McDonagh and Another v Fane Investments Ltd and Others, Fane Investments Ltd and Others v McDonagh and Others

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr Justice Twomey
• Judgment Date: 25 April 2024
• Neutral Citation: [2024] IEHC 240
• Docket Number: Record No. 2021/4439 P

Between

Brian McDonagh and Maurice McDonagh

Plaintiffs

and

Fane Investments Limited, Quanta Capital Investents Limited, Mel Sutcliffe and Ulster Bank Ireland DAC

Defendants

Fane Investments Limited

Plaintiff

and

Brian McDonagh, Kenneth McDonagh and Maurice McDonagh

Defendants

[2024] IEHC 240

Record No. 2021/4439 P

RECORD NO. 2022/2174 P

THE HIGH COURT

COMMERCIAL

JUDGEMENT of Mr Justice Twomey delivered on the 25th day of April, 2024 .

INTRODUCTION

1 . This case is the latest in a 10-year saga of litigation pursued by Mr. Brian McDonagh (“ Mr. McDonagh”), who is circa €19 million in debt. Although Mr. McDonagh is now subject to an Isaac Wunder Order (vis-à-vis Ulster Bank), these proceedings were issued before the Isaac Wunder Order was obtained against him. The 10 years of litigation raises a number of points, which may be of more general application.

2 . The first relates to the rights of defendants, which do not appear to receive as much attention as the rights of plaintiffs. This is understandable perhaps, because most cases focus on whether there has been an alleged breach of the rights of the persons who have instituted the proceedings in question. Accordingly, there tends to be a concentration on the rights of plaintiffs, firstly in having access to the courts and then on their right to damage for alleged breaches of their personal, property or contractual rights.

3 . However, this case raises the question of whether the property rights of defendants are adequately protected by permitting plaintiffs with unmeritorious/misguided claims, to inflict significant and irrecoverable financial loss at will, often on multiple occasions, on any third party they choose to sue. This arises where those plaintiffs have insufficient resources to discharge a defendant's legal costs, when the defendant wins, and so those plaintiffs have nothing to lose.

Where does a ‘winning’ defendant, with irrecoverable legal costs, obtain justice?

4 . Another way to put the issue, raised by this case, is that while a plaintiff obtains justice by accessing the courts and obtaining judgment (even if he loses), where does the successful defendant, with irrecoverable legal costs go, to obtain justice?

5 . With the concentration on the right of a plaintiff to sue and to vindicate his rights, the rights of a defendant seem to get less attention. The reality is that such a defendant has nowhere to go and her ‘justice’ appears to be to simply accept the financial loss she has incurred in defeating an unmeritorious, misguided or vengeful claim. It is for this reason that one might ask whether there is an effective disincentive to the brining of unmeritorious, misguided or vengeful litigation, in order to adequately the property rights of defendants, with irrecoverable losses. After all, the plaintiff has the option of going to court or not; the defendant has no choice, yet she is the one ending up with the irrecoverable legal costs for ‘winning’ the case.

6 . Over ten years ago in the Supreme Court case of Farrell v. The Governor and Company of the Bank of Ireland [2013] 2 ILRM 183 at para. 4.12, Clarke J. stated:

“ If there were not provision requiring generally for the payment of costs to the successful party then there would be a real risk that the bringing or defending of proceedings could be used as a form of unfair tactic little short, at least in some cases, of blackmail.”

Since this statement is premised on the ‘ payment’ of costs by a losing party, it follows that where a plaintiff has insufficient resources to pay those costs, then the bringing of unmeritorious, misguided or vengeful proceedings can amount to a form of blackmail. Where the proceedings are issued in the High Court, the sums involved can be enormous, since the successful defendant is facing tens/hundreds of thousands of euro, if not more, in irrecoverable costs in order to defeat those claims.

7 . The irony for a defendant in this situation is that, while a plaintiff is able to seek justice and take an unmeritorious case against her, there is nowhere for her, as a successful defendant, to seek justice, to recover her merited claim for legal costs, if the plaintiff has insufficient resources. She, it seems, is meant to be happy that her rights have been vindicated by the courts in dismissing the plaintiff's unmeritorious claim. However, this takes no account of the fact that tens/hundreds of thousands of euro of her property (i.e. money she has to pay in legal costs) has, in effect, been appropriated, by the actions of a plaintiff.

The ‘ need to prevent persons litigating on a consequence-free basis.’

8 . It was this type of situation which led the Supreme Court in W.L. Construction Limited v. Chawke [2019] IESC 74 at para. 67 (per O'Malley J.). to state five years ago, that there is a ‘ need to prevent persons litigating on a consequence-free basis.’ It seems to this Court that this need arises, whether the plaintiff is an individual, as in this case, or an individual behind a company, as happened in the W.L. Construction case. Yet, in the five years since that judgment, there are still no consequences for an individual plaintiff, with insufficient resources to pay the defendant's legal costs, taking unmeritorious/misguided and sometimes serial litigation against a defendant. For example, there is no requirement that even a relatively small amount of money ( i.e. relative to the plaintiff's finances, but sufficient to act as a disincentive to bringing unmeritorious claims), is put up as security for costs. This would ensure that a plaintiff is not litigating on a ‘ consequence-free basis’ against a defendant, for whom the litigation is full of consequence (in terms of legal costs).

9 . The irony of the current situation is that if a defendant is ‘lucky’ enough to be pursued by a company, with an unmeritorious/misguided claim, she is unlikely to be facing a financial loss when she ‘wins’, since the law provides for a ‘level-playing’ field, by entitling her to seek security for her costs from the plaintiff company, before it proceeds with the claim.

10 . However, if she is unlucky enough have the exact same unmeritorious/misguided claim brought by an individual, there is no requirement for the plaintiff to put up even a small security for the defendant's costs. Thus, there is no level-playing field between plaintiff and defendant and so no effective disincentive to the bringing of that claim. This explains why the caselaw regarding vexatious and abuse of process claims in our courts is full of cases concerning individual plaintiffs, and rarely, if ever, corporate plaintiffs. This is because the requirement to provide security for costs appears to reduce considerably, if not eliminate, unmeritorious, misguided or vengeful litigation on the part of corporate plaintiffs. This is also evidenced by the fact that it is practically unheard of for a court to have to grant an Isaac Wunder Order against a corporate plaintiff for continuously bringing unmeritorious/misguided/vengeful litigation.

No level playing field between a defendant and certain plaintiffs

11 . So long as there are no consequences for such plaintiffs, there will never be a level playing field between a defendant, who has everything to lose (in legal costs), and a plaintiff, with insufficient resources to pay the defendant's legal costs, and so with nothing to lose (in legal costs). Accordingly, the risk of blackmail, to which the Supreme Court in Farrell alluded, will continue for certain defendants.

12 . The absence of any effective disincentive to unmeritorious litigation by plaintiffs with nothing to lose, begs the question of whether a defendant's property rights are adequately protected. This is because such plaintiffs continue to be allowed to take consequence-free unmeritorious litigation, and so can inflict, at will, irrecoverable financial loss on a defendant, despite the Supreme Court's call in W.L. Construction for an end to ‘ consequence-free’ litigation. This is as matter of significance to every person in the State, because, any person, at any time, can be subjected to tens/hundreds of thousands of euro in irrecoverable legal costs, by the simple expedient of a person (with insufficient resources to pay the defendant's legal costs) deciding to institute unmeritorious, misguided or vengeful proceedings against that person.

Confirmation bias

13 . The second issue of general application, which arises in this case, relates to the risk of confirmation bias in litigation, which was highlighted by Gearty J. in Crumlish v. HSE [2023] IEHC 194. Confirmation bias arose in that case in the context of a medical expert giving a medical opinion to support a claim of medical negligence. That case highlighted the risk of a medical expert, knowing that a cancer diagnosis had not been diagnosed, seeking out and relying only on evidence which confirms his view, that the diagnosis was negligently missed, rather than analysing the evidence, without any pre-conceived outcome in mind.

14 . However, confirmation bias is a risk in all types of litigation, and not just in the context of experts giving their views in a personal injuries/medical negligence claim. This is because litigation, by its very nature, involves the giving of reasons by a litigant for acts or omissions after the event i.e. after the alleged negligence, after the alleged breach of contract, after the failure to meet a deadline (see e.g. Glenman Corporation Limited v Galway County Council [2023] IEHC 336 at para [50–52]). The risk arises because these reasons are given, usually with the benefit of legal advice, and invariably with the benefit of knowing what legal tests have to be satisfied for the litigant to succeed. It arises because once a litigant is viewing her past acts or omissions, with the knowledge of what legal test has to be satisfied,...