Quinn Insurance Ltd (Under Administration) v PriceWaterhouseCoopers (A Firm)

JurisdictionIreland
JudgeMr. Justice Gerard Hogan
Judgment Date21 March 2017
Neutral Citation[2017] IECA 94
Date21 March 2017
CourtCourt of Appeal (Ireland)
Docket NumberNeutral Citation Number: [2017] IECA 94 2015 No. 525
BETWEEN /
QUINN INSURANCE LIMITED (UNDER ADMINISTRATION)
PLAINTIFF/APPELLANT
- AND –
PRICEWATERHOUSECOOPERS (A FIRM)
DEFENDANT/RESPONDENT

[2017] IECA 94

Hogan J.

Ryan P.

Irvine J.

Hogan J.

Neutral Citation Number: [2017] IECA 94

2015 No. 525

THE COURT OF APPEAL

Insurance – Liability – Particulars – Respondent seeking an order compelling the appellant to provide particulars – Whether technical provisions were materially understated

Facts: In April 2010 the High Court appointed administrators to the plaintiff/appellant, Quinn Insurance Ltd (QIL), pursuant to the provisions of s. 2 of the Insurance (No. 2) Act 1983. In 2012 the administrators commenced an action in the name of QIL whereby it sued its former auditors, the defendant/respondent, PricewaterhouseCoopers (PwC), for negligence, breach of contract and breach of duty in or about its auditing of the plaintiff’s books and records and separately in relation to its regulatory returns. The essence of the claim was that PwC ought to have known that the relevant financial statements and regulatory returns did not give the reported true and fair view of the state of the plaintiff’s affairs for each year of the material period. At the heart of the plaintiff’s claim against the defendant was the allegation that the former’s financial statements materially understated its liability for insurance claims or the technical provisions. PwC applied to the High Court seeking an order pursuant to Ord. 19, r. 7 compelling the plaintiff to provide further particulars in relation to certain aspects of the claim relating to the allegation that the technical provisions were materially understated. In the High Court Costello J made an order directing replies to a majority of the particulars sought ([2015] IEHC 303), while refusing to direct the furnishing of other particulars. QIL appealed to the Court of Appeal against that decision and PwC cross-appealed in respect of her failure to direct certain particulars.

Held by Hogan J that so far as QIL’s appeal was concerned, he would dismiss the appeal in respect of particulars 11(3) XIII F and G, 21(12) VII B, X A and F, XI A and F, XV B, XVI A and XVII A, but he would allow the appeal in respect of particulars 11(3) II, V, VIII and XI, 21(12) VII A and D, IX B and D, X D and E, XI C, D and E.

Hogan J held that so far as PwC’s cross-appeal was concerned, he would dismiss the cross-appeal in relation to particulars 11(3) III, VI, IX, XII, VIII A, B and C, 21(12) V A, B, C and D and 97(1) I, II, III and particular 135(1) , but he would allow the cross-appeal in respect of particulars 11(3) XII F and G, 11(3)V A, C and D.

Appeal dismissed in part.

JUDGMENT of Mr. Justice Gerard Hogan delivered on the 21st day of March 2017
Part I
1

In April 2010 the High Court appointed administrators to Quinn Insurance Ltd. (‘QIL’) pursuant to the provisions of s. 2 of the Insurance (No.2) Act 1983. In its time QIL was principally a motor and household insurance company, but it has since transpired that the extent of its insolvency is enormous: it has ceased to write any new business and at the hearing of the present appeal the Court was informed that the deficit between assets and liabilities is in the order of €1.6 billion. Certainly, to date the High Court has approved the drawing by QIL of sums of more than €1.2 billion from the Insurance Compensation Fund to meet the deficit between its assets and liabilities.

2

Since their appointment the administrators have sold the core business of QIL (including its insurance book) so that virtually the only remaining asset which QIL retains is the present action against its former auditors, Pricewaterhouse Cooper (‘PwC’). For the years up 31st December 2005, 2006, 2007 and 2008 (‘the material period’), PwC was the auditor of the plaintiff and reported on the plaintiff's financial statements and separately on the plaintiff's regulatory returns.

3

In 2012 the administrators of QIL commenced an action in the name of the company whereby it sued PwC for negligence, breach of contract and breach of duty in or about its auditing of the plaintiff's books and records in the material period and separately in relation to its regulatory returns. The essence of the claim is that PwC ought to have known that the relevant financial statements and regulatory returns did not give the reported true and fair view of the state of the plaintiff's affairs for each year of the material period. All are agreed that this action will be an enormous and complex case. If the matter should come to trial it might be expected that the hearing would last for more than twelve months with a claim for damages in the order of €800m. Some measure of the difficulties inherent in this mammoth litigation may be gleaned from the fact that the various notices for particulars raised to date and the replies to these particulars already cumulatively extend to more than 800 pages.

4

At the heart of the plaintiff's claim against the defendant is the allegation that the former's financial statements materially understated its liability for insurance claims or, to employ the widely-used industry term, the ‘technical provisions’. Despite the extensive pleading and counter-pleading on the part of the litigants, the litigation is nonetheless in its (relatively) early stages, since the pleadings have yet fully to close. In particular, discovery is yet awaited. This is likely to be a daunting process which might yet generate tens of millions of documents.

5

The issue which now comes before us relates to PwC's motion in the High Court seeking an order pursuant to Ord. 19, r. 7 compelling the plaintiff to provide further particulars in relation to certain aspects of the claim relating to the allegation that the technical provisions were materially understated. In the High Court Costello J. made an order directing replies to a majority of the particulars sought (Quinn Insurance Ltd. (in administration) v. Pricewaterhouse Coopers [2015] IEHC 303), while refusing to direct the furnishing of other particulars. QIL has now appealed to this Court against that decision and there is also a cross-appeal by PwC in respect of her failure to direct certain particulars.

6

In the High Court the disputed particulars extended to some 23 pages. As it happens, only a minority of the particulars which were in dispute before the High Court remain outstanding in the wake of that judgment. This Court's task has been accordingly made easier by the fact we can now focus on the more limited number of particulars – some 47 specific requests in all - which remain in dispute between the parties in respect of both the appeal and the cross-appeal.

7

While even the experienced legal practitioner might be taken aback that 47 individual requests still require to be adjudicated upon by an appellate court in respect of proceedings that are already four years old, this in its own way gives a further sense of the vast dimensions of this litigation. In fairness, however, counsel for PwC, Mr. Gleeson S.C., was unapologetic in respect of what he acknowledged was the fastidious nature of his client's attitude to this feature of the pleading process. He insisted that against the backdrop of this hugely complex litigation a generous approach to the scope of particulars was required in order to corral the extent of the pleadings. The essence of the submission was that detailed particulars were required in respect of a vastly complex claim, as otherwise PwC would lack the capacity fairly to defend the claim and to know the essence of the case which it was now required to defend.

8

Counsel for QIL, Mr. Gallagher S.C., was equally robust in his submission to the effect that while this claim was admittedly complex, it had already been fully particularised following a detailed statement of claim and extensive replies to particulars. He submitted that PwC well understood the nature of the claim against it.

9

Before considering the details of the disputed particulars themselves, it may first be convenient to summarise the general legal principles which govern applications of this kind.

The applicable legal principles regarding particulars
10

The applicable principles regarding the delivery of particulars are not really in dispute and may be lightly summarised here. It is, of course, the application of these principles – not least in a case of formidable complexity such as the present one – which presents all the difficulties.

11

The starting point of the legal analysis is the well known dictum of FitzGerald J. in Mahon v. Celbridge Spinning Co. Ltd. [1967] I.R. 1, 3:-

‘The whole purpose of a pleading, be it a statement of claim, defence or reply, is to define the issues between the parties, to confine the evidence at the trial to the matters relevant to those issues, and to ensure that the trial may proceed to judgment without either party being taken at a disadvantage by the introduction of matters not fairly to be ascertained from the pleadings. In other words a party should know in advance, in broad outline the case he will have to meet at the trial….’

12

This theme was taken up by Henchy J. in Cooney v. Browne [1985] I.R. 185, 191 a decision which remains, in many way, the leading Irish authority on the scope of particulars:-

‘Where the particulars are sought for the purpose of the hearing, they should not be ordered unless they are necessary or desirable for the purpose of a fair hearing. ‘The object of particulars is to enable the party asking for them to know what case he has to meet at the trial, and so to save unnecessary expense, and avoid allowing parties to be taken by surprise’: Spedding v. Fitzpatrick (1888) 38 Ch. D. 410, at p. 413. Thus, where the pleading in question is so general or so imprecise that the other side cannot know what case he will have to meet at the...

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4 cases
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    ...was subsequently approved by the Court of Appeal in Quinn Insurance Limited (Under Administration) v. Pricewaterhousecoopers [2017] IECA 94 at paragraph 16. 39 Before proceeding further, I should deal, at this point, with the debate that took place between the parties as to whether the pri......
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    ... ... 4. Hearing of Appeal in Quinn Insurance Limited (Under Administration) v PwC ... ...

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