W.L. Construction Ltd v Chawke

• Jurisdiction: Ireland
• Judge: Ms. Justice Iseult O'Malley
• Judgment Date: 31 October 2019
• Neutral Citation: [2019] IESC 74
• Court: Supreme Court
• Docket Number: [Supreme Court Appeal Nos. 81/2018 and 92/2018]
• Date: 31 October 2019

BETWEEN:

W. L. CONSTRUCTONI LIMITED

RESPONDENT

AND

CHARLES CHAWKE & EDWARD JOSEPH BOHAN

APPELLANT

AND

BY ORDER OF THE COURT,

WILLIAM LOUGHNANE

[2019] IESC 74

Clarke C.J.

O'Donnell J.

McKechnie J.

Charleton J.

O'Malley J.

[Supreme Court Appeal Nos. 81/2018 and 92/2018]

THE SUPREME COURT

Costs – Jurisdiction – Non-parties – Defendants seeking an order for costs against the 99% shareholder in the plaintiff company – Whether there was any requirement to give notice to the non-party that such an order may be sought

Facts: The substantive claim of the plaintiff company, W.L. Construction Ltd, was dismissed in the High Court. The defendants, Mr Chawke and Mr Bohan, subsequently sought and obtained an order for costs against Mr Loughnane, who was the 99% shareholder in the company. He succeeded in setting it aside in the Court of Appeal, primarily on the ground that he had not previously been put on notice that such an application might be made. There was an appeal and cross-appeal before the Supreme Court concerning the exercise of the jurisdiction to join non-parties to proceedings for the purpose of finding them liable for costs. The general issues arising were primarily the existence, or extent, of any requirement to give notice to the non-party that such an order may be sought and whether the jurisdiction should be exercised only where the non-party concerned was set to directly benefit from the proceedings. There was also a case-specific dispute as to whether the trial judge should have made an order against Mr Loughnane in all the circumstances of this case including what he characterised as the absence of notice and, if an order was indeed appropriate, whether it should have been a full costs order or partial only.

Held by O’Malley J that she could see no grounds for interfering with the decision of the trial judge, and she considered that the Court of Appeal erred in reversing him.

O’Malley J held that the appeal would be allowed.

Appeal allowed.

JUDGMENT of Ms. Justice Iseult O'Malley delivered the 31 ^st day of October, 2019

Introduction

1 This appeal concerns the exercise of the jurisdiction to join non-parties to proceedings for the purpose of finding them liable for costs. Such personal costs orders are generally referred to as “Moorview orders”, the jurisdiction of the Irish courts to make them having been confirmed in ( Moorview Developments Limited & ors. v. First Active plc [2011] 3 I.R. 615, [2018] IESC 33). The fundamental basis for the exercise of this jurisdiction was described by McKechnie J. in Moorview as being the injustice which might result where an individual initiates litigation through an insolvent company for his own benefit but without any risk to himself if the litigation is unsuccessful.

2 In the instant case the plaintiff company's substantive claim was dismissed in the High Court. The defendants, Mr. Chawke and Mr. Bohan, subsequently sought and obtained an order for costs against Mr. Loughnane, who was the 99% shareholder in the company. He succeeded in setting it aside in the Court of Appeal, primarily on the ground that he had not previously been put on notice that such an application might be made.

3 The general issues arising are primarily the existence, or extent, of any requirement to give notice to the non-party that such an order may be sought; and whether the jurisdiction should be exercised only where the non-party concerned was set to directly benefit from the proceedings. There is also a case-specific dispute as to whether the trial judge should have made an order against Mr. Loughnane in all the circumstances of this case including what he characterises as the absence of notice and, if an order was indeed appropriate, whether it should have been a full costs order or partial only.

4 As there is an appeal and cross-appeal before the Court, I will for the sake of clarity refer to the parties as “Mr. Loughnane” and “the defendants” respectively.

Background – the High Court

5 The plaintiff company, W.L. Construction, took High Court proceedings against the defendants in respect of payment for work done by it on foot of a building contract entered into in 2005 and completed in 2006. The original summary summons, issued in April 2008, claimed the sum of €191,030.40. When the case was opened by counsel (on the 19th November 2015) the claim was set at €342,931. At one stage the evidence of the company's quantity surveyor placed the value as low as €28,691, but on his final figure it was €152,220.05. By the conclusion of the case in the High Court in 2016, the trial judge (Noonan J.) estimated that some 14 different versions of the figure had been presented to the court.

6 It is relevant to note here that part of the reason for the delay in bringing the matter to trial was a dispute about documentation. In October 2007 the plaintiff company's solicitors had furnished the defendants with books of invoices said to underpin the claim. Mr. Loughnane was subsequently to admit that many of those invoices were not relevant to the work done by the company for the defendants. In March 2015 the solicitors had furnished a further book of invoices which, according to the trial judge, largely if not entirely overlapped with those previously sent. These were said to underpin claims in relation to variations to the original contract. Mr. Loughnane then swore an affidavit of discovery in which he swore to the relevance of the invoices to the claim. He confirmed in evidence that he stood over them.

7 Mr. Loughnane and the quantity surveyor were the principal witnesses for the plaintiff in the hearing. It was agreed that the quantity surveyor took his instructions from Mr. Loughnane. At the close of the plaintiff's evidence (which ran for a total of 28 days) the defendants applied for a non-suit and dismissal of the claim. The application was made on the basis of two alternative arguments – that the claim was an abuse of process by reason of litigation misconduct to an extent justifying dismissal, and that the plaintiff had failed to establish that any debt was due.

8 The trial judge (Noonan J.) acceded to the application on both grounds. In a detailed reserved judgment delivered on the 3rd October, 2016 he was highly critical of the evidence given by Mr. Loughnane (see [2016] IEHC 539). He found, in brief, that Mr. Loughnane had deliberately and repeatedly lied on oath and had produced a number of invoices in support of the company's claim that were either fraudulently altered or not relevant to the work done. On one occasion Mr. Loughnane had admitted under cross-examination that he had altered a document, and was warned by Noonan J. in relation to the privilege against self-incrimination. On the following day he denied having made any admission, saying that he had misunderstood the question – this was found by the trial judge to have been a “blatant” lie. There was no suggestion at any stage that any other person could be responsible for the alterations to the documents. Mr. Loughnane also admitted having furnished invoices found to be fraudulent to the company's quantity surveyor, with a view to having them advanced as part of the company's claim. The quantity surveyor was found to have engaged in a process of “constantly altering, amending and reinventing”, and his evidence was described as “confused and utterly confusing” and quite unreliable.

9 Having reviewed the judgments of this Court on the issue, Noonan J. concluded that the case fell within the rare and exceptional category, involving the power and duty of the court to protect its own process from abuse, where it was appropriate to strike out or dismiss a claim. On this question, he noted that the case had originally been called on for six days and had taken an inordinate amount of time, due in large measure to the way in which the plaintiff's ground had constantly shifted and also due to Mr. Loughnane's dishonesty and the time necessarily taken to expose it. It had, he found, been impossible for the defendants to know at any given time what case they had to meet – new claims were constantly being presented up to Day 25 of the trial. In his view this was “the clearest abuse of the court's process”.

10 Separately, Noonan J. found that, taking the plaintiff's case at its height, the evidence of Mr. Loughnane and, for somewhat different reasons, the evidence of the quantity surveyor, was entirely lacking in credibility such that no prima facie case had been made out that any sum was due. Mr. Loughnane's evidence had been “grossly dishonest” in a number of respects. It was possible that some of it was truthful, but it was all but impossible to separate truth from fiction, and it was not the function or duty of the court to disentangle a case that had become entangled by lies. He considered the question whether the defendants should nonetheless be required to go into evidence, but came to the view that the justice of the case required that they should not have to proceed further. In this regard he was influenced by the fact that the costs to date would have been, by any standards, enormous. If the defendants’ evidence were to take a similar length of time to that of the plaintiff, this would impose a further very significant costs burden on them in circumstances where the uncontradicted evidence indicated that the plaintiff was insolvent and there was no prospect of recovering the costs.

11 After that judgment was given the defendants applied, by way of motion on notice, to join Mr. Loughnane as a defendant to the proceedings for the purpose of making him liable for their costs. Relying upon the judgment of Clarke J. in Moorview v First Active, they argued that the costs incurred by them arose as a direct result of the litigation misconduct of the plaintiff, which, they contended, was solely and entirely orchestrated by Mr. Loughnane. It was not...