Ryan v Dengrove Designated Activity Company

• Jurisdiction: Ireland
• Judge: Mr Justice Maurice Collins
• Judgment Date: 07 July 2022
• Neutral Citation: [2022] IECA 155
• Court: Court of Appeal (Ireland)
• Docket Number: Court of Appeal Record No. 2022/45

Between

Pat Ryan

Plaintiff/Respondent

and

Dengrove Designated Activity Company

Defendant/Appellant

[2022] IECA 155

Edwards J

Noonan J

Collins J

Court of Appeal Record No. 2022/45

COURT OF APPEAL

CIVIL

Discovery – Relevance – Necessity – Appellant appealing from a discovery order – Whether discovery was necessary for the fair disposal of the proceedings

Facts: The defendant/appellant, Dengrove, appealed to the Court of Appeal from a discovery order made by the High Court (Twomey J) on 26 January 2022. The categories in dispute were: category D (“All records, notes, memoranda, or other documents recording, describing or otherwise relating to any compromise agreement or agreements between the Defendant and the Plaintiff’s co-partners”); and category F (“All documents, board minutes and/or other records referencing any change or proposed change to the rate of interest which has been charged or secured on the City Quay Properties”). Dengrove emphasised that the material that the High Court directed to be discovered comprised “extensive banking documentation about other borrowers who are not party to these proceedings” which are confidential. The confidentiality of such documents was, it said, an important public interest, referring to the decision of the Supreme Court in National Irish Bank v Raidió Teilifís Éireann [1998] 2 IR 465. Dengrove submitted that discovery of such documents should not be ordered unless it is “clear” that the interests of justice require such an order to be made (citing the decision of the High Court (Clarke J) in Independent Newspapers v Murphy [2006] 3 IR 566 and the judgment of Clarke CJ in Tobin v Minister for Defence [2019] IESC 57). “Bare assertions” in the Amended Statement of Claim which (in Dengrove’s telling) “are entirely unparticularised and unsubstantiated by any evidence” cannot, it was said, legitimately be used as a “hook” or “device” to gain access to highly confidential documents (referring to Keating v RTÉ [2013] IESC 22 and Hartside v Heineken Ireland [2010] IEHC 3). A further point was made as to the form of the categories directed and in particular the use of the formula “relating to” which was said to be excessively broad (citing Dunnes Stores v McCann [2018] IEHC 123).

Held by Collins J that, regarding category D and what was pleaded in the amended statement of claim (and, so far as relevant, the amended defence), the additional material was, at its height, of very tenuous relevance and it had not been shown that its discovery was necessary for the fair disposal of the proceedings. Collins J held that the wider disclosure sought by the plaintiff/respondent, Mr Ryan, was an exercise in fishing, founded on speculative assertions that had no adequate foundation in the pleadings or any evidential basis in the material before the Court. In the circumstances, Collins J was of the view that the Judge clearly erred to making the order that he did in respect of category D and he would therefore set aside that order. Regarding category F, Collins J held that even if that material could be said to have some tangential or tenuous relevance – and, in his opinion, that had not been demonstrated – it had not been shown that its discovery was necessary for the fair disposal of the proceedings. Collins J held that the disclosure sought by Mr Ryan was an exercise in fishing, founded on speculative assertions which had no adequate foundation in the pleadings or any evidential basis whatever. In the circumstances, Collins J was of the view that the Judge clearly erred in making the order that he did in respect of category F and he would therefore set aside that order also.

Collins J’s provisional view was that as Dengrove had been entirely successful on the appeal, it should have the costs of the appeal. As regards the costs of the High Court, the order made by the Judge was that those costs should be costs in the cause. Collins J held that the Judge erred in making the orders he did in favour of Mr Ryan. In those circumstances, Collins J’s provisional view was that Dengrove should also have its costs of the High Court application.

Appeal allowed.

Unapproved

No redactions required

JUDGMENT of Mr Justice Maurice Collins delivered on 7 July 2022

BACKGROUND

1 This is an appeal by the Defendant (“ Dengrove”) from a discovery order made by the High Court (Twomey J) on 26 January 2022 (“ the Order”)

2 The background to these proceedings and the nature of the claims made by the Plaintiff are considered at length in the judgment of Murray J (Faherty and Haughton JJ agreeing) in an earlier appeal in these proceedings: [2021] IECA 38. For the purposes of this judgment, a briefer account will suffice.

3 At all material times Mr Ryan was (and may still be) a member of two partnerships, the City Partnership (in which he had a 25% interest) and the City Arts Partnership (in which he had a 12.5% interest) (collectively “ the Partnerships”). There were a number of other partners in these partnerships, with varying shares. The Partnerships were formed for the purpose of acquiring and developing property at City Quay/Moss Street, next to the River Liffey (“ the Property”). Different parcels of the overall site were acquired by each Partnership. In order to fund the acquisition of the Property, the Partnerships took out two loans from Anglo Irish Bank plc (one loan for each Partnership). These loans (“ the Partnership Loans”) were secured on the Property by a number of security instruments. Importantly, the liability of the partners under these loans was several (rather than joint and several) in proportion to their respective interests in the Partnerships. In other words, the partners did not have a liability beyond their own partnership shares.

4 The Partnerships were formed and the Property acquired in 2003. In 2011, the Partnership Loans were transferred to the National Asset Management Agency (NAMA) and were sold on to Dengrove in January 2017.

5 Prior to the institution of these proceedings, a dispute arose between Mr Ryan and Dengrove as to the extent of the indebtedness secured on the Property. Mr Ryan's position was that only the Partnership Loans – the specific facilities advanced to the Partnerships for the purpose of acquiring the Property — were secured on it. Dengrove's position was that the security instruments were “ all sums” mortgages/charges and that all debts due to it by any of the partners, however arising, were captured by them. While Mr Ryan had no other liabilities to Dengrove, other partners had very significant additional liabilities to Anglo-Irish Bank which had transferred to Dengrove. As Murray J noted at paragraph 9 of his judgment, the “ difference between the positions urged by the parties is, in financial terms, stark: as I have noted, on Dengrove's account the amount outstanding is €430M, while according to the appellants it is €17.3M.”

6 Other issues also arose between Mr Ryan and Dengrove including as to whether Dengrove was entitled to charge default or penalty interest. A substantial amount of default interest had been charged by Dengrove but Mr Ryan contested its entitlement to do so.

7 It was in these circumstances that Mr. Ryan commenced these proceedings in March 2018. Again, I gratefully adopt the description of the proceedings given by Murray J:

“The primary contention advanced in the proceedings, and elaborated upon in the Statement of Claim delivered on May 2 2018, was that the partnership agreements precluded one partner from charging the assets of the partnership, that Dengrove was bound by these restrictions, and that Dengrove could not assert that the property could be used as security for indebtedness other than that arising from the specific facilities extended to those partnerships. The indebtedness accrued pursuant to the two partnership facilities which it is alleged was all Dengrove was entitled to require the borrowers (including the first named appellant) to redeem, was described in the proceedings as ‘The Lawful Redemption Amount’. It was claimed in the proceedings that Dengrove could not charge default or penalty interest on that amount.”

8 As it was put in paragraph 50 of the Statement of Claim, the proceedings had “ as their objective the establishment of the Plaintiff's entitlement to discharge his own indebtedness and in addition that of each of the other partners partnership indebtedness and thereby secure the return of all security.”

9 Dengrove delivered a full defence and the matter proceeded to trial in the ordinary way. Along the way, Mr Ryan sought discovery. Certain categories of discovery were agreed and others were the subject of adjudication by the High Court (Haughton J). Amongst the categories agreed was a category (category 5) directed to the calculation by Dengrove of interest on the indebtedness of the Partnerships. 1 Discovery was duly made by Dengrove.

10 In the lead-up to the hearing, Dengrove abandoned its claim to default/penalty interest but it seems that there were other issues regarding the calculation of interest and, consequently, the calculation of the redemption amount. However, we were told by Ms Smith SC, counsel for Dengrove, that all the remaining issues affecting the calculation of the redemption amount had in fact been resolved following engagement between the parties respective financial experts and she explained that the experts had agreed the applicable rate(s) of interest and had agreed the amount that was due and owing on foot of the partnership loan facilities i.e. the redemption amount. No issue was taken with that account.

11 On the third day of hearing a settlement was agreed. The background to the settlement and the terms of it are discussed at paragraphs 15–18 of Murray J's judgment. The settlement stipulated the agreed redemption amount (€17,379,125.09). It provided for a consensual sale of the...