Court allows solicitor negligence claim for contribution against former partner despite personal innocence.
Legislator-Zusammenfassung
KI-generiertThe court determined that a solicitor firm could seek contribution from a former partner for negligence in a mortgage transaction. Although the partner was personally innocent, the court found he was bound by undertakings given by his former co-practitioner. Liability was established at a principle level, but the specific amount of contribution was deferred until the damages hearing.
Legislator-Regeste
KI-generiertCivil Liability Acts 1961-1998; s. 10: A party guilty of negligence may claim contribution from a co-wrongdoer, even if the co-wrongdoer was personally innocent of the wrongdoing.
Schlagwörter
KI-generiertZitierte Gesetzesbestimmungen
KI-generiertZitierte Rechtsprechung
KI-generiertVerwandte Entscheide
KI-generiertVolltext
Neutral Citation Number: [2011] IEHC 108
THE HIGH COURT
2008 10559 P
BETWEEN
ACC BANK PLC
PLAINTIFF
AND
BRIAN JOHNSTON, PRACTISING UNDER THE STYLE AND TITLE OF BRIAN JOHNSTON & CO, SOLICITORS
DEFENDANT
AND
JOSEPH TRAYNOR & SEAMUS MALLON
THIRD PARTIES
JUDGMENT of Mr. Justice Clarke delivered the 4th day of March, 2011
1. Introduction
1.1 This judgment relates to issues which have arisen between two solicitors. In an earlier judgment in these proceedings (ACC v.
Johnston [2010] IEHC 236) (“the principal judgment”) I found that the defendant (“Mr. Johnston”) was guilty of negligence in the way
in which he handled a mortgage and lending transaction on behalf of the plaintiff (“ACC”). Mr. Johnston has sought an indemnity
against the firm of solicitors who acted for the purchaser/borrower in the same transaction. One of the disputes which arises
concerns whether the second named third party (“Mr. Mallon”) was, in fact, a member of the firm in question at all material times.
1.2 There is no doubt but that undertakings were given on a number of occasions relating to the underlying transaction, which
undertakings appear on notepaper bearing the title “Traynor Mallon”. Mr. Johnston seeks to make both the first named third party
(“Mr. Traynor”) and Mr. Mallon liable on foot of those undertakings in circumstances where it is clear that the relevant undertakings
have not been complied with.
1.3 Mr. Traynor has allowed judgment to be given against him in default. However, Mr. Mallon has suggested that no liability attaches
to him on a number of bases to which it will be necessary to refer in early course.
1.4 It should also be noted that, for reasons set out in the principal judgment, the question of the calculation of any damages to
which ACC might be entitled as against Mr. Johnston awaits further hearing. Likewise, I directed that the issues which should be tried
as and between Mr. Johnston and Mr. Mallon, at this stage, should be confined to liability issues, with the question of the quantum of
any indemnity or contribution which Mr. Mallon might have to make (in the event that he is liable) being also left over to such a
further hearing. Obviously if no liability attaches to Mr. Mallon, then he is not an appropriate or necessary party to that further
hearing. On the other hand, if Mr. Mallon is found liable, then it equally follows that he is entitled to be heard on the damages
question.
1.5 In that context, it is appropriate to turn to the issues which arise.
2. The Issues
2.1 As already noted there is no dispute but that certain undertakings were given on notepaper headed “Traynor Mallon” and that the
undertakings concerned have not been complied with. Likewise, there is no dispute but that it was Mr. Traynor who was personally
responsible for the giving of the undertakings concerned. Mr. Mallon has given sworn testimony (which was not challenged on behalf
of Mr. Johnston) that he had nothing to do with the giving of the undertakings concerned and, indeed, was unaware at any material
time that such undertakings had been given. There is, therefore, no allegation of personal wrongdoing on the part of Mr. Mallon.
However, the case made on behalf of Mr. Johnston is that the relevant undertakings were given with either the actual or ostensible
authority of Mr. Mallon such that he is now liable for any breach of same.
2.2 Against that proposition a number of arguments are put forward by Mr. Mallon.
2.3 First, it is said on behalf of Mr. Mallon that, while a partnership between Mr. Traynor and himself formerly existed and practised
under the title of Traynor Mallon, that partnership, it is said, came to an end in March, 2006 (there being some debate about the
precise date in March), such that the partnership was no longer in being when any of the relevant undertakings were given. The first
in time of the undertakings which are material to this case was given in August, 2006. On that basis it is argued on behalf of Mr.
Mallon that the partnership which he had with Mr. Traynor had terminated prior to any of the undertakings in question being given.
Mr. Johnston contests, on the facts, as to whether the partnership between Mr. Mallon and Mr. Traynor in fact ended in March.
Rather, it is argued that the partnership did not come to an end until the 30th August, 2006, by which stage at least the first (and
financially most significant) of the relevant undertakings had been given. The first issue is, therefore, as to when the partnership
between Mr. Traynor and Mr. Mallon in fact came to an end.
2.4 The second issue which arises concerns the question of whether Mr. Traynor still had ostensible authority to bind Mr. Mallon even
after the partnership came to an end. This issue arises in two different ways. First, ostensible authority is argued on behalf of Mr.
Johnston as a fallback position in respect of the August undertaking to which I have referred. In that context it is said that, even if
Mr. Johnston is wrong in arguing that the partnership continued to subsist until the 30th August, nonetheless Mr. Traynor continued
to have ostensible authority to bind Mr. Mallon notwithstanding the earlier dissolution of the partnership concerned. In addition, it is
clear that the other undertakings relied on post-dated, on either view, the dissolution of the partnership for those undertakings were
given well after the 30th August. So far as those later undertakings are concerned, Mr. Johnston accepts that they were given at a
time when the partnership did not exist but nonetheless contends that Mr. Traynor retained ostensible authority to bind Mr. Mallon.
The second set of issues which arise are, therefore, questions of both law and fact as to whether Mr. Traynor had ostensible
authority so as to bind Mr. Mallon even after the partnership between them had been dissolved. The factual basis for Mr. Johnston’s
argument under this heading stems from the fact that it is said that Mr. Traynor had taken no steps to inform the public (and, in
particular, Mr. Johnston) that the partnership between him and Mr. Traynor had come to an end.
2.5 In summary, so far as the status of the partnership is concerned, the issue is one of actual authority with ostensible authority as
a fallback position insofar as the August, 2006 undertaking is concerned, while the issue is one of ostensible authority only in relation
to the subsequent undertakings.
2.6 Clearly, if Mr. Mallon is right in respect of those issues, then he is not responsible for any undertakings given by Mr. Traynor and
no further issues arise. However, even if Mr. Mallon is found, contrary to those submissions, to be responsible for some or all of the
relevant undertakings given by Mr. Traynor, then a number of other issues are raised by Mr. Mallon in his defence.
2.7 First, Mr. Mallon argues that there is no direct link of sufficient causal connection between any losses which ACC may have
suffered and the undertakings given by Mr. Traynor. For the reasons set out in the principal judgment I was satisfied that Mr.
Johnston was negligent and in breach of his contractual terms of retainer with ACC in accepting the undertakings concerned. On that
basis, Mr. Mallon argues that there is no true casual connection between any losses which ACC might have suffered and the
undertakings for, it is said, without Mr. Johnston’s negligence the relevant transactions would not have gone ahead so that no loss
would have been incurred. Against that argument it is submitted on behalf of Mr. Johnston that it equally follows that had the
relevant undertakings being complied with, no loss would have occurred. The next issue which arises is, therefore, one concerning
causation.
2.8 Finally, Mr. Mallon argues that, even if he is liable on Mr. Traynor’s undertakings, it cannot be said that he is a “concurrent
wrongdoer”, within the meaning of the Civil Liability Act 1961 (as amended), with Mr. Johnston. It is said that, in order that Mr. Mallon
and Mr. Traynor be concurrent wrongdoers, two matters must be established. First, that Mr. Mallon would, in fact, have a liability to
ACC for if Mr. Mallon would not have a liability to ACC then he could not be a concurrent wrongdoer in any sense of that term. As a
result of the way in which ACC made out its case against Mr. Johnston, it is argued that Mr. Mallon could not be liable to ACC on the
undertakings concerned, for ACC disavowed any knowledge or reliance on those undertakings.
2.9 Second, it is argued that the requirement in the Civil Liability Act, 1961(s. 11) that, in order for two parties to be concurrent
wrongdoers, both must be responsible for the same “damage”, is not met because, it is said, the liability of Mr. Mallon (should it exist)
is for a breach of some or all of the relevant undertakings whereas the liability of Mr. Johnston arises for negligence in accepting
those undertakings. It is said that a proper application of the meaning of the term “damage” as used in the Civil Liability Acts and as
interpreted by the courts, leads to a conclusion that any liability which Mr. Mallon might have (contrary to his submissions) is not a
liability in respect of the same “damage” and, thus, does not lead to Mr. Mallon being properly considered to be a concurrent
wrongdoer with Mr. Johnston. In those circumstances it is argued that Mr. Johnston, having no independent cause of action against
Mr. Mallon, is not entitled to maintain third party proceedings against him in the absence of both of them being concurrent
wrongdoers within the meaning of the Civil Liability Acts.
2.10 Against the background of those issues it is appropriate to turn next to the facts which are, to a considerable degree,
uncontroversial. It will be necessary to leave over some questions as to the proper inferences to draw from those facts, having
regard to the law, to a later section of this judgment. In addition, as much of the conveyancing transaction in respect of which Mr.
Traynor acted for the purchaser (“Mr. Tiernan”) and Mr. Johnston acted for ACC as lender, was described in detail in the principal
judgment, I propose only to set out a brief description of those facts but refer in more detail to the additional facts which arise solely
in the context of the issues between Mr. Johnston and Mr. Mallon. On that basis I now turn to the facts.
3. The Facts
3.1 Mr. Traynor was apprenticed to Mr. Mallon at his solicitor’s practice in Castleblaney, Co. Monaghan until his entry onto the roll of
solicitors sometime in the late 1980s. On qualification Mr. Traynor, without the offer of a full time position in Castleblaney, proposed
to establish a practice in Dundalk, Co. Louth, with the assistance of Mr. Mallon. Mr. Traynor and Mr. Mallon thereafter practised under
the title of “Traynor Mallon & Company, Solicitors”. Mr. Traynor managed the practice while Mr. Mallon, who was and remains based
primarily at his practice in Castleblayney, provided the financial backing to the new firm and took a less involved role in its
management. When pressed on the nature of his supervisory role over the firm’s affairs, Mr. Mallon indicated that, while he would
review the biannual statutory reports produced by the firm’s accountants for the Law Society in order to remain informed on the
running of the Dundalk office he admitted that he and Mr. Traynor did not meet at regular intervals, but rather they met informally
“whenever meetings needed to be had”. Nevertheless it was accepted by Mr. Mallon that the responsibility of the partners was joint
and several.
3.2 On 17th May, 1989 Messrs. Mallon and Traynor concluded a written agreement at the inception of the firm to regulate their
relationship. While the agreement describes the relationship as one of employer and employee respectively, albeit with provision for it
to morph into a partnership after a period, there is no dispute but that a partnership came to exist between the two before 2005.
They practised publicly under the business name of Traynor Mallon & Co. while privately an equal profit share arrangement persisted.
The point at which the partnership relationship commenced is not nearly as contentious as the issue over its dissolution.
3.3 It would appear that at some point in 2002, during an audit of the Dundalk office, Mr. Jim Ryan, an accountant, discovered so-
called “irregularities”. The effect of those irregularities was that both partners were obliged to contribute in excess of €200,000 in
order to clear a deficit in the firm’s client account. During the course of his evidence Mr. Mallon expressed misgivings over Mr.
Traynor’s management of the partnership business. While Mr. Mallon’s concerns abated following the 2002 incident the situation again
deteriorated towards the end of 2005 to such an extent that Mr. Mallon retained his own bookkeeper to spend time managing the
affairs at Traynor Mallon. In any event Mr. Mallon decided in early 2006 to put in place a situation whereby the partnership would be
dissolved.
3.4 To that end, Mr. Mallon instructed solicitors to write to Mr. Traynor by letter dated 14th March, 2006 in which his aggravation and
umbrage with Mr. Traynor’s conduct and breach of trust was expressed. The letter further called on Mr. Traynor to account for any
benefits he had received from the partnership and moreover, citing his alleged conduct, Mr. Mallon demanded that Mr. Traynor
voluntarily absent himself from the running of the practice and to turn over his keys to Mr. Mallon. Finally Mr. Traynor was informed of
Mr. Mallon’s intention to apply to court to dissolve the partnership on grounds of misconduct. It was ventured in the alternative that
Mr. Mallon was willing to buy out Mr. Traynor’s interest in the firm but only following a full reconciliation of the partnership accounts.
In his evidence Mr. Mallon expressed the view that this letter, to his mind, effectively dissolved the partnership.
3.5 Thereafter, both Messrs. Mallon and Traynor, in the company of their respective legal advisors, met outside the Law Library on
the 30th March, 2006 in an effort to come to terms on the final dissolution of the firm. There is no dispute as between Messrs. Mallon
and Traynor that the partnership of Traynor Mallon & Company was terminated on, if not before, that date. Indeed this view is shared
by Mr. Ken Connolly BL, who acted for Mr. Mallon and was also present at that meeting. Mr. Connolly in his evidence described the
breakdown in the relationship between the two gentlemen in terms where “they couldn’t even look at each other in the hall”. Mr.
Connolly was unequivocal in his view that any partnership that existed between Messrs. Mallon and Traynor had come to an end
before or at the meeting of the 30th March and that it was abundantly clear to him that into the future there was not going to be
any partnership between the two. Similarly, there is no dispute between the parties that, at the conclusion of the meeting on the
30th March, it was proposed that Mr. Traynor would purchase Mr. Mallon’s interest in the firm but that aside, further agreement was
not reached on the shape and form of any final financial arrangement. The effect which the March 2006 exchanges were to have on
the partnership of Traynor Mallon is, however, a matter of much contention.
3.6 Counsel for Mr. Traynor sought to lay much emphasis on the fact that Messrs. Mallon and Traynor saw fit to conclude a written
document dated the 30th August, 2006 whose purpose, on its face, was “[t]o transfer the firm to Joseph Traynor, to determine the
partnership between Seamus Mallon and Joseph Traynor […] [and] in the event that a partnership is not so found to determine the
joint practice arrangement of the said parties practising under the said style and title […]” and which also included the following term:
“[u]pon the signing hereof, Seamus Mallon shall no longer be a partner of the firm.” It was contended that it was an implication of this
agreement that, prior to its execution, a partnership persisted between the parties. In his evidence Mr. Mallon disagreed with this
contention and explained that, as far as he was concerned, the partnership had been determined in March and therefore the only
function of the agreement was to tie up the loose ends in relation to finance arrangements. Following a valuation by Mr. David Rowe
of the firm Outsource, which placed a figure of circa €1.8 million on the firm as at 31st December 2005, Mr. Mallon agreed to sell his
interest to Mr. Traynor for €1.5 million. Of this Mr. Mallon received approximately half by way of bank draft and cheques. In October
2009 Mr. Mallon obtained a judgment against Mr. Traynor for the balance, some €834,615, which included interest. There was some
suggestion by counsel for Mr. Johnston that Mr. Traynor fraudulently used part of the monies obtained from ACC for the Castlewarden
lands in part satisfaction of the dissolution agreement’s financial arrangements. In any event this matter does not fall to the court to
decide as ACC is not pursuing a claim against Mr. Mallon in this regard.
3.7 Counsel for Mr. Johnston also laid particular emphasis on the confidentiality clause of the August agreement which provided that
“this agreement is confidential between the parties.” It was advanced that this evidenced a desire on the part of Mr. Mallon to
maintain the public perception that Traynor Mallon & Company continued to practise unchanged as it would have been to Mr. Mallon’s
detriment financially, it is said, in terms of securing the receipt of the bullet payments under the August agreement, were the
dissolution to be made public. Mr. Mallon again rejected this contention and instead asserted that his interpretation was that the
confidentiality clause merely applied to the financial terms of the settlement and that he naturally expected Mr. Traynor to publicise
the dissolution and to boast about the fact that he now owned his own firm which was to be styled “Traynor & Company”. In
circumstances where Mr. Traynor continued to use the letterhead of Traynor Mallon & Company in the period between March 2006
and September 2007, at least in correspondence with Mr. Johnston, the issue of notice of the dissolution is of central importance to
the determination of this case.
3.8 Following the March exchanges, a number of steps were taken in order to effect the dissolution of the partnership. On a basic
level Mr. Mallon testified that he did not involve himself in the supervision or management of the Dundalk offices from January 2006
onwards. Indeed Mr. McQuillan, an auditor and accountant, gave evidence that, for tax purposes, the partnership terminated as of
the 31st December 2005. This date was also used as the date to determine the partners’ closing capital account balances as part of
the financial arrangements for the dissolution. Furthermore, Mr. Mallon suggested that for VAT, PAYE and PRSI purposes the change in
circumstances of the firm would have been notified to Revenue, although the when and how of this where not entirely clear to the
court. Mr. Traynor, separately, proceeded on the 22nd May, 2006 to register the business name of “Traynor & Company Solicitors”
with the Companies Registrar.
3.9 The state of the evidence was that, on the 25th August, 2006, Mr. Patrick Groarke, on behalf of Mr. Mallon, wrote to the Law
Society notifying them that his client was in the advanced stages of agreeing to sell his interest in Traynor Mallon to Mr. Traynor.
Thereafter, it would appear that Mr. Traynor wrote to the Law Society on the 11th October, 2006 advising that the effective date of
dissolution of the partnership was the 31st March, 2006. Mr. Traynor again wrote on the 24th October, 2006, enclosing details of his
firm’s new letterhead. Furthermore, correspondence from Rosemary Fallon, Executive Officer for the Law Society, was brought to the
court’s attention which did indicate that, according to their records, the practice of “Traynor & Co. Solicitors” commenced on the 1st
April, 2006, until its closure on the 4th February, 2010.
3.10 The firm’s insurers, however, were not informed until December 2006 when the firm’s professional indemnity insurance policy
came up for renewal. There was no notification published in Iris Oifigiúil or any newspaper of record. The firm’s banking arrangements
remained in place until August during which time Mr. Mallon remained a joint signatory on cheques. Mr. Mallon explained this by noting
that his property in Castleblayney secured the firm’s overdraft. Post-dissolution, Mr. Traynor continued to run the practice from the
Dundalk office with most if not all of the same staff and handling all of the previous files. Indeed, were a client to arrive to the office
on the 1st April, 2006, Mr. Mallon conceded that they would not notice any change unless Mr. Traynor explained the dissolution of
Traynor Mallon and its reconstitution in the new form of Traynor & Co. In explaining these apparent omissions Mr. Mallon expressed
the view that, as the purchaser, he would have expected Mr. Traynor to have taken all of the necessary steps to publicise his new
business. He also expressed the view that he had never encountered an advertisement detailing the departure of a partner from a
practice. A point of significant note, as mentioned earlier, is that Mr. Traynor continued to conduct his business using the Traynor
Mallon letterhead which listed both Messrs. Mallon and Traynor as partners in the firm. It was this action, although never fully
explained to the court, which bears directly on the core issue of the undertakings in this case.
3.11 In July, 2006 Mr. Brian Johnston was appointed by ACC to act as their solicitor in relation to a number loans to Mr. Tiernan,
which have been the subject of the principal judgment. Mr. Johnston first wrote on the 24th July, 2006 to Traynor Mallon & Co.
Solicitors in respect of the lands at Castlewarden, Co. Kildare notifying them of his appointment. Mr. Traynor thereafter corresponded
with Mr. Johnston using the Traynor Mallon & Company Solicitors’ letterhead from the 27th July, 2006, until the letterhead changed to
“Traynor & Company, Solicitors” on the 6th September, 2007, and on no less than seventeen separate occasions. At this point it may
also be of note that, on the 28th August, 2006, Mr. Traynor wrote to Mr. Groarke, who was acting for Mr. Mallon in the context of
the dissolution, using the Traynor Mallon letterhead. In any event, of greater concern are those letters which contained undertakings
purportedly on behalf of Traynor Mallon on which Mr. Johnston testified to relying.
3.12 As described previously, Mr. Traynor gave a number of undertakings to Mr. Johnston during the period from July, 2006 to
September, 2007. The principal undertaking for present purposes was the confirmation given by Traynor Mallon on the 24th August,
2006, to Mr. Johnston that “the monies received from ACC bank will be used solely for the purchase of the property at Castlewarden”.
Mr. Johnston’s reliance on same is evidenced by his return letter of the 25th August in which he encloses an uncrossed cheque in
favour of Mr. Traynor’s client and notes that “this is made payable at your client’s request, but that we will be relying on your
undertaking to hold this money and to use it for the sole purpose of purchasing the lands at Castlewarden”. As appears from the
principal judgment most of the relevant monies were paid over on the basis of that undertaking. The other relevant undertakings
include, in broad terms: an undertaking to furnish ACC with all net proceeds of the sale of lands at Redbarns Road, Dundalk, Co. Louth
and Annagasson, Dundalk Co. Louth and to assign any deposits held in respect of the contracts of sale of those properties in
permanent reduction of Mr. Tiernan’s debt; an undertaking to lodge four million euro to the ACC Bank from the sale of lands at Hill
Street, Dundalk, Co. Louth in permanent reduction of the sums due to the bank and which were secured on the same property; in
respect of property at Tullydonnell, Co. Louth, an undertaking to furnish Mr. Johnston with appropriate title documentation and maps
in early course. However, ACC does not claim that any losses arise in relation to those undertakings. Further there was an
undertaking to lodge the title documents immediately on the sale of the Castlewarden property being completed. Finally, there was an
undertaking to stamp and register the title documents, including the deed of transfer, for the Castlewarden property. Further monies
were paid over on foot of this undertaking.
3.13 As pointed out, on the basis of at least some of these undertakings, considerable sums of ACC’s money were transferred to Mr.
Traynor’s firm. The relevant undertakings were not honoured and the money has effectively vanished and would not appear to be
recoverable against either Mr. Tiernan or Mr. Traynor.
3.14 It should also be noted, as set out at paragraph 4.25 of the principal judgment, that ACC advanced a further sum of €1,000,000
to Mr. Traynor’s client following an approach from Mr. Tiernan. This money was advanced on the strength of the security of a
solicitor’s undertaking to pay ACC an additional €1,000,000 from the sale of the Hill Street property. In early 2007, Traynor Mallon duly
furnished Mr. Johnston with the required undertaking. However, these additional funds were also advanced on the basis of the existing
security apparently held by ACC and were thus believed to be secured on the Castlewarden lands and, from Mr. Johnston’s
perspective, on the undertakings given in respect of those lands.
3.15 Following complaints to the Law Society by Mr. Johnston for the breach of undertakings, Mr. Traynor was subject to
investigation. In April, 2009 Mr. Mallon was appointed by the President of the High Court to act as practice manager of the firm. From
that point Mr. Mallon has cooperated with the Solicitors’ Mutual Defence Fund and the Law Society in investigating the practise of Mr.
Traynor. Mr. Mallon continues to run the reconstituted practise at Dundalk while Mr. Traynor is no longer entitled to practise as a
solicitor.
3.16 Against the background of that general description of the facts it is appropriate to turn to the issues which arise. I propose
dealing with any disputed questions of fact under each of the relevant headings. Likewise, I propose dealing with any relevant legal
questions under those headings. In the circumstances it is appropriate to turn to the first issue which is as to the time at which the
partnership between Mr. Mallon and Mr. Traynor actually came to an end.
4. When did Traynor Mallon come to an End?
4.1 As pointed out earlier, while there is a difference between Mr. Traynor and Mr. Mallon as to the precise date in March, 2006 when
the partnership between them can be said to have come to an end, both suggest that their partnership had ended at the very latest
by the 30th March. The principal underlying facts are not in dispute. Mr. Mallon wrote to Mr. Traynor, through his solicitors Messrs.
Groarke & Co, on the 14th March. One possible conclusion is that that letter, of itself, brought the partnership to an end. In
Halsbury’s Laws of England Vol. 35, para. 164, the circumstances in which the dissolution of a partnership by notice can occur are
stated in the following terms:-
“Subject to any agreement between the partners, a partnership for which no fixed term has been agreed, and for no fixed
adventure or undertaking, may be dissolved by any partner by giving notice of his intention so to do to the others. The
Partnership Act 1890, does not require the notice to be in writing. The firm is dissolved from the date mentioned in the
notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. The
notice must amount to an unambiguous intimation of a final intention to dissolve the partnership and must be given to all
partners unless the articles otherwise provide.”
4.2 The first issue to be addressed is as to whether the letter of the 14th March, 2006 meets that test. Two questions seem to me
to arise. Both stem from the terms of the letter itself. In material part that letter provides as follows:-
“Dear Mr. Traynor, We are instructed by the above named Seamus Mallon in respect of regularising matters regarding the
determination of the partnership practising under the style and/or title of Traynor Mallon & Company, Solicitors […] Finally
we have been instructed, in the absence of your consent to dissolve the partnership, to apply to Court pursuant to
Section 35© and 35(d) of the [Partnership] Act to dissolve the Partnership on the grounds of your professional
misconduct. […]”
4.3 It is clear, therefore, that the letter does not specify a date from which the partnership is to be treated as coming to an end.
However, as is clear from the passage from Halsbury cited above, in the absence of the relevant notice specifying a date from which
the partnership is to be dissolved, the date of receipt of the notice will be the operative date. The fact, therefore, that the letter
does not specify a date is not, of itself, fatal.
4.4 The second question which arises concerns the terms of the letter and whether it can be described as being “an unambiguous
intimation of a final intention to dissolve the partnership”. That the notice must be unambiguous is clear from cases such as Stewart
v. Gladstone [1878] 10 Ch.D. 626 at 650. On balance I have come to the view that the relevant letter is not sufficiently unambiguous
to amount to a sufficient notice of dissolution. The letter speaks of the intention of Mr. Mallon to seek a dissolution from the High
Court. It is, of course, open to a partner to go down the route of applying to court for a dissolution of the partnership. Where
dissolution occurs as a result of a court process the dissolution is normally taken to date from the issue of proceedings. There is,
therefore, a difference in substance between a dissolution by notice and a dissolution by the court. Insofar as the letter addresses
the question of dissolution, it appears to do so in the context of intimating that the dissolution will take place by court process. If
that be so, then the dissolution was not to have immediate effect but rather would have had effect whenever that court process was
begun. At a minimum the letter is ambiguous as to whether it is intended to immediately bring the partnership to an end rather than to
threaten that the partnership will be brought to an end, in the absence of agreement, by the issuing of appropriate proceedings. It
can, of course, be the case that a party who has actually caused the dissolution of a partnership by notice may nonetheless issue
proceedings seeking ancillary relief including, if there be a dispute, a declaration that the partnership has already dissolved. However,
there is a difference between an application to the court to dissolve the partnership, on the one hand, and an application to the
court to declare that a partnership has already been dissolved by notice, on the other hand.
4.5 It is next necessary to consider whether the meeting of the 30th March gave rise to a dissolution of the partnership. All who
attended that meeting and who gave evidence are agreed that it was clear, as a result of that meeting, that the partnership was to
come to an end. All that was left, it is said, was to agree the financial terms. There would appear to have been some discussion as to
those financial terms at the meeting of the 30th March, but no agreement was reached. I accept, therefore, as a fact, that at the
meeting of the 30th March it was agreed between Mr. Mallon and Mr. Traynor that the partnership would be dissolved with immediate
effect. In addition, it was agreed that Mr. Traynor would take over the business of the partnership as it stood. It remained for the
parties to agree the financial terms on which Mr. Traynor would take over the partnership business. However, it does not seem to me
that the fact that the parties had not agreed those terms is fatal to the conclusion that the partnership had been dissolved on that
date. If it had proved impossible for Mr. Mallon and Mr. Traynor to agree the amount which Mr. Traynor was to pay to Mr. Mallon,
then it would have been open to Mr. Mallon to commence proceedings which would have led to a recognition by the court that the
partnership had been dissolved on that date and which would also have led to the court making ancillary orders to provide for a
valuation of the partnership assets as of that date and the like.
4.6 Before leaving this topic I should deal with two points made on behalf of Mr. Johnston against the proposition that the partnership
can be said to have been dissolved on the 30th March. First, it is said that there was no agreement between the parties as to the
date by reference to which the partnership was to be valued. That is true so far as it goes. However, it is clear on the facts as I
have found them, that there was an unambiguous intention displayed by both parties at the meeting of the 30th March to bring the
partnership to an end. That is, for the reasons which I have already set out, sufficient. It is also clear that, by operation of law, the
date for the valuation of the partnership then becomes the date on which that unambiguous intention is notified to both parties. It
seems to me that where all parties agree that a partnership is to be dissolved then same amounts to a mutual notice by all parties to
the others, immediately communicated, which notice is unambiguous as to the dissolution of the partnership. It follows that the
partnership is, subject to the parties having agreed some other date, to be dissolved as of that date and any valuation process is to
occur as of that date.
4.7 In that regard argument is made on behalf of Mr. Johnston that no one was given instructions to value the partnership as of that
date. That is again true so far as it goes. However, it does not seem to me that it is appropriate to draw any inference adverse to
Mr. Mallon’s contention arising from that fact. The valuation of Mr. Mallon’s entitlements was not an exact science. The evidence
established that a preliminary valuation of the partnership had been arrived at some months earlier. The key elements of that
valuation involved certain limited tangible assets of the partnership but were principally concerned with the value of work already
done in the solicitors practice while the partnership subsisted. The valuation involved fees already billed to clients but not yet paid,
together with work in progress being work already done on files in the solicitor’s office which had not yet been converted into a fee
note to the client concerned. There must, necessarily, have been a significant amount of estimation in coming to any view as to the
value of the partnership under both of those headings. Fees billed will not necessarily be paid. In some cases a client may be unable
to pay or significant difficulty might be encountered in forcing payment thus incurring collection costs. Therefore, the full value of
fees already billed is unlikely, in practise, to be recovered or recovered without some cost. Likewise, any estimation of the value of
work in progress, being work done on cases or matters which have not yet been billed, necessarily involves an estimation. Similar
questions concerning recoverability would also arise under those headings. If the court, or an arbitrator, were required to value the
partnership for the purposes of determining the rights and obligations of the former partners on a dissolution, then obviously a best
estimate under all of those headings would need to have been made. Likewise, an estimate of the value of any goodwill attaching to
the partnership would need to have been made. However, such a process is far from an exact science.
4.8 When added to those factors it is also necessary to consider the practical realities of the situation whereby the value of the
partnership would be significantly reduced unless its business could continue. In those circumstances, it is hardly surprising that Mr.
Mallon regarded both the amount which he was to receive from Mr. Traynor and the time over which it was to be paid to be matters
primarily for a practical commercial negotiation (admittedly one conducted against the background of Mr. Mallon’s actual entitlements)
rather than a rigorous exercise of valuation. That practical negotiation is what Mr. Mallon anticipated on the 30th March, and that
practical negotiation is what, in fact, ensued leading to an agreement on the relevant commercial terms which was incorporated into
the written document of the 30th August.
4.9 The second point concerns the terms of that document itself. There is no doubt but that the way in which that document is
drafted implies that the partnership continued up to the date of the agreement. Indeed the agreement itself is open to ambiguity. For
example, Clause 3 provides:-
“Joseph Traynor acknowledges that the firm remains the property of Seamus Mallon subject to any payment to which the
said Joseph Traynor may be entitled (which is not admitted) until payment in full of the amounts specified at Part III
hereunder is made to and receipted by Seamus Mallon.”
On the other hand Clauses 18 and 19 provide:-
“18. Upon the signing hereof Seamus Mallon shall no longer be a partner of the firm and in consideration of the terms and
provisions of the within agreement shall have no share, interest or entitlement in any assets or business of the firm.
Seamus Mallon shall at that time sign each and every document necessary to transfer the business and assets of the firm
to Joseph Traynor or his assigns and/or nominees and shall surrender his authority over each of the bank accounts of the
firm.
19. As and from the date of the signing hereof Seamus Mallon shall have no responsibility whatsoever to the clients of the
firm (including in respect of their funds held in the clients account(s) and Joseph Traynor shall and hereby does provide a
full and absolute indemnity to Seamus Mallon in this regard.”
How it is possible to reconcile Clause 3 with Clause 18 is difficult to say. Two points need to be made in that regard. First, if, in truth,
the partnership had been dissolved as of the 30th March, it does not seem to me that the partnership can be revived retrospectively
by an implication derived from the terms of the agreement subsequently entered into on the 30th August. It would, of course,
notwithstanding an actual dissolution on the 30th March, have been possible for Mr. Traynor and Mr. Mallon to have reached terms on
the 30th August which made express provision for events that occurred between the 30th March and the 30th August and to provide
for the rights and obligations of the parties in respect of those events. That did not happen. It does not seem to me that it is
appropriate to treat the 30th August agreement as retrospectively providing for the continuation of a partnership which had, in fact,
dissolved on the 30th March. Likewise, I am not satisfied on the facts that the wording of the agreement of the 30th August ought
lead me to come to a different conclusion as to whether the partnership had, in truth, been dissolved on the 30th March. I am
satisfied on the evidence that there was an unambiguous acceptance by both Mr. Traynor and Mr. Mallon, on the 30th March, that
the partnership was then at an end leaving only negotiations as to the precise financial arrangements to be concluded. The terms of
the agreement of the 30th August are, in my view, a result of unfortunate drafting rather than reflecting the actual legal and factual
situation.
4.10 In all those circumstances I am satisfied, as a matter of fact, that the partnership between Mr. Mallon and Mr. Traynor came to
an end on the 30th March. In follows that there was, in fact, no partnership in existence between them at the time when any of the
relevant undertakings were given on the notepaper bearing the heading “Traynor Mallon”. However, as pointed out, that finding does
not resolve the case, for Mr. Johnston places reliance on ostensible authority. In those circumstances it is necessary to turn to the
question of whether Mr. Traynor had the ostensible authority of Mr. Mallon to give undertakings on behalf of an apparent continuing
partnership between them on any of the dates when the undertakings relevant to these proceedings were given. I, therefore, turn to
the question of Mr. Traynor’s ostensible authority.
5. Mr. Traynor’s Ostensible Authority
5.1 It seems to me to be appropriate to start, under this heading, by setting out the fundamental legal principles which underlie the
ostensible authority of a partner to take action on behalf of the partnership, at least insofar as those principles have some relevance
to the issues which arise in this case.
5.2 It is, perhaps, appropriate to start by stating the obvious. Ostensible authority is only relevant when there is no actual authority.
If the relevant partner has actual authority then that is sufficient to bind the partnership. Ostensible authority is, therefore,
concerned with circumstances where partners may be bound for each other’s actions even though the partner actually committing
the wrongful act may not have actual authority.
5.3 Second, it is important to note that, in order for any person to have the ostensible authority of another, the person relying on
ostensible authority must be able to point to actions or omissions on the part of the person sought to be bound which justify implying
authority. It is not possible to rely simply on the statements or actions of the person who is said to have implied authority. This is
sometimes referred to as the bootlaces or bootstraps problem. A person cannot pull himself up by his own bootlaces. A person cannot
create a situation where they have the implied authority of a third party simply by asserting or acting as if they have that authority.
These general principles apply equally to the ostensible authority of employees or agents as much as they do to partners. In the
context of partnership, therefore, the mere fact that someone says that they are a partner of a third party or acts in a way which
implies that they are such a partner, does not give that person ostensible authority to bind the third party. The third party has done
nothing to create the ostensible authority. It is necessary, therefore, that a person claiming the existence of such an implied
authority must be able to point to some act or omission on the part of the alleged partner from which it is reasonable to imply the
existence of the partnership and the entitlement of the putative partner to bind that partnership.
5.4 However, beyond those general principles it is important to note that the case law concerning ostensible authority of partners
(and, where relevant, by implication similar authorities in the field of employer/employee and principal/agent) is concerned with a
whole variety of different types of cases which are separately concerned with different bases on which it might be suggested that
ostensible authority does not exist. In some cases (such as Re: Hall [1865] Ir. Ch. 287, Martin v. Sherry [1905] 2 I.R. 62 and DPP v.
McLoughlin [1986] I.R. 355 and many others) the question was as to whether there was a partnership relationship at all. In other
cases (such as Allied Pharmaceutical Distributors & Anor v. Walsh & Ors [1991] 2 I.R. 8) there was undoubtedly a partnership but the
question was as to whether the particular actions of a partner were within or without the implied authority of the partner concerned
to act. That authority will extend to the ordinary business of the partnership but not beyond in the absence of additional
circumstances which would justify implying authority on the particular facts of the case. In the context of professional partnerships it
might be reasonable, to use an Irish terminology, to describe this as the “nixer” problem. The fact that someone may be a partner (or,
indeed, an employee) in or of a professional firm does not necessarily mean that that partner may not do work outside the scope of
firm in the form of what is often colloquially referred to in Ireland as a nixer. It would be a question of fact in each case to decide
whether the firm acted in any way which could be said to confer ostensible authority on the relevant person in respect of the
transaction concerned. That problem deals with situations where the work is of the type normally done by the partnership but may
not, in fact, have been done by the partner on the occasion in question within the parameters of the partnership’s business. If the
work is not actually done within the parameters of the partnership business, then the question will nonetheless arise as to whether
the partner had implied authority to bind the partnership in all the circumstances of the case. It was this type of issue that arose in
Kooragang Investments Pty Ltd v. Richardson & Anor [1982] A.C. 462.
5.5 A different but analogous problem may arise where the work done is outside the scope of what the partnership normally does but
where there may be reason to believe (viewed from the perspective of the person dealing with the partnership and having regard to
acts or omissions on the part of the other partners) that the work was nonetheless being done for the partnership. If, for example, a
partnership became aware that a partner was, in the partnership offices and using partnership resources, providing services which
were outside the ordinary scope of the partnership, and continued to permit the partner to carry out those tasks, then it might very
well be that implied authority would be present even though as and between the offending partner and the remainder of the
partnership different considerations might apply.
5.6 It is, therefore, in my view, important, when analysing any of the decided case law, to pay particular attention to the precise
problem which the court confronted in the case in question. The court’s analysis is necessarily informed by the question which the
court is being required to answer. In this case the question is of a particular type. There was undoubtedly a partnership in existence.
Mr. Traynor had, certainly until March, 2006, ostensible authority to bind the partnership within the ordinary course of the
partnership’s business. It seems to me that, on the facts of this case, two real questions arise. The first is as to the status of Mr.
Traynor’s ostensible authority after the dissolution of the partnership. The second is as to whether the giving of undertakings of the
type given by Mr. Traynor in this case can be said to be within the scope of the ordinary course of a solicitor’s practice. I should
emphasise that there is no question in this case of special circumstances which would confer implied authority on Mr. Traynor outside
the ordinary scope of a solicitor’s practice. I propose addressing both of those issues in turn.
5.7 The first question concerns the ostensible authority of an undoubted former partner to bind, on an ostensible authority basis,
other former partners after the partnership has been dissolved but where the former partner said to have bound others continues with
the partnership business. The Partnership Act 1890 (s. 36(1)) does suggest that a partner who has left the partnership may continue
to be bound by partnership actions unless and until notice of departure is given. In that context, the law makes an entirely logical
distinction between existing customers and new customers. A partner leaving the partnership may give public notice in Iris Oifigiúil of
the new status of the partnership and, thereafter, the remaining partners will no longer have implied authority to bind the retiring
partner so far as new customers are concerned. In relation to existing customers then something more is required for those customers
as they must have the departure of the relevant partner brought to their attention and unless there is actual evidence of such
customers having had a public notice brought to their attention, then something more may well be required.
5.8 In the course of argument it was suggested on behalf of Mr. Mallon that the wording of s. 36(1), referring as it does to a
continuing firm, has no application to a case where there were only two partners and the partnership is dissolved for, it is said, in
those circumstances there is no longer any firm because, in turn, a firm requires at least two partners. Whatever may be the merits of
that argument as a matter of textual analysis, it seems to me to be clear that most of the provisions of the Partnership Act 1890
were simply declaratory of the common law position that had evolved prior to its enactment. It is clear from cases such as Parkin v.
Carruthers 3 Esp. N. P. C. 248, which is cited in Carter v Whalley (1830) 109 E.R. 691, at 692, that the common law position that
existed prior to the Partnership Act 1890 imposed the same obligations of notice on parties to a completely dissolved partnership,
where one continued the business, as the common law did in respect of a retiring partner from a partnership where, in substance if
not in theoretical legal form, the partnership continued to do business with two or more remaining partners. I describe that position as
being one of substance rather than theoretical legal form for it is, of course, theoretically the case that a new partnership can be
said to come into existence where a partnership is dissolved by the resignation of an individual partner. Given that the Partnership Act
1890 was largely designed to codify existing common law provisions, it does not seem to me that that Act should be taken, by
implication, to have amended the common law, unless the Act expressly and specifically purports so to do. I see no reason to depart,
therefore, from the common law position which was that notice of the dissolution of a partnership involving just two partners was
required in order that persons continuing to deal with the apparent partnership should be deprived of being able to argue that the
partner continuing on with the business of the partnership was acting with the ostensible or implied authority of the former
partnership.
5.9 Applied to the facts of this case it seems to me that, where a firm of solicitors is dissolved, but where, to the knowledge of those
solicitors, the business of the firm is to be continued by one or more of them, then those carrying on that continuing business have
the ostensible authority of those who are no longer involved unless and until those departing from the business give appropriate
notice of that fact. In that context, appropriate notice is general public notice in respect of persons who are not former clients or
persons who had dealings with the former firm and specific notice in the case of those who were former clients or had such dealings.
5.10 The reason for that position is obvious. If someone never was a partner then it requires some act or omission on their part to
give rise to an implication that they would be bound by the partnership. If, for example, Mr. Mallon and Mr. Traynor had never been
partners, then an assertion by Mr. Traynor that Mr. Mallon was his partner could not create implied authority on the part of Mr.
Traynor to bind Mr. Mallon. It would require some act or omission on Mr. Mallon’s part, from which a person dealing with Mr. Traynor
might reasonably be entitled to imply that Mr. Traynor was acting on Mr. Mallon’s behalf, to create such a situation. In those
circumstances there is no implied authority until Mr. Mallon does or omits to so something that creates that implied authority.
5.11 However, where there is an existing partnership then the situation is different. Mr. Traynor had, in fact, authority up to a certain
point. Persons dealing with the firm were entitled to assume that, as long as the firm continued in existence, Mr. Traynor had the
authority of Mr. Mallon. Mr. Mallon was bound because he had acted, by actually being Mr. Traynor’s partner, in a manner which held
himself out as being bound for Mr. Traynor’s actions within the ordinary confines of the solicitors practice. This is not, therefore, a
case about whether there ever was implied authority on the part of Mr. Mallon in the first place. Rather it is case where there
undoubtedly was implied authority on behalf of Mr. Mallon and the question is as to when it ends. It seems to me clear that implied
authority, once given, continues unless and until circumstances become apparent which would not entitle a third party to treat that
authority as continuing. Of course there may be circumstances, not relevant in this case, where it might not be reasonable to infer
that authority continues even in the absence of notice. A person who had ostensible authority, for example, solely to carry out one
transaction or a specified series of transactions, could not be said to have any continuing implied authority once the relevant
transactions had been completed. But this is not such a case. Mr. Traynor had general authority to carry out the solicitor’s practice
which he conducted in partnership with Mr. Mallon for as long as that partnership should subsist. By that course of action Mr. Mallon
conferred an implied authority on Mr. Traynor to continue to bind him until such time as notice or other circumstances would have led
any particular person dealing with the firm to reasonably conclude that the partnership was no longer in place.
5.12 In that context, it is appropriate to refer to Tower Cabinet Co Ltd v Ingram [1949] 2 K.B. 397 in which case the fact that a
former partner’s name continued on the notepaper did not create ostensible authority. Be that as it may, the partner in the case in
question was clearly unaware that the former partner continued to use notepaper with his name on it. In addition, the claimant
company had not dealt with the partnership while the defendant was a party. Neither matter is the case here.
5.13 On the facts of this case a number of matters are absolutely clear. Mr. Mallon took no steps to inform either the public generally
or the clients of Traynor Mallon or those dealing with the firm, in particular, that the partnership was at an end. As pointed out
earlier, Mr. Mallon accepted that someone going into the office on the 1st April, 2006, would not have been aware of any change.
There is no evidence of any general public awareness or any specific awareness on the part of Mr. Johnston, of the change in
circumstances, at any time which is material to the undertakings which are relevant to this case. It does not seem to me to be
necessary to decide whether that was a deliberate policy on the part of Mr. Mallon (as counsel on behalf of Mr. Johnston suggests) or
whether, as Mr. Mallon alleges, it was simply that Mr. Mallon assumed that Mr. Traynor would be more than happy to tell anyone that
he was now the sole proprietor of the firm. Even on the latter basis it is clear that Mr. Mallon took a chance by leaving it to Mr.
Traynor to inform clients, the public generally, and other firms of solicitors (such as Mr. Johnston) who might have to deal with
Traynor Mallon, of the fact that Traynor Mallon was no longer a firm involving Mr. Mallon. There is no evidence that Mr. Traynor, in
fact, took it on himself, at any material time, to inform any persons about the change in circumstance. It follows that Mr. Traynor
continued to have implied or ostensible authority to bind Mr. Mallon at the time when any of the relevant undertakings in these
proceedings was given. The second question to which it is now necessary to turn is as to whether it can be said that those
undertakings were given in the ordinary course of business.
5.14 There was much concentration at the hearing as to whether it was reasonable for Mr. Johnston to accept the relevant
undertakings in all the circumstances of the case. While that question is also relevant to the degree of culpability of Mr. Johnston, on
the one hand, and Mr. Traynor (and, if necessary, Mr. Mallon), on the other hand (an issue to which I will turn), it does not seem to
me to be relevant to the issue with which I am now concerned. The question under this heading is not as to whether it could be said
to be in the ordinary course of business for Mr. Johnston to take the undertaking, but rather whether it can be said to have been in
the ordinary course of business for Mr. Traynor to give it. In that context, I accept the evidence of Mr. Felix McTiernan, who is, of
course, a most experienced conveyancing solicitor, which was to the effect that undertakings of the type given by Mr. Traynor were
regularly given by solicitors in the course of the completion of conveyancing transactions. The undertaking was to the effect that
Traynor Mallon would only use monies for a particular purpose, in this case the completion of a sale or the payment of stamp duty. It
may be, for reasons which are gone into in some detail in the principal judgment, that the practise of closing on undertakings in that
way was a practice which exposed many clients to unnecessary additional risk, which risk should not have arisen without express
advice and instructions. However, the fact that carrying out a transaction in a particular way may have been an unwise way of
conducting the transaction, does not alter the fact that undertakings as to what is to happen to money paid over formed (and, to an
extent, continue to form) a normal part of many conveyancing transactions. To put it at its lowest, there appears to have been a
practice that solicitors acting for vendors regularly give undertakings to use portions of purchase monies to discharge existing
encumbrances, such as mortgages. Conveyancing is a central part of many solicitors business. Giving undertakings as to where money
which is handed over in conveyancing transactions is to go is a part of that business.
5.15 It is important to recollect that the focus in this case is on whether the actions of Mr. Traynor in giving the undertakings can be
said to have been actions taken in the ordinary course of a solicitor’s practice. That is, it seems to me, a significantly different
question from one as to whether it was negligent of Mr. Johnston to accept those undertakings without his client’s authority. Indeed,
it is implicit in the principal judgment that had Mr. Johnston, in fact, had ACC’s authority, then there would have been nothing wrong
with the transaction at all. There was some additional risk. If, for whatever commercial or other reasons, ACC were willing to take
that additional risk, then that was ACC’s decision. If ACC had given its consent, then how could it be said that the giving of the
relevant undertaking by Mr. Traynor would have been outside the course of Mr. Traynor’s solicitors practice. On that basis, whether
Mr. Johnston was authorised to take the undertaking concerned cannot determine whether it was within the course of Mr. Traynor’s
business to give it. In the circumstances, I have no doubt that the giving by Mr. Traynor of an undertaking as to what was to happen
to the proceeds of sale, in the form in which he did, was within the ordinary course of business. The case law on undertakings, such
as United Bank of Kuwait v. Hammond & Ors [1887] 1 W.L.R. 1051, is more concerned with undertakings given which might be outside
of the type of transaction which a solicitor normally engages in as a solicitor or where the solicitor had no reasonable expectation of
getting the funds the subject of the undertaking. Those questions do not seem to me to arise on the facts of this case.
5.16 It follows that Mr. Traynor had the ostensible authority of Mr. Mallon to carry on the ordinary solicitors business which they had
previously carried on, and had that ostensible authority at all times material to the giving of the undertakings in question. This is
because Mr. Mallon took no steps to inform the public, the practice’s clients, or other firms of solicitors who might have to deal with
it, that the partnership was at an end. In addition, as it happens, Mr. Johnston was not aware of the termination of the partnership.
In those circumstances, and having regard to my finding that the relevant undertakings were given within the ordinary course of a
solicitors practice, I am satisfied that Mr. Mallon is responsible, as a partner, for the undertakings given by Mr. Traynor and Mr.
Traynor’s failure to comply with them, even though Mr. Mallon was not directly aware of the undertakings concerned. In that regard,
Mr. Mallon is no different from any partner who may ultimately have to answer for negligence or other wrongdoing carried out by
partners. His personal innocence is not, unfortunately, in those circumstances, any defence.
5.17 Given my finding that Mr. Mallon is liable for the actions of Mr. Traynor, two further questions arise which go to the liability of
Traynor Mallon, rather than the independent liability of Mr. Mallon, for the acts of Mr. Traynor. I turn to those questions the first of
which involves the provisions of the Civil Liability Act 1961 (as amended), in relation to concurrent wrongdoers.
6. Concurrent Wrongdoers
6.1 Both points under this heading stem from the provisions of the Civil Liability Act 1961 (s. 11). It is important to say something
about third party claims before going on to analyse the two points raised. There are a wide range of bases on which it may be
considered appropriate to join a third party to proceedings. The defendant may have some entirely independent reason for being
entitled to claim relief connected with the main action as against the proposed third party. For example, a defendant may claim that a
third party is liable to indemnify that defendant under a contract (whether of insurance or otherwise). The defendant may claim to
have a separate cause of action against the third party which is sufficiently connected with the claim brought by the plaintiff against
the defendant so as to make it convenient that both matters be dealt with together. However, unless the defendant has an
independent or standalone cause of action against the third party, then it seems that in order to be able to pursue a third party
claim, a defendant has to be able to establish that the proposed third party is a concurrent wrongdoer, in the sense in which that
term is used in the Civil Liability Acts.
6.2 For reasons which I analysed in Moloney & Anor v Liddy & Ors [2010] IEHC 218, the position at common law was that a defendant
could not sue a concurrent wrongdoer liable for the same damage to the plaintiff. The Civil Liability Acts were designed to alter that
position and to permit a defendant to bring appropriate proceedings against a concurrent wrongdoer in those circumstances. If both
are sued in the same proceedings, then there will be a claim for contribution or indemnity between the defendants. If only one is
sued, that defendant can join the other as a third party. In such cases, the relevant defendant does not have an independent cause
of action against either its co-defendant or the third party, but is permitted, provided that both are concurrent wrongdoers, to bring
a claim in the proceedings against either the co-defendant or the third party under the provisions of the Civil Liability Acts.
6.3 It follows that Mr. Johnston is only entitled to claim against Traynor Mallon (howsoever that firm might be taken to be actually, or
by implication, constituted at any relevant time) if either Mr. Johnston has an independent, standalone claim against Traynor Mallon,
or if Mr. Johnston and Traynor Mallon can be taken to be concurrent wrongdoers.
6.4 I did not understand Mr. Johnston to argue that he had any independent claim against Traynor Mallon. It follows that, on the
facts of this case, Mr. Johnston is only entitled to a remedy against Traynor Mallon if both can be described as concurrent
wrongdoers for the purposes of the Civil Liability Acts. In that context, two points are made on behalf of Mr. Mallon. However, before
dealing with those points, it is relevant to note that judgment in default has already been obtained by Mr. Johnston against Mr.
Traynor. Obviously, to the extent that Mr. Mallon might be correct in either or both of the points which he makes, then that point
would apply equally to Mr. Traynor. However, it is accepted by Mr. Johnston that the fact that he has obtained judgment in default
against Mr. Traynor cannot in any way bind Mr. Mallon so that Mr. Mallon is entitled, if he be correct, to rely on either or both of the
points to which I am about to refer.
6.5 I have already noted that both points stem from the wording of section 11(1). That section provides as follows:-
“For the purpose of this Part, two or more persons are concurrent wrongdoers when both or all are wrongdoers and are
responsible to a third person (in this Part called the injured person or the plaintiff) for the same damage, whether or not
judgment has been recovered against some or all of them.”
It is clear, therefore, that in order that Mr. Johnston and Traynor Mallon be concurrent wrongdoers, then two conditions are required
to be met:
(a) Both must be liable to the same party (on the facts of this case, ACC); and
(b) the liability must be in respect of the same ‘damage’.
Both of those matters are contested on behalf of Mr. Mallon.
6.6 So far as the first point is concerned, attention was drawn on behalf of Mr. Mallon to the stated position of ACC in these
proceedings, which was to the effect that it placed no reliance on the undertakings given by Traynor Mallon, for it was ACC’s case
(and a case which I accepted) that ACC were unaware, at any material time, that the relevant undertakings had been given.
However, it seems to me that that argument misses the point. Mr. Johnston was ACC’s agent. The undertakings were given by
Traynor Mallon to Mr. Johnston in his capacity as ACC’s agent. The fact that, as and between ACC and Mr. Johnston, ACC were not
aware of and did not authorise the acceptance of those undertakings, does not, in my view, mean that ACC would not be entitled to
rely on the undertakings. ACC are bound by the actions of their agent. They are also entitled to the benefit of their agent’s actions.
ACC may not have wished Mr. Johnston to accept undertakings, but he having accepted those undertakings, ACC are at least entitled
to the benefit of them. It may be that ACC did not consider it worthwhile to pursue Traynor Mallon. That is neither here nor there.
The fact remains that the Traynor Mallon undertakings were given to ACC’s agent and relied on by that agent and it seems to me to
follow that Traynor Mallon is liable to ACC in respect of any obligations arising under the undertakings.
6.7 The second point is more complex. In Moloney, I had occasion to review relevant authorities on the question of the meaning of
the term “same damage”. For the reasons analysed in Moloney I came to the view, following both Canadian and United Kingdom
jurisprudence, that the term “same damage” did not mean the same thing as “same damages”. Thus, a loss associated with a failure
by legal advisers to commence proceedings in time (from which flowed the loss of the chance to bring the relevant proceedings) is
not the same damage as the loss that might have been pursued in the cause of action thereby lost. This is so even though, in at
least some cases, the calculation of the damages may be closely analogous.
6.8 Applying the same reasoning it is necessary to consider whether the damage caused to ACC by, on the one hand, Mr. Johnston’s
negligence and, on the other hand, Traynor Mallon’s failure to comply with its undertakings, is the same damage. For the reasons
analysed in the principal judgment, I was satisfied that the consequences of Mr. Johnston’s negligence vis-à-vis ACC was such as
required the case to be viewed on a “no transaction” basis. In other words, the inference to be drawn was that had Mr. Johnston not
been negligent, no transaction would have taken place. In practical terms that means that had Mr. Johnston not been negligent,
ACC’s money would have remained with Mr. Johnston and would never have been handed over to Mr. Traynor.
6.9 What then are the consequences of Traynor Mallon’s breach of undertaking. There were two possible ways in which Traynor
Mallon could have complied with the various undertakings given to Mr. Johnston. First, the monies could actually have been employed
in completing the sale to Mr. Tiernan and in paying the stamp duty on that transaction. Had that happened, then ACC would, in
principle, have obtained a proper first legal charge over the relevant property. There might well, however, have been complications
stemming from the true purchase price, to which it will be necessary to return. However, in order for ACC to have succeeded against
Mr. Johnston it would, of course, have been necessary for ACC to establish not only that Mr. Johnston was guilty of negligence but
also that there was a casual connection between that negligence and whatever loss ACC might be able to establish. There is, as I
have noted, a complicating factor in this case which stems from the fact, as is pointed out in the principal judgment, that it would
appear that the real contract price between Mr. Tiernan and the vendor to Mr. Tiernan, was a lot less than the €7m that appeared on
the copy contract which was given to ACC. It will be necessary to return to the consequences of that complication in due course.
However, leaving that matter aside for the moment, no negligence on the part of Mr. Johnston could have any causal connection with
any loss suffered by ACC had Traynor Mallon actually complied with its undertaking and closed the sale. Subject to the real problem
concerning the difference in consideration, ACC would have got what it bargained for. It was Mr. Johnston’s job to procure a first
legal charge before releasing the monies. However, if ACC actually got a first legal charge at the end of the day, then even if Mr.
Johnston might have been negligent in exposing ACC to a risk by closing on an undertaking, that risk would not, in fact, have
materialised or caused any loss, and the same legal charge would have been put in place as would have occurred had the three way
closing that was anticipated taken place. Subject, therefore, to the difference in consideration point, if Traynor Mallon had actually
complied with the undertaking in the sense of procuring the closing of the sale and the paying of the relevant stamp duty, then there
would be no liability on either side to ACC.
6.10 The other way in which Traynor Mallon could have complied with the undertaking was, of course, to retain the money unless and
until the sale was closed. The fact is that Traynor Mallon did not do so. It would appear that some but not all of the money was
handed over to the vendor’s solicitor, such that the status of the sale in question must now be subject to some considerable
controversy. On the evidence the balance of the monies would appear to have been paid in various ways either for the benefit of Mr.
Traynor personally or for Mr. Tiernan. The consequence, in those circumstances, is that the money is “gone” when, had the
undertaking been complied with, it would have been kept by Traynor Mallon unless and until the sale could be properly closed.
6.11 It seems to me, therefore, that, again subject to the difference in consideration point, the breach by Traynor Mallon of its
undertaking and the negligence of Mr. Johnston give rise to the same damage. The damage is that the money is gone. If Mr. Johnston
had not been negligent it would not be gone. If Traynor Mallon had complied with its undertaking and, absent an actual closing, it
would not be gone. If Traynor Mallon had complied with its undertaking and completed the transaction then subject to the point
concerning difference in consideration to which I will now turn, there would be no loss in either case.
6.12 Under this heading, it is finally necessary to turn to the question of the difference in consideration. As pointed out in the
principal judgment, it is difficult to envisage how a three way closing could have occurred without the difference in consideration
becoming apparent. Whatever draft deeds might have been prepared in advance of the three way closing, it is inevitable that an
actual executed deed would need to have been produced at that closing which would have specified the correct consideration. I
should say in passing that it does not seem to me that questions concerning the failure of Mr. Johnston to have a draft deed
presented to him in advance of handing over the money are of any relevance in this case. It may well have been in breach of normal
practice for Mr. Johnston not to have insisted on sight of such a draft in advance. However, it does not seem to me that there is any
real possible causal connection between that possible negligence and any loss on the facts of this case. Given that a false and
doctored version of the contract for sale (apparently executed) had already been produced, it seems highly unlikely that the
production of a similarly false and doctored draft deed (unexecuted) could not have been secured. It seems to me to be highly
probable, therefore, that, had a three way closing been attempted, there would have, in fact, been no closing, for it seems to me
inconceivable that it would have been possible to manage the procedure necessary for such a closing (involving, as they would, the
vendor’s solicitor) without it becoming apparent that what the vendor was actually getting as the purchase price was very different
from what ACC and its solicitor (Mr. Johnston) believed was that purchase price. The only reasonable inference to draw is, therefore,
that, in the absence of negligence on the part of Mr. Johnston there are no circumstances in which the sale might have closed.
6.13 It is in this context important to note that there is no plea of fraud made against Traynor Mallon. The claim in the third party
proceedings against Traynor Mallon is confined to an allegation of breach of undertaking. If, therefore, Traynor Mallon had actually
closed the sale, paid the stamp duty, and arranged for the relevant documentation to be transmitted to Mr. Johnston, then it follows
that this could have been done, in compliance with the undertaking, even though the consideration actually paid to the vendor was
very different from that which ACC and Mr. Johnston understood that it was to be. However, the fact of the difference in
consideration would have been discovered when the relevant documents were transmitted to Mr. Johnston. In that context, it is
necessary to construe what the true nature of the undertaking given by Traynor Mallon actually was. That question of construction
arises in the highly unusual circumstances where Traynor Mallon had transmitted to Mr. Johnston a false version of the contract of
sale from which Traynor Mallon must have known that both Mr. Johnston and ACC believed that the purchase price was €7m. How
then is one to construe an undertaking given in that context in circumstances where the true purchase price which Mr. Tiernan had
agreed to pay was significantly less?
6.14 In that context, it does not seem to me that it could be said that Traynor Mallon had complied with its undertaking if it were
simply to have closed the sale at €4.6m and paid the appropriate stamp duty on that amount. In those circumstances, I am not
satisfied that there was any way in which Traynor Mallon could have complied with its undertaking other than by closing a transaction
which was the one which Mr. Johnston and ACC believed was to be closed (i.e. a transaction at €7m). There is not, therefore, in my
view, despite the difference in consideration point, any practical way in which a situation could have arisen whereby Traynor Mallon
could have properly complied with its undertaking other than by retaining the monies. There was no reality to the sale closing at €7m.
There was, therefore, no reality to Traynor Mallon complying with its undertaking by closing the sale. The only basis on which Traynor
Mallon could properly have complied with its undertaking was, therefore, by retaining the money. It follows that, in that eventuality,
the loss attributable to the breach by Traynor Mallon of its undertaking is that the money is gone in just the same way as the loss
attributable to Mr. Johnston’s negligence is that the money gone. In those circumstances, I am satisfied that the “damage” is the
same. The damage is that the money is gone.
6.15 In all those circumstances, I am satisfied that Traynor Mallon and Mr. Johnston are concurrent wrongdoers. It is finally necessary
to turn to the question of causation.
7. Causation
7.1 In substance, in reliance on cases such as Canole v Redbank Oyster Company Ltd. & Anor [1976] 1 I.R. 191, it is argued on
behalf of Mr. Mallon that there is no causal connection between any losses suffered by ACC and the breach of undertaking by Traynor
Mallon for, it is said, those losses would not have occurred without Mr. Johnston’s negligence. However, it seems to me that there is
an inextricable link between Traynor Mallon’s breach of undertaking and Mr. Johnston’s negligence. The loss could not have occurred
without both. If Mr. Johnston were not negligent, then Mr. Traynor would never have got the money. If Traynor Mallon were not in
breach of undertaking then the money would have remained with Traynor Mallon and could have been retrieved by ACC. If Mr.
Johnston had been negligent but Traynor Mallon had not been in breach of undertaking then, for the reasons already analysed,
Traynor Mallon would have retained the money and it would have been available to be repaid to ACC so that no loss would have
arisen. If Mr. Johnston had not been negligent then the money would never have left his account and could equally have been
returned to ACC. In Redbank Oyster Company a second act of negligence, in allowing a boat to put to sea when it was known to be
dangerous, meant, in the words of Henchy J., that the firm who had negligently repaired the boat “were being relegated to an area of
remoteness within which responsibility in negligence does not operate”.
7.2 However, it seems to me that this is not the sort of case where something occurred to break the causal link between Traynor
Mallon’s breach of undertaking and any loss suffered by ACC. True it is that Traynor Mallon might not have had an opportunity to
breach the relevant undertakings if Mr. Johnston had not been negligent in accepting them. But the loss did not occur simply by the
monies being handed to Traynor Mallon. The loss occurred when Traynor Mallon dealt with those monies other than in accordance
with its undertaking. There is not, in my view, therefore, any basis for suggesting that there is a lack of causal link between Traynor
Mallon’s breach of undertaking and any losses which ACC may have suffered.
8. Conclusions
8.1 In summary, therefore, I am satisfied that Mr. Traynor, operating under the style of Traynor Mallon, had authority to bind Mr.
Mallon at all material times. Mr. Traynor was operating in the ordinary course of a business as a solicitor in giving the relevant
undertakings. The breach by Traynor Mallon of those undertaking renders Traynor Mallon a concurrent wrongdoer for the purposes of
the Civil Liability Acts with Mr. Johnston such as, at the level of principle, entitles Mr. Johnston to seek to claim a contribution or
indemnity against Traynor Mallon. For the reasons already set out that entitlement includes an entitlement to pursue such a claim
against Mr. Mallon, even though he be personally innocent of any wrongdoing.
8.2 The only remaining question is as to the damages to which ACC may be entitled (an issue which, as I have pointed out, has been
deferred) and the question as to how the relative liabilities of Mr. Johnston on the one hand and Mr. Mallon and Mr. Traynor on the
other hand are to be deal with. I have come to the view that it would be inappropriate at this stage to deal with the relative positions
of Mr. Johnston and the former partners in Traynor Mallon. The precise way in which ACC will make out its loss is not yet clear. It is
possible that different considerations as to the respective liabilities of Mr. Johnston and the former partners in Traynor Mallon might
apply to different heads of loss. In those circumstances, it seems to me to be appropriate to defer a decision on the precise way in
which the obligations of those parties as and between each other should be determined until the damages hearing when the precise
basis on which ACC will be entitled to damages will be clear.
8.3 Therefore, for the purposes of this hearing, I determine that, at the level of principle, Mr. Johnston is entitled to a contribution or
indemnity from Mr. Mallon with the amount of that contribution or indemnity to be determined at the same hearing as is to take place
for the purposes of determining the amount of damages to which ACC is to be entitled as against Mr. Johnston.