LSREF III Stone Investments Ltd v John Morrissey and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 11 March 2015
• Neutral Citation: [2015] IEHC 199
• Court: High Court
• Date: 11 March 2015

[2015] IEHC 199

THE HIGH COURT

[1548 S/2011]

[86 COM/2011]

Record No.1548S/2011

LSREF III Stone Investments Ltd v Morrissey

COMMERCIAL

No Redaction Needed

Approved Judgment

BETWEEN

LSREF III STONE INVESTMENTS LIMITED

PLAINTIFF

AND

JOHN MORRISSEY

DEFENDANT

LSREF III STONE INVESTMENTS LIMITED

Plaintiff

and

AMENDED DEFENCE AND COUNTERCLAIM

ANGLO IRISH BANK CORPORATION LIMITED

JOHN MORRISSEY

DEFENCE AND COUNTERCLAIM

Application to strike out - Amended Defence - Amended Counterclaim - Discovery - Bank Loans - Irish Bank Resolution Corporation Act 2013

Facts: The plaintiff brought motions to strike out in whole or in part an amended defence and counterclaim (‘the 2015 Amended Defence and Counterclaim’) and the defendant brought a motion to stay proceedings (the Debt proceedings’) or to consolidate the proceedings with new proceedings (‘New proceedings’)issued in 2014. The defendant also brought a motion for discovery..

This was the fifth judgment stemming from proceedings originally issued by the Anglo Irish Bank Corporation (‘the Bank’) to recover judgment of €36 million from the defendant on foot of loan facilities. After a complex history of proceedings the parties agreed to a modular trial. During the trial the Irish Bank Resolution Corporation Act 2013 (‘the 2013 Act’) was enacted and the Minister for Finance made a Special Liquidation Order pursuant to s. 4 of the Act appointing joint special liquidators. The plaintiff argued that the 2015 amended defence and counterclaim exceeded the grant of leave to amend the defence and counterclaim granted by Finlay J in 2014. The plaintiff argued that this constituted an abuse of process and ought to be struck out or considerable parts of the amended defence and counterclaim be struck out.

Held The Court stated that it would be adverse to all the proceedings and related orders to date if it were to admit matters that have already been ruled out or rejected at earlier stages. In order that the trial judge hearing the remaining issue in the Debt proceedings could more easily understand the pleadings in the remainder of the case, the Court would direct the defendant to produce an addendum to his 2015 amended defence and counterclaim confined to the outstanding issues.

In relation to the motion to stay and/or consolidate proceedings in light of the decisions in the Debt proceedings and the New proceedings the Court determined there was no question of law or fact of sufficient importance to warrant consolidating two actions. Furthermore, the balance remaining in the ‘New’ proceedings was a constitutional challenge to parts of the 2013 Act.

It was well established that Courts should not seek to determine whether legislation is compatible with the Constitution where matters can be determined on other grounds. It was therefore appropriate to determine whether or not the plaintiff was entitled to judgment against the defendant pursuant to the Loan Sale Agreement and the Deed of Transfer in the Debt proceedings first. If the issue was determined against the defendant only then would the question of constitutionality arise. Discovery should only be considered when pleadings have closed and issues joined except in exceptional circumstances that did not apply in this case. The Court struck out certain parts of the 2015 amended defence and counterclaim, refused the application to stay the debt proceedings with new proceedings issued in 2014, and refused an application to consolidate the debt proceedings with the new proceedings. The Court determined that it was appropriate for the defendant to make a fresh request for voluntary discovery arising out of the issued defined by permitted proceedings. O’Donnell v. Dun Laoghaire Corporation [1991] 1 ILRM 301 applied.

1 JUDGMENT of Ms. Justice Costello delivered the 11th day of March, 2015

2 Delivered this 16th January 2015 by Black & Company, Solicitors for the Defendant, of 28 South Frederick Street, Dublin 2

Introduction

3 1. This judgment is the fifth judgment that will be delivered by the High Court in these proceedings. It is a judgment in respect of motions to strike out in whole or in part an amended defence and counterclaim delivered on 16 ^th January, 2015 ("the 2015 Amended Defence and Counterclaim"), brought by the plaintiff and a motion to stay the proceedings ("the Debt proceedings") or to consolidate the proceedings with new proceedings issued in 2014 entitled John Morrissey v. Irish Bank Resolution Corporation Limited (in Special Liquidation), LSREF III Stone Investments Ltd., Kieran Wallis, Eamonn Richardson, The Minister for Finance, Ireland and The Attorney General, Rec. No. 2014/9156 P ("the New proceedings") brought by the defendant. There was also a motion for discovery brought by the defendant. The 2015 Amended Defence and Counterclaim is attached to this judgment as a schedule and this judgment should be read referencing the pleading where necessary. Before dealing with the issues raised in these motions it is necessary to set out a history of the proceedings to date.

History of the proceedings

4 2. Anglo Irish Bank Corporation Ltd. ("Anglo" or "the Bank") instituted proceedings by way of summary summons on 13 ^th April, 2011, seeking to recover judgment in the sum of €36 million from the defendant ("Mr. Morrissey") arising on foot of various facilities entered into between the Bank and Mr. Morrissey. The proceedings were entered into the Commercial List of the High Court by Order dated 23 ^rd May, 2011. There was an exchange of affidavits and Mr. Morrissey was granted leave to defend the proceedings and the matter was adjourned to plenary hearing. This meant that the case henceforth was subject to case management by the Commercial Court and the defendant was confined to the grounds upon which he had been given liberty to defend the proceedings in his defence. At a hearing on 24 ^th October, 2011, Kelly J. refused to allow the defendant to deliver a very wide ranging defence. Among many pleas it was pleaded that the Bank should have known in 2008 and 2009 that it was insolvent and that this afforded a defence to the claim for the monies advanced pursuant to the facilities. The vast majority of the Defence and Counterclaim Mr. Morrissey sought to deliver raised historical issues in the Bank relating to its general business conduct and its solvency to which the plaintiff took exception. Kelly J. held that:-

"This defence is not going to be allowed stand in this division of the Court because I am not going to be sent up blind alleys by the Defendant to start having to look at matters that can have no bearing whatsoever on such line of defence as he may have and this is entirely contrary to the whole notion of trying to have a commercial court that is to deal with commercial disputes. "

5 There may well be a lot of people interested in some of the issues that you raise but they are not relevant or pertinent to the enquiry that this court is obliged to undertaking having a regard to the parameters of the claim."

6 3. Kelly J. ordered Mr. Morrissey to deliver an amended defence and counterclaim which was to identify and focus on the true matters and issues in issue between the parties. He expressly ruled out a defence based on wider complaints about the conduct and role of Anglo generally. This ruling still applies to the Debt proceedings.

7 4. On 8 ^th November, 2011, an "Unless Order" was made by Kelly J. directing Mr. Morrissey to deliver his defence by 2:00pm on 21 ^st November, 2011. The Defence and Counterclaim was delivered at 2:29pm and thus a judgment was automatically entered. This judgment was set aside on 8 ^th December, 2011, and Irish Bank Resolution Corporation Ltd. ("IBRC") was substituted as plaintiff.

8 5. On 23 ^rd January, 2012, there was a further directions hearing before Kelly J. It was noted that there was agreement in principle between the parties to a modular trial. Kelly J. directed that two issues were to be determined in advance of the determination of any other issues (if necessary) in the proceedings:-

9 (a) Whether the plaintiff was entitled to make demands on foot of the loan facility of February, 2009 as it did; and

10 (b) Whether the relationship between the plaintiff and the defendant went beyond that of a contractual relationship such that a fiduciary relationship existed between the plaintiff and the defendant.

11 6. The modular trial did not take place until a year later and was heard over 13 days between 22 ^nd January and 20 ^th February, 2013, by Finlay Geoghegan J. On 14 ^th May, 2013, she delivered her reserved judgement which ran to some 66 pages. At para. 5 she identified the defences pleaded in Mr. Morrissey's Defence and Counterclaim relevant to the issues to be determined in the module before her as:-

"The relevant defences pleaded in Mr. Morrissey's defence and counterclaim relevant to the issues to be determined in this module in summary are:"

(i) the Bank, in making demand for repayment of all monies then due, was in breach of an express or implied term of the then contractual arrangements between the Bank and Mr. Morrissey; and

(ii) the Bank, in January 2010, was estopped from demanding, calling in or terminating Mr. Morrissey's then facilities;

(iii) the representations, warranties, conduct, advice and consulting services provided by the Bank to Mr. Morrissey since 2000 created a fiduciary relationship between the Bank and Mr. Morrissey."

12 7. Thus the first line of defence involved construing the loan facility documents and assessing whether there were express or implied terms which prevented the Bank from exercising its right of demand in a certain way. The second line of defence was that there had been various representations giving rise to an estoppel and the third...