Court of Appeal: Commercial proceedings can be re-entered to court list due to breach of settlement agreement

Killian Flood BL

About this case:

• Citation:
  [2021] IECA 20
• Judgment:
  External link
• Court:
  Court of Appeal
• Judge:
  Mr Justice Donald Binchy

The court rejected arguments by the defendants that the High Court consent order striking out the case required the plaintiff to issue fresh proceedings. The order to strike out the case was subject to the express condition that the proceedings could be re-entered under the terms of the settlement, the court said.

Background

The plaintiff, the Solicitors Mutual Defence Fund Limited, had invested €8.4 million in bonds on the advice of the defendants in 2005. Subsequently, the bonds lost 97 percent of their value and the plaintiff issued proceedings for breach of contract, negligence and misrepresentation. The case was listed for trial in 2011, but the parties reached a settlement agreement before the hearing.

The agreement said that the defendants would pay €8.4 million to the plaintiff in instalments outlined in the schedule. The agreement also contained a clause that if the defendants failed to repay the monies in line with the agreement, the plaintiff could re-enter the proceedings to the court list for the plaintiff to seek judgment. The parties informed the High Court that the case had settled and, at their request, Ms Justice Mary Finlay-Geoghegan struck out the proceedings by consent with liberty to re-enter.

In March 2013, the defendants stopped making payments to the plaintiff under the settlement. However, the plaintiff only issued a motion to re-enter the proceedings in June 2019. The defendants objected to the motion, claiming that the court no longer had jurisdiction to deal with the proceedings by virtue of the strike out order from 2011. It was claimed that the proper approach was for the plaintiff to issue fresh proceedings to sue for the settlement.

The question of whether the High Court was functus officio was considered by Mr Justice Denis McDonald on a trial of a preliminary issue. The judge found that the plaintiff was entitled to re-admit the proceedings to the Commercial Court, saying that a court had to consider both the wording and the specific context of a consent order. The “unmistakable terms” of the consent order was to allow the plaintiff to re-enter the case for judgment if the defendants defaulted on payments under the settlement. The court concluded that it was not the intention of the parties for the High Court to be made functus officio from the consent order and allowed the plaintiff to re-enter the case. The defendants appealed the decision to the Court of Appeal.

Court of Appeal

The defendants submitted that the terms of the settlement formed no part of the consent order and that there was nothing to indicate that Ms Justice Finlay-Geoghegan was made aware of the contents of the settlement. The defendants also noted that there was not a Tomlin order made in the case, which would have allowed the High Court to have an ongoing role in the enforcement of the agreement. As such, the defendants argued that the court order had to be strictly construed and that the effect of a strike out was that the proceedings not longer existed. The only proper course of action was for the plaintiff to issue new proceedings, the defendants argued.

The reason that the defendants were seeking to have fresh proceedings issued was to avail of the Statute of Limitations Act, 1957. Since the plaintiffs issued its motion more than six years after the breach of the settlement, the defendants argued that the claim was statute-barred. However, the defendants were concerned that the plaintiff could get around this issue by re-entering the proceedings and the time limit would be ignored.

The Court of Appeal rejected these concerns and upheld the ruling of the trial judge. Giving the judgment of the court, Mr Justice Donald Binchy said that refusing to re-enter the proceedings was contrary to the clear intention of the settlement and, in fact, would deny the plaintiff the remedy which was expressly provided in the agreement. The court said this was a “highly unattractive proposition.”

While the court order was agreed by the parties, any doubt about the terms could be answered by the clauses in the settlement agreement. A court should not obstruct the implementation of a concluded settlement without very good reasons, the court said.

Further, the court was of the view that there was nothing precluding the defendants from validly raising the Statute of Limitations point in the re-admitted proceedings. Mr Justice Binchy said it “could never be the case that the applicable limitation periods set out in the Statute could be avoided because the proceedings have been issued before the obligations giving rise to the application for judgment have been created in the first place.” The fact that counsel for the plaintiff accepted this point meant that there was no prejudice caused to the defendants’ position if the matter was re-entered, the court said.

Conclusion

The appeal was dismissed and the plaintiff was provisionally entitled to a costs order for both the High Court and Court of Appeal hearings.