Scotchstone Capital Fund Ltd v Ireland and the Attorney General

• Jurisdiction: Ireland
• Judge: Mr. Justice Mark Sanfey
• Judgment Date: 02 April 2020
• Neutral Citation: [2020] IEHC 184
• Docket Number: [2019/2991 P.]
• Court: High Court
• Date: 02 April 2020

BETWEEN

SCOTCHSTONE CAPITAL FUND LIMITED

AND

PIOTR SKOCZYLAS

PLAINTIFFS

AND

IRELAND

AND

THE ATTORNEY GENERAL

DEFENDANTS

[2020] IEHC 184

Mark Sanfey J.

[2019/2991 P.]

THE HIGH COURT

Damages – Infringement of EU law – Fraudulent or vexatious proceedings – Defendants seeking an order striking out the proceedings on the grounds that they were fraudulent or vexatious or bound to fail – Whether the plaintiffs’ claim was frivolous, vexatious and bound to fail

Facts: The plaintiffs, Scotchstone Capital Fund Ltd and Mr Skoczylas, claimed damages arising out of other proceedings involving the plaintiffs. They alleged that the claim arose from “manifest infringements of EU law” by a court of last resort in Ireland’s jurisdiction. Two motions were before the High Court: firstly, the plaintiffs’ motion for judgment issued on the 26th of July, 2019; and secondly, the motion of the defendants, Ireland and the Attorney General, of the 1st of August, 2019, for an order pursuant to O. 19, r. 28 of the Rules of the Superior Courts and/or the inherent jurisdiction of the court striking out the proceedings on the grounds that they were fraudulent or vexatious or bound to fail. Sanfey J ruled that the defendants’ motion should be heard first, on the basis that, if it were unsuccessful, an order that the defendants deliver their defence within a defined period would inevitably follow.

Held by Sanfey J that it was clear, notwithstanding all the apparent complexity, that the defendants were correct when they contended that the ruling of the Court of Justice of the European Union was acte clair, that it was appropriately considered and applied by each Irish Court thereafter, and that the question of an infringement of EU law, manifest or otherwise, by the Court of Appeal or the Supreme Court did not arise, and that being so, the plaintiffs’ claim was frivolous, vexatious and bound to fail.

Sanfey J held that he would hear the parties as to the exact terms of the order.

Motion sought by the defendants striking out the proceedings granted.

JUDGMENT of Mr. Justice Mark Sanfey delivered on the 2nd day of April, 2020.

Introduction

1 In these proceedings, two motions are presently before the court: firstly, the plaintiffs' motion for judgment issued on the 26th of July, 2019; and secondly, the defendants' motion of the 1st of August, 2019, for an order pursuant to 0. 19, r.28 of the Rules of the Superior Courts and/or the inherent jurisdiction of the court striking out the proceedings on the grounds that that they are fraudulent or vexatious or bound to fail.

2 At the outset of the hearing, counsel for the defendants submitted that it would be appropriate for the court to hear the defendants' motion first, even though it was second in time. Counsel readily accepted that if the defendants' motion were unsuccessful, the defendants would have to deliver a defence, but that the obvious order was to consider the defendants' motion first, as if this were successful, the question of delivery of a defence would not arise.

3 The second named plaintiff (‘Mr. Skoczylas’), who effectively conducted the case on behalf of the plaintiffs and whose submissions I was informed were adopted by the first named plaintiff, opposed this application and submitted that the plaintiffs' motion should proceed before what Mr. Skoczylas described throughout his submissions as ‘the retaliatory motion’ of the defendants. Mr. Skoczylas in fact delivered written submissions in relation to the running order, urging me to hear the plaintiffs' motion first.

4 In the event, I ruled that the defendants' motion should be heard first, on the basis that, if it were unsuccessful, an order that the defendants deliver their defence within a defined period would inevitably follow. This judgment is therefore primarily concerned with the defendants' motion, and whether the proceedings should be struck out on the grounds that they are frivolous or vexatious or bound to fail.

5 The present case is essentially a claim for damages arising out of other proceedings involving the present plaintiffs. They allege that the claim arises from what they allege are “manifest infringements of EU law” by a court of last resort in this jurisdiction. The nature of the present case is examined at paras 35-40 below.

6 In order to comprehend the issues in relation to the defendants' motion, it is necessary to understand the background to the matter, and in particular the history of the related litigation. Specifically, it is necessary to consider a course of litigation which led to three High Court judgments, a preliminary reference under Article 267 TFEU and the subsequent judgment of the CJEU, and subsequently the judgment of the Court of Appeal. There was in addition a determination by the Supreme Court in which that court refused an application made by a number of parties including the parties in the present proceedings for leave to appeal to the Supreme Court from the judgment of the Court of Appeal.

7 It will be necessary to consider these judgments and how they are related to the current proceedings. For ease of reference, those judgments are as follows:

(1) Dowling & Ors. v. The Minister for Finance [2014] IEHC 418 (‘the first High Court judgment’);

(2) Dowling v. Minister for Finance C – 41/15, 8th November 2016, (‘the CJEU Ruling’);

(3) Dowling v. Minister for Finance [2017] IEHC 520, (‘the second High Court judgment’);

(4) Dowling v. Minister for Finance [2017] IEHC 832 (‘the third High Court judgment’);

(5) Dowling v. Minister for Finance [2018] IECA 300, (‘the Court of Appeal judgment’);

(6) Dowling v. Minister for Finance [2019] IESC DET 55, (‘the Supreme Court determination’).

Dowling & Ors. v. the Minister for Finance & Ors .

8 In order to understand the factual context of the present proceedings and in particular the applications before me, it is necessary to revisit and summarise the course of litigation set out above, and the decisions to which they gave rise. The summary which follows is for this purpose only, and a full account of the circumstances of this litigation may be found in the judgments set out above.

9 The four applicants in the cases above (to which I will refer collectively as ‘the Dowling Litigation’) were Gerard Dowling, Padraig McManus, and the two plaintiffs in the current proceedings, Mr. Skoczylas and Scotchstone Capital Fund Limited (‘Scotchstone’). The plaintiffs were all shareholders of Irish Life and Permanent Group Holdings plc (‘ILPGH’) which operated as a holding company and was the owner of Irish Life and Permanent plc (‘ILP’), a bank which now trades in this jurisdiction as Permanent TSB.

10 The litigation arose as a result of the making of a direction order in respect of ILPGH by the High Court in July 2011, pursuant to the Credit Institutions (Stabilisation) Act 2010 (‘CISA’ or ‘the Act’). The Act was intended to address the “serious disturbance” in the economy of the State. The recitals to the Act referred to measures being necessary “… to address a unique and unprecedented economic crisis which has led to difficult economic circumstances and severe disruption to the economy”. They referred to the “continuing serious threat to the stability of certain credit institutions in the State, and to the financial system generally” and stated that it was “… necessary, in the public interest, to maintain the stability of those credit institutions and the financial system in the State”. The recitals also refer to the functions and powers conferred by the Act being “necessary to secure financial stability and to effect a reorganisation of certain credit institutions …”.

11 Section 7 of the Act conferred on the Minister the power to make a “proposed direction order,” which would propose that a “relevant institution be directed to take (within a specified period) or refrain from taking (during a specified period) any action, or series of actions,” including, “in particular,” but not limited to, certain actions set out in the section itself. On the completion of certain notification procedures set out in the Act, in which the institution had a short period in which to make written submissions, the Minister could apply ex parte to this Court under s.9 of the Act for a direction order. Section 11 of the Act permitted the relevant institution or a member of that institution to apply to the court for the setting aside of the direction order. The court could set aside the order “only if it is of the opinion that there has been non-compliance with any of the requirements of section 7 or that the opinion of the Minister under section 7(2) [‘that the making of a direction order in the terms of the proposed direction order is necessary to achieve a purpose of this Act specified in the proposed direction order’] was unreasonable or vitiated by an error of law.”

12 An order was made on 26th July, 2011 in this Court by McGovern J. under s.9 of CISA in relation to ILPGH. O'Malley J. summarised the effect of this order in the first High Court judgment as follows:

“In summary, the effect of the order was to enable the Minister to acquire 99.2% of the company. This was done by compelling it to issue a very large number of new shares to him, at a share price dictated by him, (being just under 6.5 cents per share), in return for the sum of €2.7 billion. For this purpose control of the company was taken from its organs and shareholders; the Memorandum and Articles of Association were altered; the decisions taken at the EGM were nullified and the company was delisted from the London and Irish Stock Exchanges.

Further, various relevant legal rules, whether deriving from statute, common law, equity, codes of practice or contract were in effect disapplied insofar as the company was concerned.” [para. 1.8]

13 The applicants in the Dowling litigation applied to this Court to set aside the direction order....