Keohane v Hynes

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke,Hardiman J., Clarke J., Laffoy J.
• Judgment Date: 20 November 2014
• Neutral Citation: [2014] IESC 66
• Court: Supreme Court
• Docket Number: [Appeal No: 15/2010]
• Date: 20 November 2014

[2014] IESC 66

THE SUPREME COURT

[Appeal No: 15/2010]

Between/

Michael Keohane

Plaintiff/Appellant

and

John Hynes

First Named Defendant

and

Duncan Grehan practising under the style and title of Duncan Grehan and Partners

Second Named Defendant/Respondent

Appeal – Jurisdiction – Practice and Procedures – Negligence – Breach of Contract – Liability

Facts: The appeal under consideration raised questions about the exercise of the inherent jurisdiction which the courts possess to dismiss proceedings as being bound to fail. The case arose out of a contract entered into in September 2009 for the purchase of shares in a company called Lawayo Limited. In the proceedings, the plaintiff/appellant ("Mr. Keohane") asserted that he entered into an arrangement with the first named defendant ("Mr. Hynes") for the sale to Mr. Hynes of the shareholding in question. It would appear that a written contract was entered into in respect of the sale of the shares in question but that the contracting party in that contract was not Mr. Hynes but rather a company called Studley Investments Limited ("Studley"). While some of the sums due under the contract were paid, a significant balance in excess of £650,000 remained due. Mr. Keohane alleged that Mr. Hynes was liable to pay the euro equivalent of that balance together with interest. However, Mr. Keohane had also joined the second named defendant/respondent ("Grehan and Partners") who were the solicitors who acted both on his behalf and on behalf of the purchaser in the transaction in question. Against Grehan and Partners it was alleged that they were negligent in failing to advise Mr. Keohane of the fact that he was contracting with a company rather than with Mr. Hynes personally. In addition, Mr. Keohane claimed that some of the provisions of the contract were insufficient to protect his interests. It was said that there was an actionable failure on the part of his solicitors to ensure that any contract entered into was, irrespective of who the purchaser might be, sufficient to protect his interests. It was argued that those issues were exacerbated by what was said to have been the conflict of interest arising by virtue of the fact that Grehan and Partners acted for both sides. In summary, Mr. Keohane alleged that, if the true nature of the contract which he was to sign had been explained to him, he would not have entered into that contract. In addition, it was said that it was possible that, if there had been no wrongdoing on the part of Grehan and Partners, a contract which was with Mr. Hynes personally and which did adequately protect his interests could have been procured and entered into. It was said that Studley became insolvent and was dissolved so that the contract with them became worthless. The claim was framed in the tort of negligence, in breach of contract and in misrepresentation. Against that background, Grehan and Partners brought an application before the High Court seeking to have the proceedings dismissed either under O.19, r.28 of the Rules of the Superior Courts or under the inherent jurisdiction of the Court. Hedigan J. acceded to that application and dismissed the proceedings: Mr. Keohane appealed against that finding. It also appeared that Hedigan J. made an order striking out as being bound to fail the proceedings not only as against Grehan and Partners but also against Mr. Hynes. In addition, in the context of the appeal, Mr. Keohane sought leave to introduce additional evidence in the form of what was said to be a recording of a conversation between his wife and a solicitor in the firm of Grehan and Partners. At the conclusion of the hearing, and having taken some time to consider the matter, the Court informed the parties that the appeal as and between Mr. Keohane and Grehan and Partners would be allowed and that the order of Hedigan J. dismissing the proceedings as against Grehan and Partners would be vacated. The Court indicated that it had reached that conclusion without needing to address the question of additional evidence for, as the Court noted, it was satisfied that, on the basis of the evidence before the High Court, the proceedings should not have been dismissed.

Held by Justice Clarke that he was satisfied that the trial judge had wrongly engaged with the facts in an impermissible way and that the trial judge's reasoning in dismissing the proceedings as against Grehan and Partners as being bound to fail could not be sustained. It was reasoned that even on the basis of permitting a new argument to be raised, Justice Clarke was not satisfied that the lack of consequences argument put forward on behalf of Grehan and Partners was such as made the proceedings bound to fail. In concluding, Justice Clarke determined that it was necessary to return to the question of the position in respect of the claim against Mr. Hynes. He noted Mr. Hynes appeared to have been served with the notice of appeal. Thus, Justice Clarke was of the opinion that it was clear that an order to dismiss the claim against Mr. Hynes could not validly have been made on an application brought solely by Grehan and Partners in circumstances where no like application was brought before the High Court on behalf of Mr. Hynes. Subject to clarifying with counsel as to the status of the appeal against the order insofar as it related to the claim against Mr. Hynes, Justice Clarke allowed that aspect of the appeal as well.

Hardiman J., Clarke J., Laffoy J Mr. Justice Clarke

Judgment of Mr. Justice Clarke delivered the 20th November, 2014

1 1. Introduction

1.1 This appeal raises questions about the exercise of the inherent jurisdiction which the courts possess to dismiss proceedings as being bound to fail. This case generally arises out of a contract entered into in September 2000 for the purchase of shares in a company called Lawayo Limited. In the proceedings, the plaintiff/appellant ("Mr. Keohane") asserts that he entered into an arrangement with the first named defendant ("Mr. Hynes") for the sale to Mr. Hynes of the shareholding in question. It would appear that a written contract was entered into in respect of the sale of the shares in question but that the contracting party in that contract was not Mr. Hynes but rather a company called Studley Investments Limited ("Studley"). While some of the sums due under the contract were paid, a significant balance in excess of IR£650,000 is said to remain due.

1.2 Mr. Keohane alleges that Mr. Hynes is liable to pay the euro equivalent of that balance together with interest. However, Mr. Keohane has also joined the second named defendant/respondent ("Grehan and Partners") who are the solicitors who acted both on his behalf and on behalf of the purchaser in the transaction in question. Against Grehan and Partners it is alleged that they were negligent in failing to advise Mr. Keohane of the fact that he was contracting with a company rather than with Mr. Hynes personally. In addition, Mr. Keohane claims that some of the provisions of the contract were insufficient to protect his interests. It is said that there was an actionable failure on the part of his solicitors to ensure that any contract entered into was, irrespective of who the purchaser might be, sufficient to protect his interests. It is argued that those issues are exacerbated by what is said to have been the conflict of interest arising by virtue of the fact that Grehan and Partners acted for both sides. In summary, Mr. Keohane alleges that, if the true nature of the contract which he was to sign had been explained to him, he would not have entered into that contract. In addition, it is said that it was possible that, if there had been no wrongdoing on the part of Grehan and Partners, a contract which was with Mr. Hynes personally and which did adequately protect his interests could have been procured and entered into. It is said that Studley became insolvent and was dissolved so that the contract with them became worthless. The claim is framed in the tort of negligence, in breach of contract and in misrepresentation.

1.3 Against that background, Grehan and Partners brought an application before the High Court seeking to have the proceedings dismissed either under O. 19, r.28 of the Rules of the Superior Courts or under the inherent jurisdiction of the Court. Hedigan J. acceded to that application and dismissed the proceedings: (See Keohane v. Hynes & anor [2009] IEHC 601). Mr. Keohane appealed to this Court against that finding. It also appears that Hedigan J. made an order striking out as being bound to fail the proceedings not only as against Grehan and Partners but also against Mr. Hynes. It would appear that no application had been brought by Mr. Hynes seeking such a strike out. In those circumstances, it is said that there could have been no proper basis on which the claim against Mr. Hynes could have been struck out in any event. This side issue is one to which it will be necessary to turn in due course.

1.4 In addition, in the context of this appeal, Mr. Keohane sought leave to introduce additional evidence in the form of what is said to be a recording of a conversation between his wife and a solicitor in the firm of Grehan and Partners.

1.5 At the conclusion of the hearing, and having taken some time to consider the matter, the Court informed the parties that the appeal as and between Mr. Keohane and Grehan and Partners would be allowed and that the order of Hedigan J. dismissing the proceedings as against Grehan and Partners would be vacated. The Court indicated that it had reached that conclusion without needing to address the question of additional evidence for, as the Court noted, it was satisfied that, on the basis of the evidence before the High Court, the proceedings should not have been dismissed. It was not, therefore, necessary to determine the question of whether, had a different...