“Gone but not forgotten - Striking out Court Proceedings”

Ricky Kelly and Hilda Mannix recently acted for R&Q Ireland, formerly known as the Solicitors Mutual Defence Fund Limited (“SMDF”), in a successful application before the commercial division of the High Court to re-enter the proceedings of Solicitors Mutual Defence Fund Ltd. v Costigan & Ors [No. 2009/10863P], for the purpose of seeking judgment in the amount of €4.9 million due to the failure of various defendants to comply with the terms of a settlement agreement entered into in January 2011.

In the judgment of Mr Justice McDonald, delivered electronically on 14 May 2020, the Court found that it was not functus officio (prevented from dealing with the matter) as a consequence of an Order made by Ms. Justice Finlay Geoghegan on 31 January 2011, whereby the proceedings were struck out with liberty to re-enter.

Facts

The SMDF’s original complaint alleged that it retained the Defendants, who at the time traded as Bloxham (now in liquidation), to provide stockbroking and investment advisory services and that pursuant to those advices, in January 2005, it invested €8.4 million in a bond as an appropriate and suitable investment. The bond subsequently lost 97% of its value and the SMDF issued proceedings against the Defendants in December 2009, seeking damages for breach of contract, negligence and breach of duty.

A settlement agreement was reached between the parties in January 2011 which required the defendant parties to the agreement to pay the sum of €7.3 million in line with a schedule of instalments and entitled the SMDF to re-enter the proceedings and obtain judgment in the event of a default of those payments.

The settlement agreement provided a mechanism by which the Court would be informed that the proceedings had been resolved and asked to make an order striking out the proceedings while at the same time granting the parties liberty to have the proceedings re-entered. On 31 January 2011, Ms. Justice Finlay Geoghegan granted the orders sought. Ms. Justice Finlay Geoghegan’s Order did not refer to the settlement agreement, the settlement agreement was not filed with the Court and a Tomlin Order was not made[1].

SMDF’s application to re-enter the proceedings was opposed by a number of the Defendants, all of whom argued that Ms. Justice Finlay Geoghegan’s Order made the Court functus officio and therefore that the only remedy available to the SMDF was to commence new proceedings for the purpose of enforcing the settlement. The SMDF, rejecting the position adopted by parties, argued that the Order expressly granted it liberty to re-enter the proceedings and that it was entitled to do so.

Decision

Mr. Justice McDonald held that the SMDF is entitled to re-enter the proceedings and considered a number of authorities raised by the Defendants. In particular, he distinguished the case of Ascough v Roe[2] from the present case in circumstances where in Ascough, Barron J. had regard to the terms of the settlement agreement executed by the parties, which settlement terms, unlike the settlement in this instance, did not refer to the proceedings being re-entered for the purpose of enforcement in the event of a default.

McDonald J. placed emphasis on the fact that while Barron J. clearly considered that a Tomlin Order would be the most appropriate option for parties to pursue if they wished to ensure a future role for the court in enforcing a settlement agreement, this should not be read as meaning that a Tomlin Order was the only option in these circumstances. Finally, McDonald J. noted that, in contrast to the Order made in Ascough, the Order in the present case did not simply strike out the proceedings with liberty to apply, but made provision for liberty to re-enter.

In the circumstances, the Court was of the view that the Order should be read as a whole and that it was not possible to “properly glean its meaning and effect solely by reference to the direction that the proceedings be struck out”. The Court held that the approach adopted by O’Neill J. in O’Mahony (a Minor) v. Minister for Education and Science[3] was consistent with that followed by Barron J. in Ascough, and that regard should be had to the underlying settlement agreement when seeking to construe the meaning and effect of the order made. This approach was also adopted by O’Connor J. in the more recent decision of Carthy v Boylan[4].

McDonald J. adopted the approaches of Barron J. in Ascough and O’Neill J. in O’Mahony and considered the Order not in isolation, but against the backdrop of the settlement agreement. In considering the Order in that manner, the Court first observed the language of the Order and opined that had the Order simply provided that the proceedings be struck out, those words in isolation would certainly render the Court functus officio. The fact that the Order recorded in the same sentence that by consent, there is liberty to re-enter, led the Court to determine that the term “liberty to re-enter” must mean that the parties did not intend to entirely conclude the proceedings and “clearly envisaged a potential future role for the court”.

However, McDonald J. held that this could not mean that the parties intended that the proceedings would be re-entered for the purpose of re-litigating the original claim and noted that it would be “inconceivable that the court would permit parties to proceed in that way in the absence of some detailed explanation”. Ultimately, it was held that the Order was intended to allow the re-entry of proceedings for the limited purposes of obtaining judgment.

Conclusion

The Court’s decision provides timely clarity on the options available to a party seeking to resolve Court proceedings by agreement, while at the same time incorporating a mechanism for enforcing that agreement in the event of a default.