Judgment
Title: | Archer & Ors -v- O'Connor |
Neutral Citation: | [2019] IESC 52 |
Supreme Court Record Number: | 160/13 |
Court of Appeal Record Number: | 812/14 |
High Court Record Number: | 2011 4320 S |
Date of Delivery: | 07/04/2019 |
Court: | Supreme Court |
Composition of Court: | Clarke C.J., Dunne J., Peart J. |
Judgment by: | Peart J. |
Status: | Approved |
Result: | Appeal allowed |
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THE SUPREME COURT
MARTIN ARCHER, RICHARD HOGAN, THOMAS CARROLL AND PETER KIELY UNDER THE STYLE AND TITLE OF TIMOTHY J. HEGARTY & SON
JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 4TH DAY OF JULY 2019
1. A nett issue arises on this appeal against the order made by the High Court (O’Malley J.) on the 4th March 2013 granting judgment against the appellant, Mr O’Connor, in a sum of €76,761.76 (being €75,000 principal, and €1,761.76 interest) on foot of a summary summons which issued on the 17th October 2011. The sum claimed was in respect of professional fees, and was claimed to be due and owing on foot of an agreement entered into between the firm and the appellant by way of a compromise between the parties of a claim for a higher sum, namely €107,394.21. The agreement reached, as evidenced by a letter dated 1st November 2010 signed by the appellant was that by the 30th April 2011 the appellant would pay a sum of €20,000, and if he failed to do so he would pay interest on any unpaid portion at the rate of 3% until paid, and that he would pay the balance of €75,000 “from the proceeds of sale of 42 Alden Grove on completion of the sale”. It was agreed also that if that sum of €75,000 had not been paid by 30th September 2011 interest on that sum would be paid at the rate of 3% until payment was made. The initial sum of €20,000 was paid in due course, though not by the 30th April 2011. Nothing turns on that delay.
2. The principal issue which arises is whether or not the trial judge was correct to determine that the replying affidavits filed by the appellant in opposition to the respondent’s notice of motion seeking liberty to enter judgment for the sum remaining unpaid under the said agreement did not disclose an arguable defence such that the matter should be adjourned to a full plenary hearing.
3. In that regard, the appellant had raised a number of potential grounds of defence, and indeed on this appeal has sought to raise additional grounds during the course of his oral submissions. The appellant may not advance new grounds for the first time on appeal before this Court. If he wished to rely upon them, it is incumbent upon him to raise them in the first instance in the High Court.
4. Of the grounds advanced in the High Court, it is fair to say that the appellant places reliance mainly on four. I am satisfied that any other grounds advanced in the High Court as constituting arguable grounds of defence were rightly rejected by the trial judge as not meeting the required level of arguability in accordance with the principles established in the well-known cases such as Aer Rianta cpt. v. Ryanair Ltd [2002] 1 ILRM 381, and Harrisrange Ltd. v. Duncan [2003] 4 I.R. 1.
5. The four issues which are principally relied upon by the appellant can be addressed under three headings: (i) that he entered into the compromise agreement dated 1st November 2010 under duress/undue influence, (ii) that the said agreement is null and void on the grounds that the respondent firm had a conflict of interest such that the appellant ought to have been advised to seek and obtain independent legal advice before entering into the agreement; (iii) that in any event under the said agreement he was under no obligation to pay the sum of €75,000 by the 30th September 2011 other than out of the proceeds of sale of 42, Alden Grove (which has not yet occurred) subject to the payment of interest thereafter, and therefore that the sum of €75,000 is not due and owing; and (iv) that he has a defence by way of equitable set-off arising from a counterclaim he seeks to bring against Mr O’Connell of the respondent firm in respect of professional negligence, both in respect of a period when he was a member of the respondent firm as well as during a period when he was a partner in the firm of M. J. Horgan & Sons, previously instructed by the appellant in relation to certain matters.
6. In addition to those potential grounds of defence, the appellant also appeals against the trial judge’s refusal to accede to his application to join another firm of solicitors to the proceedings, namely James Riordan & Partners, so that he could pursue a cross-claim in negligence against that firm also, by way of a defence to the respondent’s claim by way of an equitable set-off. The latter firm are solicitors who acted for the appellant after the respondent firm had ceased to act.
7. I will come to each of these issues shortly, following a brief description of the factual background.
8. The appellant is a property developer whose solicitor was Michael O’Connell. When first instructed to act for the appellant in relevant proceedings Mr O’Connell was a partner in the firm of M. J. Horgan & Sons. That firm ceased trading in 2009, whereupon Mr O’Connell was engaged as a consultant by the respondent firm. Mr O’Connell continued to be instructed by Mr O’Connor. The professional fees incurred by the appellant when Mr O’Connell was with the firm of M. J. Horgan & Son, and those incurred after he joined the respondent firm comprised the original claim for fees in the amount of €107,394. 71 which was the subject of the compromise agreement dated 1st November 2010 in the sum of €95,000, and on foot of which an initial sum of €20,000 was paid, albeit somewhat late, leaving €75,000 to be paid as provided for in that agreement.
9. While Mr O’Connell was a member of the firm of M. J. Horgan & Son, solicitors, the appellant had instructed him in relation to three sets of court proceedings. The details of those cases are not particularly relevant for present purposes. But the appellant maintains that his instructions were not properly carried out and that due to negligence on the part of Mr O’Connell in the manner in which he dealt with and conducted these cases he has suffered loss.
10. It appears from Mr O’Connell’s affidavit grounding the motion for judgment that around the time that he was departing from M. J. Horgan & Son he had discussions with the appellant, and that the appellant decided to continue to instruct Mr O’Connell after he joined the form of T.J. Hegarty & Son, the respondent firm. Thereafter there were discussions during 2009 and 2010 about fees, and according to Mr O’Connell, the appellant assured him that all fees and outlays incurred in relation to these cases would be discharged by him from the future sales of certain properties. But in the absence of an actual undertaking in this regard from Mr O’Connor the respondent firm ceased acting for the appellant and came off record in the various proceedings. Thereafter, the appellant instructed the firm of James Riordan & Partners. It was after these developments that bills of costs were prepared by the respondent firm in relation to costs incurred in the three sets of proceedings, amounting to the sum of €107,394.21, and which was later compromised in the sum of €95,000 already referred to.
11. The need to address the question of costs arose partly at least because the appellant needed to obtain his litigation files from the respondent firm who would have enjoyed a lien on same in relation to outstanding costs. Once agreement had been reached in the amount of €95,000 as evidenced by the letter dated 1st November 2010 signed by the appellant, the respondent released the files to James Riordan & Partners, notwithstanding that the first payment of €20,000 was not due to be paid under the agreement until 30th April 2011. No allegation of negligence was made at that time by the appellant against Mr O’Connell.
12. There are two letters dated 1st November 2010 and one dated 3rd November 2010 which are central to the question of whether the sum of €75,000 was due and owing when the respondent firm issued its proceedings. The relevant parts of that correspondence should be set forth.
(a) Letter dated 1st November 2010 – appellant to the respondent firm:
“Dear Sirs,
I hereby undertake to pay the sum of €20,000 to T. J. Hegarty & Son on or before 30 April 2011 and if this sum is not paid by 30 April 2011, then I further undertake to pay interest on any unpaid portion of this sum at the rate of 3% from 30 April 2011, until paid.
I further irrevocably authorise James Riordan and Partners to act for me in the sale of 42 Alden Grove and further irrevocably authorise James Riordan and Partners to give an undertaking to pay T. J. Hegarty & Son the sum of €75,000 from the proceeds of sale of 42, Alden Grove, on completion of the sale.
If the said sum of €75,000 has not been paid by 30 September 2011, then I further undertake to pay interest on any unpaid part of this sum at the rate of 3% from 30 September 2011, until paid.
I also confirm that I am agreeable to making the above-mentioned payment of €75,000 out of the net proceeds of any sale of any of my four houses at Rochestown, which are currently for sale on the open market, should these sales occur in advance of the Alden sale, subject only to the Bank’s consent.
Yours truly,
Patrick O’Connor
(b) Letter dated 1st November 2010 – James Riordan and Partners to Martin Archer, T. J. Hegarty & Son:
We confirm that we have been irrevocably instructed to act by Mr O’Connor in relation to the sale of his house at 42 Alden Grove and in relation to the giving of the undertaking below.
We hereby undertake to pay your firm the sum of €75,000 out of the proceeds of sale of 42 Alden Grove, when same comes to hand.
The undertaking by Mr O’Connor of even date to pay your firm the sum of €20,000 (and such interest as may arise) and our undertaking are in full and final settlement of all fees and outlays due to your firm and all issues of every nature that Mr O’Connor has in relation to work done for him by Mr O’Connell.
I hereby authorise and instruct James Riordan and Partners to issue the above undertaking in the above terms.
[signed] Pat O’Connor
(c) Letter dated 3rd November 2010 – Martin Archer (T. J. Hegarty & Son) to Lucia Fielding (James Riordan and Partners)
“Dear Lucia,
… I note our agreement on the fees as follows:
1. €20,000 to be paid by your client on or before 30 April 2011, interest at 3% to accrue thereafter.
2. The sum of €75,000 to be paid on or before 30 September 2011, interest at 3% to accrue thereafter.
3. I note the payment of the fees are secured on the undertakings as set out.
On foot of the above arrangement, I confirm that we are agreeable to release of lien over the files held on behalf of Mr O’Connor.
We are now organising the files for handover and will contact you in early course in this regard.
The assertion of duress/undue influence
13. The assertion of duress/undue influence is contained at paragraph 8 of Mr O’Connor’s first replying affidavit sworn on 1 October 2012. In that paragraph he states:
“8. … I believe the alleged “agreement” to be null and void by duress, undue influence and lack of independent legal advice. I had trenchantly put my strong feelings to James Riordan, my solicitor, in relation to what I believed to be Michael O’Connell’s substantial financial liability to me. I received telephone calls from James Riordan regarding Michael O’Connell’s account. These telephone calls were interrupted by the inclusion of Lucia Fielding, Managing Partner of James Riordan & Partners, on speaker phone. I believe I was placed under unbearable pressure to enter an agreement to settle with Michael O’Connell, from the combined forces of James Riordan and Lucia Fielding during the same telephone calls to me. I also had meetings with James Riordan and Lucia Fielding during which the same pressure was placed on me to settle. During these discussions Lucia Fielding informed me that Martin Archer, one of the plaintiffs, had threatened her with joining them (James Riordan & Partners) in any Counterclaim or proceedings I might bring against Michael O’Connell. Lucia Fielding informed me that Martin Archer would be very conscious of the insurance implications for both James Riordan & Partners’ insurance renewal costs and the plaintiff’s, should I make a claim against Michael O’Connell…”.
14. The trial judge in her ex tempore decision stated that she was unable to see any evidence that the appellant was put under duress. It would appear that the trial judge considered that the allegation of duress was one really being levelled against James Riordan & Partners, rather than the respondent firm. That is understandable given the oral submission made to the trial judge immediately prior to her expressing that conclusion. The appellant had stated in that regard “ … I am saying that the agreement would not take place [sic] only for the duress I was placed under by my solicitors I believe were not independent in advising me”. In so far as the appellant on the appeal to this Court has expressed his view that he was put under pressure by both firms, I do not consider that there is any evidence which puts this allegation of duress/undue influence beyond mere assertion. Clearly he was anxious that his litigation files would be released to James Riordan & Partners. That is perfectly understandable. But it is also clear that Messrs. T. J. Hegarty & Son enjoyed a lien over the files as security for their outstanding costs. I agree with the trial judge that it cannot be said that there is evidence of duress in the legal sense. The appellant knew that he owed costs to Messrs Hegartys, and that they held his files by way of lien in respect of those costs. It is understandable that he would have felt under some pressure to reach agreement in relation to outstanding costs so that his files could be released, but any such pressure should not be equated to the exertion of such a level of pressure amounting to duress. In my view, the allegations of duress/undue influence does not amount to an arguable defence in this case, and I would therefore reject this ground of appeal.
Conflict of Interest
15. The appellant contends also that the agreement entered into is null and void because a conflict of interest arose from the fact that the agreement into which Mr O’Connor entered on the 1st November 2010 was not just expressed to be in full and final settlement of all fees and outlays due and owing to Messrs. Hegartys, but also in full and final settlement of “all issues of every nature that Mr O’Connor has in relation to work done for him by Mr O’Connell”. Since Mr O’Connell had acted for Mr O’Connor both while with Messrs. M. J. Horgan & Son, and afterwards when he was with Messrs. Hegartys, both firms had an interest in securing such a release from liability in respect of any negligence allegations being levelled against Mr O’Connell by the appellant. Mr O’Connell of course denies any such claims and allegations levelled against him, and highlights that such allegations and claims were not made at the time the agreement was entered into. But on the motion for judgment that question did not arise for final determination. The question for determination at that stage was confined to whether the alleged conflict of interest was raised by Mr O’Connor beyond the level of mere assertion, and, if so, could the conflict if successfully made out at trial result in the agreement being found to be unenforceable.
16. The trial judge expressed no conclusion in relation to conflict of interest. Perhaps in her mind it was subsumed into the question of duress/undue influence. But in truth it is a separate issue raised by Mr O’Connor in his replying affidavit which was fully opened before the trial judge. It was necessary to reach a conclusion as to whether that question amounted to a potential and arguable defence to the claim being brought on foot of the said agreement.
17. It goes without saying that I am deliberately refraining from expressing any concluded view on the question of conflict of interest, and nothing I say must be taken as the expression of any view as to how the issue might ultimately be determined at any full hearing of the case. The facts underpinning the appellant’s submission are not seriously in doubt. The documentary evidence shows that by entering into the agreement dated 1st November 2010 Mr O’Connor was abandoning any claim he may have had for financial losses that he may have considered that he had in respect of work done for him by Mr O’Connell, either while with Messrs. Horgan or Messrs. Hegartys. Both these firms therefore stood to gain some advantage by the abandonment of any such claims by Mr O’Connor against Mr O’Connell.
18. In my view the question of conflict of interest raised on the replying affidavit by Mr O’Connor goes beyond mere subjective assertion by him, and finds a prima facie arguable evidential basis in the contents of the agreement itself. In my view it amounts to an arguable defence to the respondent’s claim, because if its effect is found to be that the agreement on foot of which the proceedings are brought is null and void as a result of the existence of a conflict of interest, then potentially at least the foundation of the claim evaporates. In my view that is a question that requires a plenary hearing to resolve so that evidence on both sides can be heard, and relevant legal submissions can be advanced.
19. On that basis I would allow this appeal and direct a plenary hearing on that issue.
The sum of €75,000 is payable only from the proceeds of sale of 42, Alden Grove
20. I have set forth the contents of the agreement sued upon. The “undertaking” given therein by the appellant is “to pay T. J. Hegarty & Son the sum of €75,000 from the proceeds of sale of 42 Alden Grove on completion of the sale”. That “undertaking” is accompanied by a matching undertaking from James Riordan & Partners to Messrs Hegartys that would pay that sum from the proceeds of sale of that property “when same comes to hand”. Mr O’Connor agreed also that where the agreed sum was not paid by 30th September 2010 he would in addition pay interest at 3%. It is not in dispute that there was no contract for sale of the property entered into with any purchaser as of the 1st November 2010, and neither is it in dispute that the property had not been sold prior to the commencement of these proceedings.
21. The respondent takes the position that the agreement was that the sum of €75,000 would be paid by the 30th September 2010 and that the reference to the sale of 42 Alden Grove simply refers to the means by which the sum would be paid. However, Mr O’Connor contends that at all times it was known that the sum could only and would be paid from the proceeds of sale of that property (or from the proceeds of sale of one of the four other properties at Rochestown), and that he was not required under the agreement to pay the sum until such time as he completed the sale of the property. The question that arose before the trial judge was whether that defence to the claim on foot of the agreement amounts to an arguable defence.
22. The trial judge was of the view that since the defendant acknowledged in the agreement that he owed the sum of €75,000 for professional fees, she did not consider that he could now say that he did not owe the amount claimed. She stated that whether or not the house was sold, he still owed the amount agreed.
23. In my view the trial judge fell into error in concluding that there was not an arguable defence to the claim based on the appellant’s contended construction of the agreement. Again, without expressing any concluded view, it is in my view at least arguable that on a plain reading of the agreement, the sum of €75,000 was to be paid out of the proceeds of sale and the solicitors acting for the appellant in that sale gave an undertaking to do so from the proceeds of sale. I readily accept that questions might arise about what, if any, genuine efforts have been made by Mr O’Connor to obtain a purchaser, and whether by lack of genuine effort he frustrated the payment of a sum that he had agreed to pay. But that question, and perhaps others, which might be made by the respondent can be made at a full plenary hearing. The only question at the moment is whether the appellant’s defence on the basis of the wording of the agreement itself amounts to an arguable defence, and in my view it does. I would therefore allow the appeal on that ground, and direct a plenary hearing on that issue, in addition to the question of conflict of interest already dealt with.
Defence by way of equitable set-off arising from a counterclaim in negligence he seeks to bring against Mr O’Connell
24. It must be noted at this point that Mr O’Connor has already instituted negligence proceedings against Mr O’Connell and the respondent firm (see plenary proceedings Record Number: 2012 No. 12111P), but according to the affidavit of Mr O’Connell sworn on the 15th January 2013 those proceedings had not been served on the named defendants by the date of swearing of that affidavit. He does not appear to have advanced those proceedings to date.
25. In my view if the appellant has a claim in negligence against the respondent firm and Mr O’Connell, he ought not be permitted to pursue those claims by way of a counterclaim in the present proceedings. There are two reasons for this. Firstly, he has already instituted proceedings by way of plenary summons, and those issues can be heard and determined in those proceedings. Secondly, the present proceedings claim a liquidated sum on foot of an agreement. The issue of possible negligence arising from the quality of the services provided does not arise from the agreement sued upon. If the claim was one for costs on foot of a bill of costs, then potentially the quality of the services provided that gave rise to the bill could give rise to a defence to the proceedings in whole or in part, and with the potential for a set off. But where as in this case the amount has been agreed in full and final settlement of all fees due, and of all issues that Mr O’Connor may have had in relation to the work done by Mr O’Connell, a claim of negligence against Mr O’Connell does not even arguably amount to a defence by way of equitable set off in these proceedings.
26. The principles applying to the situation where a defendant to summary proceedings seeks to bring a counterclaim by way of defence to the plaintiff’s claim have been clearly stated by Clarke J. (as he then was) in Moohan v. S & R Motors (Donegal) Ltd [2008] I.R. 650, in which at pp. 656-657 he stated:
“… the overall approach to a case such as this (involving, as it does, a cross-claim) seems to me to be the following: –
(a) It is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross-claim to amount to a defence as such, it must arguably give rise to a set off in equity and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set off;
(b) If and to the extent that a prima facie case for such a set off arises, the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate portion of) the claim (or have same, in a case such as that with which I am concerned, referred to arbitration);
(c) If the cross-claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle (unreported, Supreme Court, 31st July 1957)”.
27. In my view it would be inequitable for the appellant to bring a counterclaim in negligence in the present proceedings where he has already commenced separate proceedings in that regard and has not progressed them as he is obliged to do. In addition, it would not be appropriate where the claim for fees is on foot of the agreement, and the question as to the quality of the services provided does not directly arise.
28. For the sake of completion, I should add that Mr O’Connor sought in the court below to be permitted to join James Riordan & Partners so that he could include by way of counterclaim a claim of negligence against that firm as well as against the respondent firm. That application was refused. I am satisfied that the trial judge was correct to refuse that application. If the appellant wishes to take proceedings in negligence against James Riordan & Son, he should institute separate proceedings against that firm.
29. As a result of my above conclusions, I would allow the appeal, and would direct a plenary hearing on the basis of two issues only to be pleaded by way of defence, namely:-