High Court: Solicitors’ insurers may pursue proceedings despite strike out order following settlement



High Court
High Court

The High Court has held that Solicitors Mutual Defence Fund Limited is entitled to re-enter proceedings for judgment of €4.9 million it alleges are outstanding pursuant to a 2011 settlement with Bloxham Stockbrokers.

Background

Solicitors Mutual Defence Fund Limited (Solicitors Mutual) provided professional indemnity cover for solicitors in Ireland. Bloxham were retained by it to provide stockbroking and investment advisory services. In 2005, Solicitors Mutual invested €8.4 million in a bond which it alleges was recommended by Bloxham. The bond subsequently lost 97 per cent of its value.

Solicitors Mutual commenced proceedings against Bloxham in December 2009, alleging breach of contract, negligence, and breach of duty. A settlement agreement was reached in 2011.

Pursuant to a notice of motion issued in June 2019, Solicitors Mutual sought to re-enter proceedings. Former Bloxham partners Arthur Quinlan, Angus McDonnell, Pramit Ghose, Martin Harte, and Anne Barrett opposed the re-entry.

‘Struck out with liberty to re-enter’

The defendants argued that an order of the High Court of January 2011, made when the settlement was agreed, provided that the proceedings were “struck out with liberty to re-enter”, that the court was functus officio and that fresh proceedings were required to enforce the settlement agreement.

Counsel for Solicitors Mutual argued that there was no legal basis for the proposition advanced by the defendants. Counsel drew attention to the decisions of Ms Justice Mary Finlay Geoghegan in A.S. v M.S. [2007] IEHC 412 and M.M. v. R.R. [2012] IEHC 171 in which she had expressly permitted proceedings to be re-entered in circumstances where liberty to that effect was given in previous orders made by the court striking out the proceedings. In M.M., which related to proceedings under the Hague Convention on Child Abduction, the judge stated that the purpose of giving liberty to re-enter “is that, if the respondent and children are found to be continuing to reside in Ireland, the proceedings could be re-entered and continued against the respondent”.

Plaintiff’s counsel accepted that Delany & McGrath in Civil Procedure (4th ed. 2018) suggest that an order striking out proceedings renders the court functus officio. However, counsel submitted that the authors went too far in suggesting this, and that regard must be had to the language used in the order as a whole.

Counsel for one of the defendants submitted that any future role for the court should be explicitly embodied in the court order, and that it was not enough for the parties to agree among themselves that the court should have a future role if the settlement needed to be enforced. It was submitted that the most appropriate way in which to ensure that the court would have a future role is by the making of a Tomlin order. This provides for a consensual stay of the proceedings on the agreed terms save for the purposes of carrying the agreed terms into effect, permission to apply to the court for this purpose being reserved. Counsel submitted that fresh proceedings are required to enforce the settlement in the absence of such an order.

With regard to the use of the words “liberty to re-enter” in the order made by Ms Justice Finlay Geoghegan, counsel suggested that this formula had no effect unless the parties expressly, in the terms of the order, gave the court a role.

Counsel for another defendant, relying on Mr Justice Iarfhlaith O’Neill’s decision in Sweeney v Bus Átha Cliath (High Court, unreported, 30 January 2004), submitted that the effect of the words “struck out” is to terminate the proceedings. He also relied on the decision of Mr Justice Henry Barron in Ascough v Roe (High Court, unreported, 21 May 1992), and contrasted the effect of an order striking out proceedings with the effect of an order providing for a stay of proceedings or an order adjourning the proceedings generally with liberty to re-enter. While a stay or a general adjournment keeps the proceedings alive, the proceedings are brought to an end where the court makes an order striking out the proceedings.

Moreover, he submitted that, on the basis of the approach taken in McMullen v Carty (Supreme Court, unreported, 27 January 1998) and McMullen v Clancy (No. 2) [2005] 2 I.R. 445, re-entry of proceedings allows the parties to deal with the original dispute. It is not suitable for the purposes of enforcing a settlement of the claims made in the original proceedings. In contrast with liberty to re-enter, liberty to apply (given in an order disposing of the proceedings) does not entitle a party to return to court in the same proceedings to litigate the original claim. Counsel, relying on O’Mahony (a Minor) v Minister for Education and Science [2005] IEHC 211, said that “liberty to re-enter” enables the original claim to be litigated, rather than a settlement to be enforced.

Counsel invited the court to consider Bostani v Pieper [2019] 4 WLR 44 where Mr Justice Richard Jacobs held that even in the case of a Tomlin order, an application to enforce a settlement was subject to the same six-year limitation period as an action to enforce a contract.

In his reply, plaintiff’s counsel said that the order needs to be read as a whole, and that the words striking out the proceedings should not be read without also having regard to the statement within the order that there is liberty to re-enter.

Conclusion

Mr Justice Denis McDonald held that the terms of the order must be read as a whole to ascertain whether the court is rendered by its terms functus officio. The judge found nothing in the order of Ms Justice Finlay Geoghegan to suggest that the court was now functus officio for all purposes.

He held that Solicitors Mutual was entitled, subject to any defences that the defendants may legitimately raise, to re-enter these proceedings by way of notice of motion.

© Irish Legal News Ltd 2020



Other judgments by Mr Justice Denis McDonald