The perils of over-egging the pudding: Can an Irish court strike out an entire claim because of dishonest evidence?

Thursday 17 November 2016

 

The Perils of over-egging the Pudding: Can an Irish court strike out an entire claim because of dishonest evidence? This question was addressed in the recent decision of the Irish High Court in W.L. Construction Ltd v Chawke & anor [2016] IEHC 539.

 

Background

 

The defendants were owners of a licensed premises in Lucan, County Dublin and entered into a building contract in May 2005 with the plaintiff to undertake renovation works at the premises. Subsequently, a ‘Phase 2’ fit-out was further agreed between the parties and the premises were formally reopened for Halloween 2006. 

 

The plaintiff issued a summary summons in April 2008 arising out of a dispute in relation to payments allegedly owed to it by the defendants. The plaintiff’s main witnesses material to the judgment was its principal and a quantity surveyor. Following 28 days of the plaintiff’s evidence being heard, and prior to the defendants commencing its evidence, the defendants brought an application the subject of this judgment.

 

Relief Sought

 

The defendants brought an application for a non-suit on two grounds.

 

First, they argued that the plaintiff had been guilty of litigation misconduct to such an extent, and of such a magnitude, that the claim ought to be dismissed in limine.

 

Second, the defendants claimed that the plaintiff’s evidence had failed to establish either that there was any sum due to the plaintiff by the defendants or if so, what that sum might be.

 

Facts

 

The Claim, its Progress and Presentation

 

The court set out a chronology in its judgment as to how the plaintiff’s claim “…evolved and developed over the best part of a decade”

 

  • January 2007 - The plaintiff submitted what appeared to be a final account claiming a balance due of €175,274.66 incl. VAT.
  • May 2007 - The plaintiff sent a letter enclosing a report claiming a balance due of €289,577.45.
  • Subsequently, another document was submitted by the plaintiff claiming a balance now due of €198,957.03.
  • A further spreadsheet was delivered to the defendants claiming €216,505.30.
  • October 2007 - A second spreadsheet was delivered claiming a balance due of €221,477.45
  • April 2008 - The plaintiff issued a summary summons claiming a sum due of €191,030.40
  • January 2009 - The principal of the plaintiff company swore an affidavit grounding the application for summary judgment, averring that the sum of €191,030.40 was due. 
  • May 2009 - The principal swore a further affidavit averring that a sum of €170,627.14 was due, based on a report that the plaintiff had procured. 
  • July 2009 - The plaintiff delivered a statement of claim claiming a sum due of €170,627.14, but that VAT was to be added to this figure. 
  • August 2009 - The plaintiff confirmed in replies to particulars that the sum being claimed was €170,627.14 exclusive of VAT.
  • December 2009 - Further replies were furnished by the plaintiff claiming that the sum due of €170,627.14 inclusive of VAT.
  • February 2015 - The plaintiff furnished updated particulars of loss by way of inter alia a quantity surveyor’s report. The report “contained no bottom line” but it was “possible to infer that the amount now being claimed by the plaintiff was €370,892.83. The court noted that this sum was more than double the amount sworn by the principal in May 2009. The court also noted that it was significant that during the course of the quantity surveyor’s evidence it emerged that all the figures contained in his report were in effect figures supplied by the principal, rather than figures independently assessed by the quantity surveyor.
  • March 2015 - A second report by the quantity surveyor was furnished to the defendants, concluding a balance due of €342,931.73. The quantity surveyor gave evidence to the effect that this report was based on his own measurement and assessment of the value of the works.
  • November 2015 - A Scott Schedule was submitted to the court, having been prepared by the parties’ respective quantity surveyors - the plaintiff’s quantity surveyor’s opinion was that a sum of €212,630 was allegedly owed.
  • May 2016 - A revised Scott Schedule was produced to the court on Day 16 of the trial. The plaintiff’s quantity surveyor’s opinion then being that the plaintiff was due a sum of €61,141. However this figure included seven new items never previously claimed by the plaintiff. Without these new items, the plaintiff’s quantity surveyor conceded that only €28,691 was due, a figure which was still disputed by the defendants. 
  • 7 June 2016 - On Day 19 of the trial, the plaintiff’s quantity surveyor produced to the court a document entitled ‘Final Account - Reconciliation’ identifying a sum due according to the quantity surveyor of €167,880. This figure represented an uplift of over €100,000 on the figure put forward by the quantity surveyor four weeks earlier. The court noted that the figures now included “a new claim never previously made”
  • 28 June 2016 - Day 25 of the hearing - during the final day of the quantity surveyor’s evidence, he was asked towards the end of his cross-examination if he could tell the court what the plaintiff’s claim was. He was unable to do so, and required an adjournment to carry out further calculations. When the case resumed, the quantity surveyor’s evidence was that the sum due was now €152,220.05. In its judgment, the court noted that “this figure, never previously mentioned by [the plaintiff’s quantity surveyor], was finally arrived at by him on Day 25 of the trial.” 

 

The court observed that ‘it has been impossible for the defendants to know at any given time what case they have come to court to meet with new claims being constantly presented for the first time right up to Day 25 of the trial’.

 

The Plaintiff’s Evidence

 

In 2007, the plaintiff’s solicitor sent two books of invoices to the defendant’s solicitors which were claimed to underpin the plaintiff’s claim. The principal subsequently admitted that these books contained many invoices which were not relevant to the Lucan contract at all.

 

In 2015, another booklet of invoices was sent to the defendant’s solicitors. These invoices largely, if not entirely, overlapped with the invoices which had been sent in 2007. They were said to underpin the plaintiff’s variations claim to the original contract.

 

The court went on to examine various invoices. Examples include:

 

  • An invoice with an amount due of €700 which, although not connected with the Lucan premises (the invoice referred to a Supervalu site), had been contained in the 2007 books of invoices. It reappeared in the 2015 book of invoices; however it had been modified to refer to the Lucan premises and the figure of €700 had been changed to €7,000.
  •  
  • An invoice which was furnished in 2007 was produced again to the defendants in 2015. However, in the second version of the document, the invoice number and amount due were altered.
  •  
  • Two Invoices dated in August and September 2006 respectively were found by the court to have been altered to appear to relate to the Lucan premises. The invoices, in fact, pertained to work done on a house in Clonskeagh. 

 

In addition to the alteration of invoices, the court was unhappy with various elements of the plaintiff’s presentation of its case.

 

The court found that the principal of the plaintiff company: had ‘deliberately and repeatedly lied’ in giving his evidence; had altered invoices which were entirely unrelated to the claim ‘to give them the appearance that they were so related’. The entire claim was ‘tainted by the lies and dishonesty’ of the principal. 

 

The quantity surveyor instructed by the plaintiff was found by the court in large measure to have relied on what he was told by the principal of the plaintiff company, often without any independent verification or analysis of the claim, and when any reasonably careful analysis of the item claimed ought to have disclosed that it could not be sustained.

 

In addition, the court found it difficult to avoid the conclusion that, although the court did not suggest that the quantity surveyor had deliberately lied in his evidence, he had engaged in a process of ‘constantly altering, amending and reinventing the plaintiff’s claim’. In sum, the judge observed that the quantity surveyor’s evidence was ‘confused and utterly confusing and…quite unreliable’.

 

The court stressed that it is entitled to assess the credibility of the plaintiff’s evidence and the weight to be attached to it even at that stage of the trial. The court found that the principal’s evidence was ‘entirely lacking in credibility’ and for ‘somewhat different reasons’ so was that of the quantity surveyor. The Court observed that 'it is of course possible that some of [the principal’s] evidence was truthful but in reality, it is all but impossible to separate truth from fiction’

 

The Defendants’ Submissions

 

In arguing that the plaintiff was guilty of such a level of litigation misconduct that its claim ought to be dismissed, the defendants placed particular reliance on the UK Supreme Court decision in Fairclough Homes Ltd v Summers [2012] UKSC 26. In that case, it was stated that the court has an inherent jurisdiction to dismiss a claim on the grounds of abuse of process, even where the court considers that a claim in damages has been established by the plaintiff.

 

In relation to their second argument, that the plaintiff had not established that any sum was owed to them, the defendants argued that the appropriate test was that laid out by the Irish Supreme Court in O’Toole v Heavy [1993] 1 IR 554 - namely whether, at the conclusion of the plaintiff’s evidence, the plaintiff has made out a prima facie case. It was accepted by the defendants that the court must take the plaintiff’s case at its highest in an application of this nature.

 

The Plaintiffs’ Submissions

 

In reply, the plaintiff argued inter alia that Fairclough did not represent the law in Ireland and that, even ignoring the evidence of the plaintiff’s principal and the quantity surveyor, there was evidence to establish that ‘there is at least some claim against the defendants’.  The Plaintiff therefore argued that ‘it is not open to the Court to dismiss a claim where any amount is, at the very least, on a prima facie basis owing to it’.    

 

Judgment

 

The court first addressed the question as to whether the plaintiff had been guilty of litigation misconduct to such an extent that its claim ought to be dismissed. In relation to the Fairclough case, the Irish High Court noted that there was some divergence in English and Irish law on this point; however it appeared that, under Irish law, dishonesty by a plaintiff may reach a point where the abuse of process is such as to require the ultimate sanction of striking the claim out. The court noted that it will only be in rare and exceptional cases that this will require the ultimate step of striking out or dismissing the claim. However it came to the conclusion that this was such a case.

 

The next issue was whether the plaintiff had met the threshold of establishing a prima facie case. The court observed that the evidence of both the plaintiff’s principal and the quantity surveyor had been completely undermined by the misconduct outlined above. It stated that the evidence of the principal was entirely lacking in credibility and dishonest. Although there was no evidence that the quantity surveyor had deliberately lied in his evidence, the court noted that much of it was predicated upon the uncorroborated evidence of the principal and was ultimately hopelessly confused and contradictory. The court further noted that new claims had constantly been presented by the plaintiff, thus making it impossible for the defendants to know at any given time what case they were facing. 

 

In allowing the defendant’s application, the court concluded that:

 

  1. This was a case, of the rare kind, where the court would be justified in striking it out to prevent further abuse of process, and
  2. The plaintiff had not made out a prima facie case against the defendants that there was any sum due to it.

 

Take-Aways

 

An Irish court has an inherent jurisdiction to apply the ultimate sanction of striking out a claim in exceptional circumstances where it finds that the scale of litigation misconduct is such that it amounts to an abuse of process. Potential litigants should be wary not to over egg the pudding.