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Strict test for dismissing plaintiff’s claim
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
A recent decision has reaffirmed that a strict test will be applied where a defendant seeks to strike out a claim against it on the basis that no case against the defendant can be demonstrated.(1) The Irish courts have been slow to strike out a plaintiff's case based on the pleadings and this decision shows that it is only in exceptional cases that such an application will prevail.
The plaintiff claimed that it had entered into an agreement with the defendant that it would advance a sum of up to €3.8 million to the defendant on terms set out in the statement of claim. As part of the alleged agreement, the plaintiff claimed that it had advanced €2.2 million to the defendant, "which for expediency was paid from the bank account of Mr Derek O'Leary and Ms Linda O'Leary to the account of the defendant". The plaintiff claimed that the moneys had not been repaid and sought judgment against the defendant for damages and other reliefs. The defendant contended that it never received moneys from the plaintiff and instead claimed that any moneys lent to the defendant were loaned by Mr O'Leary pursuant to an agreement entered into personally between him and the defendant.
The defendant brought an application to dismiss the plaintiff's claim under Order 19, Rule 28 of the Rules the Superior Courts, on the grounds that the plaintiff's statement of claim disclosed no reasonable cause of action or the plaintiff's claim was frivolous or vexatious, and the inherent jurisdiction of the court applied on the grounds that the plaintiff's claim was frivolous, vexatious or bound to fail.
Order 19, Rule 28
Judge McGovern cited Order 19, Rule 28 to the effect that the court's jurisdiction was limited to striking out pleadings where they disclosed no reasonable cause of action or answer or where the claim is shown by the pleadings to be frivolous or vexatious. He also cited McCabe v Harding,(2) where Judge O'Higgins observed that for Rule 28 to apply "vexation or frivolity must appear from the pleadings alone". McGovern went on to note that the court had to consider the pleadings only and was to assume that any statements of fact contained in the pleadings were true and could be proved. Applying those principles in this case, it was not possible to conclude that the pleadings were frivolous or vexatious. There was nothing by way of prior litigation between the parties that suggested that these matters had already been canvassed or decided by the courts, or that the defendant was 'vexed' by the proceedings being brought against it as it is understood in the normal way. He also felt that the pleadings did not disclose a frivolous action. Accordingly, the test under Order 19, Rule 28 had not been met.
McGovern noted that the test for striking out under the inherent jurisdiction of the court had been developed in a series of cases since Barry v Buckley,(3) which established a concurrent and parallel inherent jurisdiction in the High Court to dismiss or strike out proceedings where they amount to abuse of process or are bound to fail. He noted that the starting point of the exercise of such jurisdiction is that it must be exercised sparingly(4) and that the test is not whether the plaintiff's case is likely to fail, but whether it is bound to fail – what must be apparent is that no matter what may arise on discovery or at the trial, the plaintiff cannot succeed.(5) McGovern cited Salthill Properties Ltd v Royal Bank of Scotland(6) to the effect that a plaintiff is not required to establish a prima facie case, but rather it is for the defendant to prove that the plaintiff's claim is bound to fail:
"It is clear from all of the authorities that the onus lies on the defendant concerned to establish that the plaintiff's claim is bound to fail. It seems to me to follow that the defendant must demonstrate that any factual assertion on the part of the plaintiff could not be established. That is a different thing from a defendant saying that the plaintiff has not put forward, at that time, a prima facie case to the contrary effect."(7)
Further, McGovern also acknowledged that where there are disputed issues, they must be resolved in favour of the plaintiff and the plaintiff's case must be taken at its high watermark.(8)
Based on the facts, McGovern noted that there were conflicting positions with regard to the alleged agreement between the parties. However, he opined that it was unnecessary for the court to resolve such questions for the purpose of this application. He also referred to two specific arguments:
- the extent of compliance with the obligation for there to be a note or memorandum of the agreement under the Statute of Frauds; and
- the extent of part performance – which, McGovern said, "should be permitted to go to trial and be tested in light of the evidence produced in court".
Ultimately, although the defendant had raised many issues, it had not established that the plaintiff's claim was bound to fail, which was the test that applied.
The case confirms that the test for striking out a claim for disclosing no cause of action or being frivolous or vexatious involves a high standard that applicants must meet. For the purpose of the jurisdiction under Order 19, Rule 28, the court can have regard only to the pleadings alone to determine whether the case was frivolous and, pursuant to the inherent jurisdiction, the applicant must demonstrate that the plaintiff's case is bound to fail. Accordingly, a party seeking to bring such an application should be mindful of the high threshold required to succeed on such an application and consider carefully whether to bring one.
(1) D&L Properties Ltd v Yoldana Ltd,  IEHC 674.
(2)  ILRM 105, Page 108.
(3)  IR 306.
(4) Citing Sun Fat Chan v Osseous Ltd,  1 IR 425.
(5) Citing Lac Minerals v Chevron Corp (unreported, High Court, August 6 1993), Judge Keane.
(6)  IEHC 207.
(7) Ibid, Paragraph 3.14 per Judge Clarke.
(8) Citing Kennedy v Minister for Agriculture  IEHC 187; Keaney v Sullivan  IESC 75.
This article first appeared in the International Law Office Litigation newsletter, 08 December 2015.