Court of Appeal: Brothers allowed to advance misrepresentation and breach of contract case against €17.6m judgment

About this case:

• Judgment:
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Background

The appellants, Mr Paul Dormer and Mr Gerard Dormer have borrowings amounting to €17.6 million from Allied Irish Bank and Bank of Scotland Ireland, in relation to which a settlement agreement had already been perfected by the High Court in January 2014.

The Dormers claimed to have discovered material to establish that the bank had not complied with the terms on which the claim was compromised and they sued in respect of the alleged breaches of that settlement agreement – accordingly, they sought to make a case for relief for misrepresentation and breach of contract.

High Court

The Dormers’ case provided that the bank officials did not make application to the credit committee in accordance with the terms of the agreement; and sought an adjournment of the proceedings so that they could pursue their investigation or complaint about the bank’s compliance with its obligations under the settlement.

In February 2016, Justice McGovern ordered that the Dormers’ application for leave to amend their statement of claim be refused and that the proceedings be struck out on the basis that they disclosed no reasonable cause of action against the defendants and were vexatious and amounted to an abuse of process.

The court was satisfied that the terms were clear and it was beyond dispute that the specified events had not happened, and held that the bank was entitled to judgment.

There was however no determination of the Dormers’ complaint about the bank’s alleged breach of contract.

Court of Appeal

Delivering the judgment of the Court of Appeal, President Ryan emphasised that the High Court had not embarked on a hearing of the Dormers’ allegations; it simply refused an adjournment to enable them to put that forward.

In all the circumstances, President Ryan was not satisfied that AIB was entitled to judgment under the terms of the settlement agreement; the most it had was a claim for specific performance and/or judgment in accordance with the terms of the settlement and/or damages for breach of contract by the Dormers.

The High Court did not decide whether the bank was in breach of its obligations under the agreement – as such, President Ryan held that neither mode of Res judicata would apply because of that judgment.

Emphasising that it was clear that the High Court could not have determined the breach of contract issue that arose, President Ryan held that the High Court went beyond what was necessary for the resolution of the dispute presented by the application; therefore, the findings in the judgment could not constitute binding legal rulings.

On an application to strike out proceedings, the court considers not only the case as pleaded but also based on any amendments that might reasonably be anticipated.

President Ryan explained that he was not of the view that because the amendment could legitimately be something of a stratagem, it followed that it should be disallowed. Neither was it fatal that the claim was inconsistent with previous submissions, or totally at variance.

The Dormers based their application on the new material that they obtained under the Data Protection Acts in relation to the application made by the three bank officials to the Area Credit Committee in February 2014.

The High Court held that they were aware of that material at a time prior to the injunction application in February 2015, however President Ryan said that it was not satisfactory to have a claim defeated on a rule of technical pleading.

Henderson v. Henderson

Rather than acting as an obstacle for the Dormers’ application, the rule in Henderson v. Henderson supported the proposition that the suit at hand should be amended to reflect the full exposition of the plaintiffs’ claim.

President Ryan explained that the rule was:

“he Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances} permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.”

As such, the Dormers were in a position at least to assert, based on the revealed material, that the bank officials did not make a case to the credit committee in accordance with what was agreed in settlement of the summary proceedings.

According to President Ryan, if such a claim had been made in the original pleading, it could not have been struck out on the basis that it was frivolous and vexatious or that it was bound to fail.

The Dormers did not have to establish the truth of the allegations they make in their amended pleadings; it was sufficient that they establish a factual basis.

The fact that the case was originally pleaded without that allegation did not make it inadmissible.

President Ryan was satisfied that the period allowed by the Statute of Limitations had not expired, and furthermore, without a specific case of prejudice made by the bank, President Ryan was satisfied that this was not a ground on which the Dormers should be now excluded from advancing.

Accordingly, President Ryan held that the appeal should be allowed in respect of the refusal of the Dormers’ application for amendment and as to the striking out of the action.