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Substitution of plaintiffs

AUTHOR(S): GearĂ³id Carey
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
DATE: 10.09.2013

Introduction

In Waldron v Herring(1) the High Court set out when it would allow a non-party to proceedings to be joined as a plaintiff (whether as a co-plaintiff, in addition to the existing plaintiff, or as sole plaintiff, in substitution for the original plaintiff) on the foot of an assignment agreement. Such orders can be made only in specific circumstances, but the court was satisfied that this was one such case. In reaching its conclusion, and in considering the objections raised by the defendants, the court helpfully recited the law relevant to such applications.

Background

The plaintiff was the registered owner of a business premises adjacent to a busy public road. On two separate occasions, within months of each other, the building was struck by vehicles and damaged. The plaintiff sued various defendants, seeking to hold them jointly and severally liable for the damage caused to his building in both incidents. The court noted that this was the correct approach for the plaintiff to take, as the court would have to attribute damage proportionately between the defendants on the basis of the evidence.

The plaintiff had borrowed money from a bank, Permanent tsb, from which a charge (security) was registered against the property in favour of the bank. The plaintiff ran into financial difficulty after the building was damaged. He was sued by the bank and had a substantial judgment recorded against him. The bank enforced its security and took possession of the property, becoming full legal owner in actual possession of the property.

The property was in a dangerously damaged state and the local council directed the bank to repair it, which it did. However, the bank wished to recover the costs of doing so and asked the plaintiff if he was prepared to consent to a High Court application to substitute the bank as a plaintiff in the present proceedings. The plaintiff agreed and, subject to terms, confirmed his agreement to the bank's application in writing. However, the master of the High Court declined the bank's application on the basis that the letter did not give the bank sufficient standing and that a valid assignment of the plaintiff's cause of action in favour of the bank was required. By the time the matter came before the High Court on appeal, a formal assignment agreement had been executed, by which the plaintiff purported to assign his right to the action in its entirety to the bank and to cede all recoveries that might be made to the bank.

Defendants' objections

Both sets of defendants objected to joining the bank – they contended that neither of the court rules cited allowed a plaintiff to join the action as envisaged. They also argued that, even if the bank had taken a valid assignment of the plaintiff's right of action, it was entitled only to institute separate proceedings of its own. The defendants also contended that the purported assignment was invalid for want of consideration, with one set of defendants arguing that, in effect, it allowed the bank to pursue a subrogated claim and that it constituted a champertous arrangement.

Assignment

The court first considered the status of the assignment. It noted that the entitlement to pursue a cause of action constitutes a 'chose in action', which is assignable pursuant to statute (Supreme Court of Judicature (Ireland) Act 1877) or in equity. It also observed that an assignment which fails to comply with statutory requirements is not necessarily invalid, as it may take effect as a perfectly good equitable assignment. For a statutory assignment, Section 28(6) of the act provides that an absolute assignment of any debt or other legal chose in action can pass the legal right to the debt or chose in action. Four main conditions have been identified:(2)

  • The assignment must be for a debt or other legal chose in action;
  • There must be 'absolute assignment', meaning that the assignor must not retain any interest, whether partial or otherwise, in the subject matter of the assignment;
  • The assignment must be in writing by the assignor; and
  • The debtor must be given express notice in writing of the assignment. A statutory assignment does not need valuable consideration (ie, any form of payment) to be valid. The assignee can then sue the debtor in its own name, without joining the assignor as a party to the action.

Although the court then explored the more relaxed conditions regarding equitable assignment – which it noted can still be relied on if the conditions for a statutory assignment are not met – it ultimately found that this assignment met the statutory requirements.

Other arguments

The court also felt that the suggestion that the plaintiff was effectively pursuing a subrogated claim "does not stand up to critical analysis"; it noted that it was merely a legal remedy intended to prevent unjust enrichment and not a cause of action.(3) Accordingly, there was no basis for the doctrine of subrogation to apply here, since the plaintiff was clearly not seeking to enrich himself. Although the court accepted that champerty(4) still subsists in Irish law, it disagreed with the suggestion that there was anything champertous about the arrangement. The bank's legitimate interest was obvious – it was not offering to fund the litigation in return for a share in the proceeds but wanted to be joined as a party itself, to release the plaintiff and to take over the litigation.

Relevant rules

Having determined that the defendants' arguments did not mean that the application could not be made, the court considered the relevant Rules of the Superior Courts relied on by the bank in support of its application. Relief was primarily sought under Order 15, Rule 2, which states:

"Where an action has been commenced in the name of the wrong person as plaintiff… the Court may, if satisfied that it has been so commenced through a bona fide mistake, and that it is necessary for the determination of the real matter in dispute so to do, order any other person to be substituted or added as plaintiff upon such terms as may be just."

However, the court felt that the situation envisaged by Order 15, Rule 2 did not arise, since there was no mistake – the bank had not become owner at the time the proceedings were commenced.

In the alternative, Order 15, Rule 13, was relied on, which provides that:

"No cause or matter shall be defeated by reason of the misjoinder or non-joinder of parties, and the Court may in every cause or matter deal with the matter in controversy so far as regards the rights and interests of the parties actually before it. The Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the names of any parties improperly joined, whether as plaintiffs or as defendants, be struck out and that the names of any parties, whether plaintiffs or defendants, who ought to have been joined, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter, be added."

However, in this regard, the court observed that:

"the Court must be concerned at the end of the day with doing justice, and it is inimical to the interests of justice that a tortfeasor or other wrongdoer should escape being made liable, where for technical or legal reasons, a person who ought to be a party to proceedings is not a party to those proceedings."

It felt that Order 15, Rule 13 gave the court the necessary flexibility to enable it to add the name of any person "whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter". Moreover, this can be done "at any stage of the proceedings". It further noted that the application does not need to be brought by one of the existing parties, but can be made "either upon or without the application of either party".

In contrast to the position before the master, the court recognised that a valid legal assignment had since been entered into, which enabled the bank to ask the court to add it to the proceedings in substitution for the plaintiff, particularly where the plaintiff had stated that he did not wish to personally continue the proceedings. On that basis, the court held that it was entirely appropriate that the bank be added to the existing proceedings as plaintiff in substitution for the existing plaintiff pursuant to Order 15, Rule 13.

Comment

The decision represents an interesting restatement of the principles applicable to the substitution of plaintiffs under Irish procedure. It is apparent from the court rules that the circumstances where the court may direct such substitution are limited, but it is also clear that in appropriate cases it will not hesitate to do so. This decision reflects a sensible and pragmatic approach in this regard. It also summarises usefully the principles applicable to assignments of choses in action under Irish law.

____________________________________

Endnotes

(1) [2013] IEHC 294.

(2) O'Rourke v Considine [2011] IEHC 191.

(3) Relying on Boscawen v Bajwa [1996] 1 WLR 328, Orakpo v Manson Investments [1978] AC 95 and Highland Finance (Ireland) v Sacred Heart College of Agriculture [1998] 2 IR 180.

(4) Being the maintenance of a person in a lawsuit on condition that the subject matter of the action is to be shared with the maintainer.

This article was first published by International Law Office on 10 September 2013.

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