Mount Kennett Investment Company v O'Meara and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 29 March 2012
• Neutral Citation: [2012] IEHC 167
• Court: High Court
• Date: 29 March 2012

[2012] IEHC 167

THE HIGH COURT

[No. 1657 P/2005]

Mount Kennett Investment Co & Greenband Investments v O'Meara & Ors

BETWEEN

MOUNT KENNETT INVESTMENT COMPANY AND BY ORDER OF THE COURT GREENBAND INVESTMENTS

PLAINTIFFS

AND

PATRICK O'MEARA, ANTHONY FITZPATRICK AND JOHN TOBIN

DEFENDANTS

MOUNT KENNETT INVESTMENT CO v O'MEARA & ORS UNREP SMYTH 21.11.2007 2007/42/8875 2007 IEHC 420

MOUNT KENNETT INVESTMENT CO & GREENBAND INVESTMENTS v O'MEARA & ORS UNREP CLARKE 1.6.2010 2010/37/9424 2010 IEHC 216

MOUNT KENNETT INVESTMENT CO & GREENBAND INVESTMENTS v O'MEARA & ORS UNREP CLARKE 9.3.2011 2011 IEHC 210

LEGAL PRACTITIONERS (IRL) ACT 1876 S3

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S149(2)

ROCHE v ROCHE 1892 29 LRI 339

M'LARNON v CARRICKFERGUS URBAN DISTRICT COUNCIL 1904 2 IR 44

O'CALLAGHAN THE LAW ON SOLICITORS IN IRELAND 2000 PARA 9.77

COLE v ELEY 1894 2 QB 350

HAMER v GILES 1879 11 CH D 942

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S149

PRACTICE AND PROCEDURE

Costs

Solicitors - Complex litigation - Settlement - Statutory entitlement of solicitor to charge property recovered or preserved - Whether solicitors employed to prosecute suit in court - Whether wording of section mandatory - Whether order could be made where money recovered or preserved by reason of compromise - Whether property recovered through instrumentality of solicitors - Whether order would give solicitor priority over other creditors - Equity - Whether countervailing considerations of equitable nature which made making of order inequitable - Whether court should take into account fact that solicitor was beneficial owner of plaintiff - Whether inequitable to allow claim for full costs - Whether reality to prospect of recovery of all solicitor client costs - Whether court should take account of indebtedness of solicitors to party who appointed received to plaintiffs - Whether court should distinguish between solicitors as equity partners in firm and as debtors - Whether appropriate for court to consider debt between parties - Delay - Whether solicitors delayed in seeking order - Whether prospect of recovery of property at time of judgment - Whether culpable delay - Whether making of order sought would be in vain - Whether recovery of costs should be proportionate to reduced settlement - Whether court set formula for recovery of proportionate costs - Mount Kennett Investment Co v O'Meara [2007] IEHC 420, (Unrep, Smyth J, 21/11/2007), Mount Kennett Investment Co v O'Meara [2010] IEHC 216 (Unrep, Clarke J, 1/6/2010) and Mount Kennett Investment Co v O'Meara [2011] IEHC 210 (Unrep, Clarke J, 9/3/2011) considered - Roche v Roche (1892) 29 LR Ir 339, M'Larnon v Carrickfergus UDC [1904] 2 IR 44, Cole v Eley [1894] 2 QB 350, Hamer v Giles (1897) 11 Ch D 942 approved - Legal Practitioners (Ireland) Act 1876, s 3 - National Asset Management Agency Act 2009 (No 34), s 149 - Orders granted (2005/1657P - Clarke J - 29/3/2012) [2012] IEHC 167

Mount Kennett Investment Co v O'Meara

Facts There had been a number of judgments concerning the case which had centred on the purchase of a site to be developed as a shopping centre. Ultimately the plaintiffs had been awarded damages against each of the defendants jointly and severally (with the defendants appealing against that order). There were also issues relating to claims of indemnities as between the defendants. Subsequently the plaintiffs had been placed into receivership by NAMA who then negotiated a settlement of the appeal on behalf of the plaintiffs. An application was then brought on behalf of a firm of solicitors, whose partners had been involved with the plaintiff companies, under the Legal Practitioners (Ireland) Act, 1876 for a charging order in respect of legal costs. On behalf of the receivers it was argued that relief under s. 3 of the 1876 Act was discretionary and the court ought to exercise its discretion either against making any order or making a reduced one. It was also contended that that the receivership predated any application under s. 3 of the 1876 Act and thus it was not possible or appropriate to make the order sought.

Held by Clarke J in making the charging order: The sum in question (€1.5m) was property recovered or preserved by the efforts of the solicitors firm concerned. However a solicitor could only take subject to any rights of set off which subsist against his client. The issue was whether there were countervailing factors which would make it inequitable to make a charging order be made or that a reduced one be made. In circumstances where a firm of solicitors had a close connection with their client, it would be inequitable to allow those solicitors to assert a claim to full costs to be charged on a costs inclusive settlement when there would have been no reality to that eventuality occurring had the settlement remained in the hands of the client and solicitors concerned. The two main partners of the solicitors firm were both heavily indebted to NAMA (on whose behalf the monies had now been recovered). Although the court would make the charging order it was for NAMA to decide to pursue whatever enforcement measures were available to it to recover the monies in question. Equity required that in the particular circumstances of the close connection between the solicitors and the plaintiffs, the charging order should be no more than a proportionate recovery.

1. Introduction

2 2 1.1 There have already been a number of judgments in these proceedings. (See - Mount Kennett Investment Company v. O'Meara & Ors [2007] IEHC 420; Mount Kennett Investment Company & Anor v. O'Meara & Ors [2010] IEHC 216; and Mount Kennett Investment Company & Anor v. O'Meara & Ors [2010] IEHC 210). As appears from those judgments, Smyth J. originally concluded that the defendants were obliged to specifically perform a contract for the sale of a site intended to be developed as a shopping centre in Clonmel. Thereafter the defendants failed to make title and I determined that the plaintiffs were, in all the circumstances, entitled to proceed with a claim in damages. That claim was ultimately tried and an award of €2,447,893.00 together with costs was made against each of the defendants jointly and severally. Each of the defendants appealed against that order.

3 3 1.2 The position that then pertained was that there remained in being, in addition to the appeal, a series of issues between the defendants. First, there were notices for contribution or indemnity in these proceedings. In addition, Mr. O'Meara had separately sued Mr. Fitzpatrick for professional negligence; Mr. Fitzpatrick being an accountant. Mr. O'Meara had also sued Mr. Tobin for professional negligence in a separate set of proceedings; Mr. Tobin being a solicitor. Finally, Mr. Fitzpatrick had also sued Mr. Tobin for professional negligence.

4 4 1.3 As all of the issues which arose both in the indemnity proceedings in this case and in the three other professional negligence actions were closely interconnected, all of those matters came for trial before me in February of this year. When the case had been at hearing for 14 days and had, it was estimated, approximately two days left to run, it was intimated to me on the morning of the fifteenth day that the parties were close to agreement. Time was provided and a settlement of all issues between those parties was reached. However, when the settlement was being ruled it was also intimated that the parties had reached a settlement of these proceedings which also, of course, remained alive by virtue of the fact that each of the defendants had filed separate notices of appeal. It transpired that the plaintiffs had been placed into receivership by NAMA, or a NAMA entity, and that the receivers appointed had negotiated a settlement of the appeal on behalf of the plaintiffs. The entitlement of the receivers to compromise the appeal was not contested.

5 5 1.4 When the matter was being ruled, counsel for the receivers attended to confirm that latter settlement and to invite me, on consent, to vacate the order for damages and costs. It should also be noted that, even at that stage, counsel did intimate that the solicitors who had acted on behalf of Mount Kennett and Greenband in these proceedings prior to the receivership might have an application to make. The solicitors who bring this application are the firm of McMahon O'Brien Solicitors. That prediction therefore proved correct and the application which is now before me was brought by those solicitors. The application is for a charging order under s. 3 of the Legal Practitioners (Ireland) Act 1876 ("the 1876 Act"). It will be necessary to turn to the provisions of the 1876 Act and the case law applicable to it in due course. However, it is, perhaps, more logical to start with the facts insofar as they are material to the question which I have to decide which is as to whether a charging order should be made and, if so, in what form. I, therefore, turn to the facts.

2. The Facts

2 2 2.1 As pointed out earlier, judgment was given against the defendants in the sum of €2,447,893.00 together with interest on part of that sum up to the date of judgment. Thereafter interest would have accrued on the entire sum awarded between the date of judgment in March 2011 up to the ultimate settlement of the appeal in February 2012. By the time that settlement was reached it seems likely that the sum due was a little over €2.6m. In addition, there was an award of costs which have been variously estimated at between €500,000.00 and a little over €900,000.00. As a rough estimate, therefore, and solely for the purposes of facilitating an analysis of what occurred, it seems to me to be appropriate to consider the liability of the defendants, jointly and severally, to Mount Kennett and Greenband as being of the order of €3.25m...