Appeal allowed; contribution claim dismissed due to failure to serve third-party notice promptly under Civil Liability Act.

THE SUPREME COURT

Record No. 285/05

Hardiman J.

Geoghegan J.

Fennelly J.

BETWEEN/

ECI EUROPEAN CHEMICAL INDUSTRIES LIMITED

Respondent/Plaintiff

and

MC BAUCHEMIE MÜLLER GmbH AND COMPANY

Appellant/Defendant

JUDGMENT of Mr. Justice Geoghegan delivered the 14th day of March 2006

1. This is an appeal from an order of the High Court determining two preliminary issues which had been directed to be heard in an

action by the respondent against the appellant claiming indemnity/contribution on a concurrent wrongdoer basis in respect of any

potential liability on the part of the respondent in an action entitled “The High Court, Record No. 3753P/1995, Between: Vincent

Donnelly - Plaintiff and Structural Concrete Bonding Services Limited, Ove Arup Jones Lang Wooten and ECI European Chemical

Industries Limited - Defendants”. The respondent had earlier obtained leave to issue and serve a third-party notice on the appellant.

After such notice was served, the appellant successfully made an application to have the third-party notice set aside on the grounds

that it had not been served “as soon as is reasonably possible” within the meaning of section 27(1)(b) of the Civil Liability Act, 1961.

2. The two issues set down and determined were as follows:

1. Whether in circumstances where the plaintiff has already made a claim for contribution against it in proceedings entitled “The

High Court, Record No. 1995 No. 3753P, Between: Vincent Donnelly – Plaintiff and Structural Concrete Bonding Services

Limited, Ove Arup, Jones Lang Wooten and ECI European Chemical Industries Limited – Defendants” (“the underlying

proceedings”), the plaintiff is disentitled by virtue of section 27(1)(b) of the Civil Liability Act, 1961 to maintain these

proceedings against the defendant.

2. Whether the plaintiff’s claim herein ought to be refused by this court in the exercise of its discretion under section 27(1)(b)

of the Civil Liability Act, 1961 in circumstances where this court has already determined in the underlying proceedings that the

plaintiff failed to serve a third-party notice upon the defendant as soon as reasonably possible as required by the provisions of

the Civil Liability Act, 1961.

3. The learned trial judge reluctantly gave negative answers to both questions. The appellant has appealed that decision to this

court.

4. To understand how the questions arise it is important that I cite in full section 27(1) of the Civil Liability Act, 1961. That

subsection reads as follows:

“(1) A concurrent wrongdoer who is sued for damages or for contribution and who wishes to make a claim for contribution

under this Part –

(a) shall not, if the person from whom he proposes to claim contribution is already a party to the action, be entitled to

claim contribution except by a claim made in the said action, whether before or after judgment in the action; and

(b) shall, if the said person is not already a party to the action, serve a third-party notice upon such person as soon as

is reasonably possible and, having served such notice, he shall not be entitled to claim contribution except under the

third-party procedure. If such third-party notice is not served as aforesaid, the court may in its discretion refuse to

make an order for contribution against the person from whom contribution is claimed.”

5. As can be seen quite clearly there is no ambiguity in paragraph (a). If a defendant wants to make an indemnity or contribution

claim in a concurrent wrongdoer capacity against a co-defendant he must make his claim within the same proceedings. He is

precluded from bringing a separate action.

6. Paragraph (b) however, deals with a different situation. This is where the indemnity or contribution claim is made against somebody

who is not a party to the action. The first part of that paragraph mandates the defendant claimant to serve a third-party notice upon

the non-party against whom the claim is being made “as soon as is reasonably possible”. Unlike paragraph (a) however, paragraph (b)

does not prescribe that the claim for contribution may only be brought by way of third-party proceedings and not by a separate

action. If the paragraph had contained only its first sentence, such a requirement might be taken as implied. It has been held in this

court, however, that the second sentence in paragraph (b) must necessarily lead to the conclusion that a claimant who does not

serve the third-party notice as soon as is reasonably possible and, therefore, does not comply with the first part of the sentence is

not necessarily precluded from making an indemnity or contribution claim by separate action but such claim may be refused by the

court as a matter of discretion.

7. The first of the two questions determined by the High Court does not present me with any difficulty and I can deal with it quite

shortly. Essentially, the issue here is whether even if it is the case that where a third-party notice is not served the claimant is not

necessarily precluded from making the claim by separate action depending on the discretion of the court, that is not so if, in fact, a

third-party notice was served as in this case but later set aside. I should mention in passing that no appeal was taken from the order

setting aside the third-party notice.

8. This precise issue is adverted to in the unreported judgment in the High Court of Barron J., delivered the 30th April, 1997 in

McElwaine v. Hughes. At the bottom of p. 278 of his judgment Barron J. having established that while a court should not construe “as

soon as is reasonably possible” too liberally, it should not at the same time be too astute to set aside a third-party notice on such

grounds and went on to observe as follows:

“O’Keeffe J. in Gilmore v. Windle (cited earlier in the judgment as [1967] I.R. 323) suggested a further hurdle by indicating that

a defendant who serves a Third-Party Notice subsequently set aside for not having been served as soon as reasonably possible

might be barred from bringing separate proceedings. However it seems to me that the provision in the subsection which

appears to so provide is intended to apply only where the procedure laid down by that subsection has been followed with a

valid Third-Party Notice.”

9. I am in complete agreement with that passage in the judgment of Barron J. It would be wholly wrong in principle if a person who

defectively served a third-party notice which was subsequently set aside was left in a different position from a claimant who did not

serve a third- party notice of any kind. I do not think I need to say anything more about the first of the two issues. I would uphold

the negative answer given by the learned High Court judge.

10. The second issue is much more difficult. However, on a careful combined reading of the second sentence in the subsection and of

the interpretation placed on it (with which I agree) by this court in The Board of Governors of St. Laurence’s Hospital v. Staunton

[1990] 2 I.R. 31 there can only be one answer in my view.

11. Although in the St. Laurence’s Hospital case, no authority is referred to by Finlay C.J. in his judgment, some cases were referred

to in argument, including Gilmore v. Windle cited above. Before treating of the St. Laurence’s Hospital case I think it useful to return

briefly to Gilmore v. Windle which was also a decision of this court. The principal majority judgment was delivered by O’Keeffe J. At p.

334 of the report the learned judge said the following:

“Sect. 27 of the Act of 1961 is clearly intended to ensure that, as far as possible, all questions relating to the liability of the

concurrent wrongdoers (and here I include persons who may be concurrent wrongdoers) should be tried in a single proceeding

…”

12. It is clear from the use of the expression “as far as possible” that O’Keeffe J. was not laying down an absolute rule that all third-

party claims had to be heard in the original proceeding. The same view was subsequently held in the St. Laurence’s Hospital case to

which I will be returning. At p. 336 of the report in Gilmore v. Windle O’Keeffe J. said the following:

“I must refer here to the terms of s. 27 of the Act of 1961, which I have already quoted. Sub-sect. 3 of s. 27 appears to

contemplate that leave to issue a third-party notice is required, although leave should not be refused merely because the

issue between the defendant and the third-party will involve a difficult question of law. At the same time a defendant, seeking

contribution under the Act, is compelled by sub-s. (1)(b) of s. 27 to serve a third-party notice, and if he does not do so the

court may in its discretion refuse to make an order for contribution. The purpose of the provision would seem to be to

encourage the bringing of claims for contribution by third-party proceedings, rather than by independent actions, and so to

have all questions arising for determination disposed of in a single proceeding.”

13. It seems clear that in the residual cases where a defendant attempts to make a third-party claim otherwise than by third-party

notice he can only do so in a separate action. The reason for this is obvious. The third-party is simply not before the court unless he

has been brought in by a valid third-party notice. The real difficulty to which the second sentence of paragraph (b) gives rise is what

are the circumstances in which a court should exercise its discretion to reject the proceedings and the obvious onus of proof

problems in respect of such relevant matters?

14. I will return now to the leading case on this section, that is to say, the St. Laurence’s Hospital case cited above. In that case, an

action had been brought against St. Laurence’s Hospital by a patient who had fallen from a window in the hospital and sustained

serious injuries. A jury awarded him £90,000 and the hospital appealed on liability and quantum to the Supreme Court. Pending the

appeal, the consultant neurologist under whose care the plaintiff had been when in the hospital and who had given evidence at the

trial was, with leave of the High Court, served with a third-party notice. He appealed to the Supreme Court against his being joined as

a party but pending the hearing of that appeal the Supreme Court dismissed the hospital’s appeal on liability and damages. The

Supreme Court allowed the neurosurgeon’s appeal on the grounds that the third-party notice had not been served “as soon as is

reasonably possible” as mandated by the subsection cited above. But Finlay C.J. in his judgment with which the other two judges

Hederman and McCarthy JJ. agreed went on to observe that having regard to the wording of paragraph (b) of section 27 subsection

(1) the hospital although prevented from proceeding by way of third-party notice was not necessarily barred from instituting a

separate action claiming contribution against the neurologist as a concurrent wrongdoer and it would then be a matter for the

discretion of the adjudicating court as to whether the contribution claim would be permitted or not. In a key passage in the judgment

at p. 35 of the report Finlay C.J. said the following:

“An interpretation making the service of a third-party notice as soon as possible in the action the only method of claiming

contribution from a person not already a party to the action coincides with the general policy of this Part of the Civil Liability

Act, 1961, making claims for contribution and indemnity as well as claims for damages all preferably heard together in the one

proceeding and at approximately the same time. I am, however, driven to the conclusion that the express vesting in the court

of a discretion to refuse to make an order for contribution upon the failure of the claimant for such contribution to serve a

third-party notice ‘as aforesaid’ makes it necessary to construe this sub-section as still leaving open the bringing of a

substantive claim for contribution which is a statutory right of action, conferred by the terms of s. 21 of the Act, and which

can be prosecuted by an action brought by civil bill or plenary summons.”

15. It is a clear inference from the ex tempore judgment given by the learned High Court judge that he was unhappy with the

interpretation placed by this court on the statutory provisions. No hint of any such misgiving seems to be contained in the judgment

of Barron J. in the McElwaine case cited above or in the careful judgment of Kelly J. in Connolly v. Casey, unreported judgment

delivered 12th June, 1998, or indeed in any other of the cases or in the very full treatment of the section in Chapter 9 of Delany and

McGrath on Civil Procedure in the Superior Courts 2nd edition. Ironically, it would seem to me that it was Finlay C.J. himself who

seemed most reluctant and hesitant about having to interpret the section in the way he did. It there is an anomaly it would appear to

come from the legislation rather than from the judicial interpretation of it. No application has been made by either party in this case

for this court to reconsider the correctness of the decision in the St. Laurence’s Hospital case. At any rate, any such reconsideration

would have to be carried out by a court of at least five judges. Even if I were not bound by the St. Laurence’s Hospital decision, for

my own part, I would not be able, in the absence of some strong convincing argument, to interpret the statutory provision in any

other way. I cannot see how the fallback contribution claim for which the Oireachtas has clearly provided is capable of being made

against a non-party except by separate action. Under section 5 of the Tortfeasors Act, 1951, (repealed by the Civil Liability Act,

1961) contribution claims were made by separate action.

16. Where, in my opinion, there is undoubtedly room for argument is how the court should approach the question of whether an

independent action claiming contribution should be rejected or not. I would have no quarrel with the procedure which was adopted in

this case. Pleas that the claim should be rejected were raised in the defence in the plenary action and the matters raised in the pleas

relevant to this defence were set down to be tried as a separate issue. There may be other procedural methods by which the issues

could be tried but I would have no criticism of what was done here. In this case, the independent action arises in the context of a

third-party notice having been set aside. That particular context may not have been particularly within the contemplation of the

Oireachtas when the section was enacted even though it necessarily follows. What in all probability was primarily contemplated by

the Oireachtas is the situation where no third-party notice is served at all.

17. In order to determine what the nature of the court’s secondary discretion is, it would seem prudent to consider first what would

happen if no third-party notice had ever been served. Since the clear purpose of the legislation is to ensure that as far as possible

third-party issues would be heard in the original plaintiff’s action, I find it difficult to accept that the court would only be entitled to

reject the independent action if prejudice to the defendant in that action is proved. This does not necessarily mean that the issue of

prejudice does not come into play at all. I will return to it in due course. First and foremost, however, it would seem to me that the

court would have to consider was there a good reason why the statutory requirement of serving a third-party notice as soon as is

reasonably possible was not complied with. This consideration must include not merely the failure to serve a third-party notice but the

failure to serve one as soon as reasonably possible. The court, therefore, would have to consider what was the latest date on which

a third-party notice ought to have been served. If there was no good reason why a third-party notice could not have been served in

accordance with the Act, then, I would take the view that in most cases, irrespective of any question of prejudice, the new

proceedings should be rejected. There may be exceptional cases in which as a matter of justice the action should not be rejected on

that account alone. Otherwise, a clear obligation to adopt a third-party procedure could become hopelessly weakened to the point of

being meaningless.

18. In considering for the purposes of the first part of the subsection whether a third-party notice has been served as soon as is

reasonably possible it is clear on the authorities now that the surrounding circumstances may be taken into account. This is dealt

with in some detail in paragraphs 9-20 to 25 in the second edition of Delany and McGrath Civil Procedure in the Superior Courts. As

the authors point out, the relevance of surrounding circumstances has been clearly established by two decisions of this court namely,

Connolly v. Casey [2000] 1 I.R. 345, 351 in which Denham J. delivered a judgment with which Hamilton C.J. and Keane J. concurred

and Molloy v. Dublin Corporation [2001] 4 I.R. 52 in which this view was confirmed by Murphy J. when delivering a further judgment in

this court with which Hardiman J. and Fennelly J. concurred. It must be assumed that the surrounding circumstances which might be

relevant to the delay issue were taken into account by Kearns J. when hearing the original application to set aside the third-party

notice especially as no appeal was ever brought from that decision.

19. The fact that surrounding circumstances are relevant to the issue of whether a third-party notice has been served as soon as

reasonably possible creates a difficulty in the way of an independent action claiming contribution in a case where the third-party

notice has been set aside, as happened here. Issues of “reasonableness” which must necessarily have arisen in the application to set

aside the third-party notice and were determined by the judge hearing that application may not in some instances be reopened in the

independent action on the basis of res judicata. The reasonableness issue however for the purposes of the first sentence in the

subsection relates to the time aspect only and there may in any given case be other non-temporal issues giving rise to a good reason

why a third-party notice was not served in accordance with the Act. Again, before any issue of prejudice could conceivably arise

(and I am by no means sure that it can arise) that issue would have to be determined by the court, that is to say, the issue of

whether there was a good reason why the third-party notice was not served. Since prima facie there would be no good reason the

onus of proof, in my opinion, is on the defendant claimant for contribution. If the claimant fails in that onus the discretion ought

normally to be exercised against permitting him to pursue the claim for contribution by separate action. If the claimant does discharge

that onus, a further question then arises whether the action can still be rejected on grounds of prejudice to the defendant in the new

action. If prejudice is relevant, I think that the onus of proving it should be on the party asserting it but the question of whether

prejudice is relevant at all is debateable. At the end of his judgment in the St. Laurence’s Hospital case Finlay C.J. referring to the

discretion vested in the court in the independent action says the following:

“It would seem clear that this discretion is part of the general policy of the provisions of the Act of 1961 seeking to have all

claims determined at the same time and is also a potential protection to a person against whom a claim for contribution is

made by unfair or prejudicial procedure. The issue as to whether or not this third party was, by a claim for contribution now

made, seriously prejudiced was not fully argued before this court and on this appeal and I express no view as to what the

decision of the High Court should be were the defendant now to institute an action for contribution.”

20. It would seem clear that all of those words by the former Chief Justice must be regarded as obiter dicta. On one interpretation,

he would seem to be suggesting that prejudice might be the only issue to be considered by the judge. For the kind of reasons which I

have been indicating, I would not share that view. There was no evidence of prejudice in this case and, therefore, the issue of

prejudice does not arise. My view, which would itself be obiter, would be that procedural prejudice only would be relevant. I would

reiterate however that the prejudice issue, if it arises at all, only arises after the court is satisfied that there was a good reason why

the third-party notice was not served in accordance with the Act and in that connection any matter already decided on an

application to set aside the third-party notice must be treated as res judicata. The learned High Court judge reluctantly felt bound to

hold in favour of the plaintiff. I do not think that that was a correct approach. The issue should have been considered in the manner

which I have indicated. I would, therefore, allow the appeal but order a new hearing of the issue in the High Court. That court on the

evidence (including any permitted additional evidence) before it should determine was there a good reason why a third-party notice

complying with the Act was not served, bearing in mind that any relevant time issue already decided by Kearns J. must be treated as

res judicata? If the answer is in the affirmative, the action should be permitted to proceed. If the answer is in the negative, the

proceedings should be rejected unless there is some exceptional circumstance which would render such refusal unjust.