Reddy & Reddy v Hyper Trust Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Rory Mulcahy
• Judgment Date: 24 May 2023
• Neutral Citation: [2023] IEHC 278
• Court: High Court
• Docket Number: Record No.: 2015/5528P

Between:

Desmond Reddy and Brian Reddy

Plaintiffs

and

Hyper Trust Limited

Defendant

[2023] IEHC 278

Record No.: 2015/5528P

THE HIGH COURT

EX TEMPORE JUDGMENT of Mr. Justice Rory Mulcahy delivered on the 24th day of May 2023

Introduction

1 This matter comes before Court in unusual circumstances and involves the Plaintiffs' attempt to prevent the Defendant pursuing in its Defence and Counterclaim two “heads of loss” (to use a neutral term) the Defendants say are not pleaded therein. The Defendant contends that the heads of loss are pleaded and, in the alternative, that it should be entitled to amend its defence to include those pleas. A draft amended Defence and Counterclaim was provided under cover of a letter dated 27 April 2023. The application arises from the inclusion of the two heads of loss in an expert report of Jim Luby (“ the Report”) delivered on behalf of the Defendant on 3 March 2023.

2 The Plaintiffs are former directors of the Defendant company (“ the Company”) which owns and operates Leopardstown Inn. Following an examinership process in 2015, the Plaintiffs exited the Company, and new investors took control.

3 Shortly thereafter, the Plaintiffs issued proceedings claiming, inter alia, trespass by the Defendant relating to a plot of land adjacent to the lands on which the Leopardstown Inn is located. The Plaintiffs had acquired the lands in question from the Company for IR£20,000 in 2000.

4 The Defendants delivered a Defence and Counterclaim in October 2015. By its Counterclaim, the Defendant pleaded that the Plaintiffs had conveyed the lands to themselves at a “gross undervalue” in breach of their obligations to deal with the Company's property as trustee. The Counterclaim expressly seeks to set aside the transfer to the Plaintiffs or, in the alternative, declarations that the land is held in trust for the company and that the Company is entitled to the proceeds from the use of the lands. The Counterclaim also seeks damages for breach of trust, misfeasance, negligence, and breach of duty. That relief is not expressly pleaded in the alternative to the reliefs seeking to set aside the transfer.

5 The Plaintiffs raised particulars in October 2015, including in relation to the plea that the lands were sold at an undervalue. The Defendant responded in November 2015 by saying that it had had advice that the land was worth at least IR£150,000 in 2000. In their Reply to the Defence and Counterclaim, the Plaintiffs denied that the lands were undervalued.

6 Separately, the Defendant counterclaimed in respect of payments made by the company between 2001 and 2013. At paragraph 38 of the Defence and Counterclaim, it alleges that the Plaintiffs had caused “certain payments” to be made from the Company to the Plaintiffs, or members of their family for purposes unconnected with the Company. These are referred to as “the Unauthorised Payments” in the Defence and Counterclaim.

7 At paragraph 39, it is pleaded that the Company has had difficulty establishing “ the amount of the Unauthorised Payments” due to what is alleged to be the deliberate shredding of Company records by the Plaintiffs. It pleads that it could only give an estimate as to “ the amount of the Unauthorised Payments”. The Counterclaim thereafter lists 19 separate transactions as the Unauthorised Payments.

8 The Defendant also alleges that this was a breach of the Plaintiffs' duties to the Company as trustees and seeks orders that the Plaintiffs account for such payments or, in the alternative, that such payments are held on trust for the Defendant, in addition to pursuing the damages claim referred to above.

9 The Plaintiffs raised particulars regarding “ each of the alleged Unauthorised Payments.” The Defendant repeated its inability to provide further information at that time, stating that the information provided would be supplemented.

10 In its Reply to the Defence and Counterclaim delivered in December 2015, the Plaintiffs denied “ each of the alleged Unauthorised Payments”.

11 The speed with which proceedings had progressed to that point slowed considerably as issues arose in relation to discovery. Ultimately discovery was exchanged in the summer of 2020. Counsel for the Plaintiffs signed a Certificate of Readiness in August 2022. On 2 December 2022, the case was fixed for hearing in July 2023.

12 The parties agreed the exchange of expert reports. The Defendant was required to deliver its expert reports in relation to its Counterclaim in February 2023. There was a slight delay in delivering Mr Luby's Report which was then delivered in March 2023.

13 Mr Luby's Report contains two heads of loss which the Plaintiffs assert have not been claimed by the Defendant in these proceedings. These include a claim for damages regarding land transferred in the range of €244,605 to €559,605. This was based on a valuation obtained from Avison Young, a real estate advisor, placing the value of the lands at a range between €270,000 and €585,000.

14 In addition, the Report includes a claim for an additional eight unauthorised payments. These are described in the Report as “additional items not included in defence and counterclaim”. The total value of the eight items is €1,096,192 (in relation to the first six) and €90,177 (the other two). In total, these amounts increase the quantum of the Defendant's Counterclaim by more than 50%, from €1,936,674 to €3,227,448.

15 Correspondence was exchanged between the parties in which the parties disputed whether or not these claims were included in the Defendant's Defence and Counterclaim. The Plaintiff sought undertakings that the Defendant would not pursue these claims, which undertakings were not forthcoming. Ultimately the within motion issued, seeking to preclude the Defendant from pursuing claims in respect of the above-mentioned sums and from relying on the relevant portions of Mr Luby's Report. In its reply, the Defendant contends that the matters are pleaded but seeks to amend its Defence and Counterclaim “ for good order and without prejudice to its position that the amounts claimed fall squarely within the pleadings”.

16 There are, therefore, two issues to be determined in respect of each of the heads of loss now claimed. First, whether the claim for either or both of the heads of loss are included in the pleaded Counterclaim. Second, if not, whether the Defendant should be permitted to amend its Counterclaim to include those claims. The second question only arises if the first is answered in the negative in respect of either head of loss.

Are the claims pleaded?

17 In ASI Sugar Ltd v Greencore Group plc [2003] IEHC 131 the purpose of pleadings is described in the following terms:

“ The function of pleadings is to define with clarity and precision the issues of fact and law between the parties. Where issues are so defined each party will have given fair and proper notice to his opponent of the case he has to meet and each party will be enabled to prepare his own case for trial. Discovery can be directed to the issues and the delay and expense thereby incurred minimised: this is particularly important in a case such as the present where discovery even with the issues so defined will be extensive. Further this will enable the court to be aware of the...