Reaney v Interlink Ireland Ltd
 IESC 13
AN CHÚIRT UACHTARACH
THE SUPREME COURT
O'Donnell Donal J.
O'Donnell Donal J.
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
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.
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.
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 ( ; , 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.
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 commenced in June 2012 was therefore €362,243.23. On its face therefore, the total award of €356,200 was just over €6,000 short of the sum lodged. Accordingly the defendants contended that the provisions of Order 22 Rule 6 of the Rules of the Superior Courts should apply, and that the plaintiff 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 of course have included all the costs of the trial. However, the High Court Judge accepted the plaintiffs' submission that the lodgement had not complied with Order 22 Rule 1(5), in that the lodgement did not specify the causes of action in respect of which the payments were made and the sum in respect of each cause of action, and the court had not otherwise permitted a single lodgement. Accordingly, the High Court considered the lodgement to be a nullity. The outcome of the High Court case was that the plaintiffs recovered the sum of €356,200, with no interest thereon and 60% of their costs, the court having determined that the lodgement made was ineffective.
I have set out these facts briefly because this appeal is not concerned with the substantial and troublesome issues which concerned the High Court hearing such as the allegation of fraud, the true interpretation of the arrangement between the parties in respect of the Parcel Line consignments, the validity of the covenant in restraint of trade included in the contract, or the interpretation and application of clause 13 of the contract. There is moreover no appeal against the award of €356,200, nor any cross-appeal. What remains now in contention relates to the validity of the lodgement, the question of interest, and the related question of whether interest should be included in the calculation of a lodgement. The consideration of such ancillary issues are often dealt with speedily at the conclusion of a case and may appear like items of detritus in comparison to the major battle which had been fought. However, not only are the issues themselves of some complexity, they are also undoubtedly important, and deserve the same attention from the court and practitioners as matters of substance involved in the proceedings. The most important reason why this is so, is because of their impact on costs, which in a case such as this, can be very considerable indeed. If for example, the defendants succeed on their arguments on this appeal, the result would be that the defendant would recover all the costs of the proceedings after the date of the topped up lodgement from the plaintiff. Inevitably this would include all the costs of the trial. There seems little doubt that this would simply obliterate the award of damages which the plaintiff recovered, and mean that the proceedings which had ostensibly resulted in a substantial award in favour of the plaintiffs, would, in reality have been a financial disaster. The decision on these issues is therefore every bit as important in real terms to the parties, as the substantial issues of law and fact which occupied so much time in the High Court.
Both parties appealed the decision of the High Court in respect of these matters. The defendants appealed the determination that the lodgement was ineffective, and the plaintiff for its part appealed the High Court's refusal to award interest pursuant to the Courts Act. These questions raised a third issue, namely that if both parties were successful on the issues they had appealed, that is if the defendants succeeded in establishing that the lodgement made was valid and effective, but the plaintiff succeeded in establishing that the High Court ought to have awarded interest, whether such interest should be taken into account in determining whether the...
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