kennedy to the production of certain confidential documents which, ultimately, he was required to produce by the order of Costello J. made on the 29th day of July, 1993. The report of Ms Foley formed the basis of the decision of the Society to seek an inquiry (in February 1996) by the Disciplinary Tribunal of the High Court into the conduct of Mr. Kennedy. Whether in reaching that decision the Society was entitled to rely on all or any part of Ms Foley's report is a matter which would require further consideration …"

8

Fennelly J. goes on to quote the following passage in the last page of the judgment of Murphy J.:

"There remains the question as to what legal consequences flow from the appointment by the Society for two purposes one of which was ultra vires and the other intra vires. The matter must be remitted to the High Court for the purposes of assessing damages (if any) to be awarded to Mr. Kennedy but it would seem appropriate for this court to determine, first, whether the appointment of Ms Foley was defective in whole or in part and, secondly, whether the report prepared by her or any part of it can be relied upon by the Society for any purpose. It will be necessary also to consider the nature of the order to be made by this court having regard to the complex history of the proceedings and the orders already made herein."

9

Fennelly J. in his judgment came to the conclusion that although the appointment was invalid in his view and that the report the product of the inquiry was indissociable from the decision of the Compensation Fund Committee based upon it which had to be quashed, nevertheless by analogy with the views expressed by Kingsmill Moore J. in the famous O'Briencase, Fennelly J. expressed the view that in the absence of evidence of deliberate and known abuse, the Law Society would not be inhibited from relying on evidence which though unlawfully acquired in the circumstances could have been lawfully acquired.

10

The Supreme Court in its earlier decision had reserved to the High Court any question of damages to be paid to the appellant but Fennelly J. made clear that nothing in his judgment implied any entitlement to damages flowing from the invalidity of the appointing decision. The High Court were to consider the matter in the light of the general law including the then recent decision of this court in Glencar Exploration Plc v. Mayo County Council which had been decided on the 19th July, 2001 and, therefore, subsequently to the earlier Supreme Court decision.

11

That was the state of play in which this case returned to Kearns J. in the High Court. There would appear to be strong internal evidence to suggest that up to that point, the appellant and his legal advisers had believed that a finding of ultra vires would lead automatically to damages. In addition to submissions and comments which would seem to have that effect in the course of trials in the High Court both the counterclaim in...

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