Reaney v Interlink Ireland Ltd

• Jurisdiction: Ireland
• Judge: O'Donnell J
• Judgment Date: 27 February 2018
• Neutral Citation: [2018] IESC 13
• Court: Supreme Court
• Docket Number: 25/17
• Date: 27 February 2018

Between/

Cyril Reaney

and

Ita O'Regan

and

Travelon Limited

Respondents/Plaintiffs

AND

Interlink Ireland Ltd (T/A as DPD)

Appellant/Defendant

[2018] IESC 13

O'Donnell Donal J.

Clarke C.J.

O'Donnell Donal J.

McKechnie J.

MacMenamin J.

Dunne J.

25/17

AN CHÚIRT UACHTARACH

THE SUPREME COURT

Interest – Lodgement – Contract – Plaintiffs seeking to appeal against High Court’s refusal to award interest pursuant to the Courts Act 1981 – Whether lodgement was ineffective

Facts: The plaintiffs, Mr Reaney, Ms O’Regan and Travelon Ltd, purchased a number of franchises from the defendant, Interlink Ireland Ltd. Subsequently two franchises were sold by the plaintiffs. The remaining franchise was terminated by the defendant by notice under clause 13 of the contract between the parties, which dated from the 22nd of December 1995. The termination of the relationship between the plaintiffs and defendant was contentious. Two sets of proceedings were issued by the plaintiffs and subsequently consolidated. The High Court (Gilligan J) awarded the plaintiffs €356,200 being €308,921 (the total including VAT in respect of clause 13), plus €38,599.50 (the Parcel Line claim including VAT) and €8,680 being the Pulsar amount which was VAT inclusive. The court also awarded the plaintiffs 60% of the costs applying the Veolia approach (Veolia Water UK Plc v Fingal County Council (No. 2) [2006] IEHC 240). The defendant made a lodgement of €362,243.23 expressed to be “enough to satisfy all of the plaintiffs’ claims in these consolidated proceedings” together with a denial of liability. The defendant contended that the provisions of Order 22 Rule 6 of the Rules of the Superior Courts should apply, and that the plaintiffs should recover its costs until the date of the topped up lodgement, and that the defendant should recover all the costs of the proceedings thereafter, which would have included all the costs of the trial. However, the High Court considered the lodgement to be a nullity. Both parties appealed to the Court of Appeal against the decision of the High Court. The defendant appealed the determination that the lodgement was ineffective, and the plaintiffs appealed the High Court’s refusal to award interest pursuant to the Courts Act 1981. The Court of Appeal held that the trial judge ought to have awarded the plaintiff an additional sum for interest at 8% pursuant to s. 22 of the 1981 Act. Having considered the lodgement, the Court of Appeal voiced some concerns as to the true interpretation of Order 22 and recommended that the provision be reviewed by the Superior Courts Rules Committee. The Supreme Court granted leave to appeal on all issues on the 30th of March 2017.

Held by O’Donnell J that the following position should apply in respect of the issues raised in this case: (i) Interest under the 1981 Act should be awarded when a court concludes that the amount it is awarding is clear cut, could, and should, have been paid earlier; (ii) Where a claim is difficult and requires assessment and determination, it may be appropriate not to award interest; (iii) Interest should not have to be included in a lodgement and accordingly should not be taken into account in considering if the plaintiff has received an award in excess of the lodgement; (iv) A single lodgement expressed as one being enough to satisfy all claims made by the plaintiff, is a valid lodgement; (v) Where a plaintiff fails to beat a lodgement, but falls short by a clear margin, and the matter is one of general assessment rather than precise award, a court may consider that a sufficient ground to depart from the presumptive costs order under Order 22 Rule 1(5) in which case a court may reflect the reasonableness of the pursuit of the claim by, if appropriate disallowing some element of the plaintiff’s costs, by reference to the Veolia principles where there are distinct issues or more generally; (vi) Conversely where a plaintiff beats a lodgement but by only a small amount, a court may still consider if it was reasonable to have pursued the case, and may reflect that adjudication in its award of costs either under the Veolia principles where there are clearly distinct issues, or by extension of them.

O’Donnell J held that the Court would allow the defendant’s appeal to the extent of substituting the figure of €26,001.26 for the award of interest of €57,325 made by the Court of Appeal, and reverse the Court of Appeal’s conclusion that interest should be included in a lodgement, but would otherwise dismiss the defendant’s appeal.

Appeal dismissed in part.

Judgment of O'Donnell J delivered the 27th day of February 2018

1 This appeal arises out of a heavily contested trial which occupied 12 days in the High Court. The essential facts have already been set out in detailed judgments in the High Court and Court of Appeal. For reasons which will become apparent, it is only necessary here to set out in simplified terms the essential issues which arose, which give rise to the specific issues which require to be determined on this appeal.

2 The plaintiffs had purchased a number of franchises from the defendant to operate a courier business in different territories in the broad Munster area. Subsequently two franchises were sold by the plaintiffs without incident, and no issue arises in relation to those transactions. The remaining franchise was terminated by the defendant company, lawfully it is accepted, by notice under clause 13 of the contract between the parties, which dated from the 22nd of December 1995. That unusual provision is central to the dispute between the parties. It provided either, that the defendant company would introduce a purchaser for the franchise, or alternatively pay an amount, to reflect the fact that it now in theory had recovered the franchise for the area and could sell it on. Either way it meant that the plaintiffs would recover something akin to market value for the franchise. The terms of clause 13 were as follows:-

‘If Notice is given by the owner under Clause 2 hereof then the owner shall purchase or procure a purchaser of the business from the Operator at a sum equal to the purchase price set out in Schedule 3 hereto plus such further sum as is agreed between the parties to fairly reflect the turnover of the business carried on by the Operator as at the date of the Notice’.

Even though the clause appeared to have been operated on two prior occasions when a purchaser was introduced, it seems clear that the terms of clause 13 leave scope for considerable debate as to the precise manner in which it should be applied. The termination of the relationship between the plaintiffs and defendant was contentious. Two sets of proceedings were issued by the plaintiffs and subsequently consolidated. The plaintiffs' initial claim sought in excess of €1 million damages and payments pursuant to the contract. A substantial component of this claim was an amount claimed in respect of clause 13, being the amount the defendant was obliged to pay in purchasing the franchise from the plaintiffs on termination. There was some additional claims for sums alleged to be due under the contract. In addition however, the plaintiffs also claim that the 18 month restraint of trade provision on termination was invalid, and claimed damages for breach of certain provisions of the contract, and furthermore claimed damages for fraud.

3 The High Court Judge (Gilligan J) delivered a careful judgment in which he rejected the challenge to the restraint of trade clause and also dismissed the claim for fraud. However, he awarded the plaintiffs a figure of €255,307 under clause 13, a further figure of €31,900 in respect of the under weighing of parcels known as the ‘Parcel Line’ consignments (which figure had been agreed between the parties subject to a determination of liability to pay), and a further award of €8,680 in respect of the ‘Pulsar’ account. The High Court dismissed certain other claims. The High Court Judge did not award interest observing that the parties had not provided for interest in their contract. At a further hearing it was decided that VAT was payable on the first two components of the award, that is the clause 13 payment and the Parcel Line payment, but was already included in the Pulsar amount. Accordingly, the total award came to €356,200 being €308,921 (the total including VAT in respect of clause 13), plus €38,599.50 (the Parcel Line claim including VAT) and €8,680 being the Pulsar amount which was VAT inclusive. The court also awarded the plaintiffs 60% of the costs applying the Veolia approach ( Veolia Water UK Plc v Fingal County Council (No. 2) [2006] IEHC 240; [2007] 2 IR 81, Clarke J), which provides for apportionment of costs where if a winning party has not succeeded on all issues which were argued before the court, a court should consider whether it is reasonable to assume that the costs of the parties in pursuing the set of issues before the court were increased by virtue of the successful party having raised additional issues upon which it was not successful, and if so, may reflect that fact in the award of costs.

4 The total award as set out above was, therefore, €356,200. However the defendant had made a number of efforts to suggest a compromise of the claim. It had sent a ‘Calderbank’ letter with certain offers. There had been a failed attempt at mediation. Most significantly for the present proceedings however, the defendants had on the 6th of January 2011 made a lodgement of €253,075 expressed to be ‘enough to satisfy all of the plaintiffs claims in these consolidated proceedings’ together with a denial of liability. On the 4th of October 2011, the defendant lodged an additional sum of €109,168.23 again specified as ‘enough to satisfy all the plaintiffs claims in these consolidated proceedings’ together with a denial of liability. The total lodgement at the date the hearing...