Court of Appeal dismisses appeal against summary judgment where defendant failed to show a real or bona fide defence.

THE COURT OF APPEAL

CIVIL

2014/1395

Article 64 Transfer

Ryan P.

Finlay Geoghegan J.

Peart J.

NATIONAL ASSET LOAN MANAGEMENT LIMITED

PLAINTIFF/RESPONDENT

AND

HENRY A. CROSBIE

DEFENDANT/APPELLANT

JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 24th day of June 2016

1. This is an appeal transferred to this Court by the Supreme Court pursuant to Article 64 of the Constitution. The defendant had

appealed to the Supreme Court against the order of the High Court (Keane J.) 31st July, 2014, granting to the plaintiff, on a motion,

summary judgment against the defendant in the sum of €77,095,090.59. The decision of the trial judge to grant judgment on the

summary application and his reasons are in a written judgment [2014] IEHC 342 delivered on the 27th June, 2014 (but incorrectly

recorded as 18th June 2014).

2. There was a further application heard by the trial judge seeking a stay on the judgment pending the outcome of proceedings

brought by the defendant against the plaintiff and National Asset Management Agency (NAMA) (2014 No. 5261 P). The order of the

31st July also records the refusal of that second application and the reasons therefore were given in a written judgment delivered on

the 31st July, 2014 [2014] IEHC 414. It is of relevance to the issue on appeal that there is no appeal against that part of the order of

the High Court of the 31st July, 2014, which refused the stay pending determination of the separate plenary proceedings.

3. I have had the opportunity of reading in draft the judgment to be delivered by Peart J. on this appeal. I agree with his conclusion

that the appeal should be dismissed and the reasons he gives for the rejection of the appeal against the summary judgment and

reasoning of the trial judge on the principal issue before the High Court, namely, whether the defendant had met the threshold

identified by the Supreme Court in Aer Rianta cpt v. Ryanair Limited [2001] 4 I.R. 607 of a real or bona fide or credible defence to the

claim for judgment in the amount claimed. I wish to add a few comments particularly in relation to the issue of the entitlement of the

defendant to pursue a counterclaim either as contended for in the High Court or identified in the course of the appeal hearing.

4. Before the trial judge, the first and principal issue was whether the defendant on the evidence adduced had raised a real or bona

fide defence that there was an agreement in force between the parties in the terms set out in a letter dated the 24th August, 2012,

from a solicitor acting for the defendant (the “McCabe letter”) that precluded the plaintiff from seeking judgment against the

defendant for the sum at issue. I am in agreement for the reasons set out by Peart J. that the trial judge was correct on the

evidence before him in concluding that the defendant had not established a real or bona fide defence that there existed between

NAMA or the plaintiff and him in August 2012, as asserted an agreement which precluded the plaintiff from seeking a monetary or

personal judgment against the defendant in the sum claimed.

5. The trial judge identified at para. 67 of his judgment what he considered to be the “high water mark from the defendant’s

perspective” of the relevant provisions of the agreement contended for by the defendant with NAMA and the plaintiff. Included

amongst those provisions were agreements not to take enforcement action or to put it another way not to seek to execute a

judgment or enforce a debt against certain property, including the defendant’s home, a property in which his son resided and also

certain assets of a business of his wife and son and property in France. The trial judge at para. 68 accepted again in the context of

taking the high watermark of the defendant’s case in reliance upon the agreement contended for that “neither NAMA nor the plaintiff

would petition for the defendant’s bankruptcy, at least during the currency of the agreement . . .”.

6. All of the above fall short of an agreement not to obtain a judgment in personam i.e. a monetary judgment against the defendant

which imposes a liability on the defendant personally to pay the judgment, but which does not of itself immediately give to the

plaintiff any rights to realise the judgment debt from any property of the defendant nor to have the defendant adjudicated a bankrupt

without further court proceedings. Accordingly I agree with the trial judge and Peart J. that no real or bona fide defence to the

judgment claimed on the summary summons was made out.

7. The defendant on appeal also submitted that the trial judge failed to consider the counterclaim which the defendant in the High

Court identified he proposed to pursue and by implication wrongly failed to remit the claim to plenary hearing or failed to place a stay

on the judgment while the counterclaim was pursued.

8. As often happens on appeal the issue of a counterclaim as distinct from a defence was focused upon in greater detail during the

appeal hearing than it would appear had occurred in the High Court.

9. The trial judge in his judgment at para. 37 records the intention of the defendant to file:-

“The defendant has sworn that it is his intention to file a full defence and counterclaim seeking declaratory relief regarding

the status of the "Comprehensive agreement" and injunctive reliefs or specific performance of the "Comprehensive

agreement", or both, against the plaintiff. The defendant contends that, in bringing the present application for summary

judgment (which he refers to as "enforcement proceedings") against him, the defendant in resiling from the legal

obligations imposed upon it pursuant to the terms of the "Comprehensive agreement".

10. Notwithstanding this reference to a counterclaim the trial judge did not in the remainder of the judgment return to consider any

counterclaim as distinct from the defence contended for in reliance upon what in para. 37 of his judgment was referred to as the

"Comprehensive agreement” and which as appears from the earlier part of the judgment was the agreement contended for by the

defendant as set out in the McCabe letter.

11. Thus, whilst I accept that on behalf of the defendant in the High Court it was submitted that he had both a defence and

counterclaim, it appears to me from para. 37 of the judgment and the earlier recitals of the defence as averred to by the defendant

as recorded in paragraphs 32-36 of the High Court judgment that the counterclaim for which the defendant was contending in the

High Court was a counterclaim which would provide him with a defence to the plaintiff’s claim for a monetary judgment. The entire

thrust of the defendant’s contentions in the High Court was that the "Comprehensive agreement" did not permit the plaintiff to bring

proceedings or seek judgment against him. To put it another way in the High Court the intended counterclaim was to seek specific

performance of an agreement which included an agreement not to sue for a monetary sum and would have provided a defence to the

claim for a monetary judgment.

12. Whilst the trial judge did not expressly consider and reject the intended counterclaim as distinct from the defence as providing a

real or bona fide defence to the plaintiff’s claim for a monetary judgment nevertheless as it was, in the terms asserted in the High

Court, dependant entirely on it being arguable that the "Comprehensive agreement" precluded the plaintiff from obtaining judgment

against the defendant, it was not necessary for him to do so. It followed inexorably from his decision on the arguable defence being

advanced.

13. What does not appear to have been pursued in the High Court is what was identified on appeal as a distinct counterclaim which

would not provide a defence to judgment in the monetary amount claimed, but which would seek declarations and determine the

entitlement of the plaintiff to execute the judgment obtained against certain identified properties of the defendant and also the

plaintiff’s entitlement to petition for the adjudication of the defendant as a bankrupt.

14. To put it another way it does not appear that in the High Court a submission was made to the trial judge that even if he rejected

the real or bona fide defence (including by way of counterclaim) of the defendant to the plaintiff’s claim for the monetary judgment

and granted judgment that nevertheless he should permit the defendant to counterclaim in the summary proceedings for declaratory

or injunctive relief against the plaintiff in relation to the property against which it could enforce or execute the judgment obtained

(and possibly the issue of its entitlement to petition for bankruptcy) and in the meantime place a stay on the judgment. In the course

of submission on appeal Mr. McDowell S.C. on behalf of the defendant sought as an alternative to his principal appeal a variation of

the High Court order to permit this upon the basis that the trial judge had not adequately taken into account the counterclaim being

contended for.

15. The defendant in his submission to this Court referred to the helpful analysis of the position on an application for summary

judgment where a defendant asserts a cross claim by Clarke J. in the High Court in Moohan v. S. & R. Motors (Donegal) Limited [2008]

3 I.R. 650 at p. 656. That case concerned an application for summary judgment in respect of non-payment on a building construction

contract and a cross claim in respect of allegedly faulty workmanship. That cross claim required to be determined by arbitration. The

approach there set out by Clarke J. in a case involving a cross claim is:-

“(a) It is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff's claim.

In order for the asserted cross-claim to amount to a defence as such, it must arguably give rise to a set off in equity and

must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on

the basis of the defendant's case, it would not be inequitable to allow the asserted set off;

(b) if and to the extent that a prima facie case for such a set off arises, the defendant will be taken to have established

a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim

(or have same, in a case such as that with which I am concerned, referred to arbitration);

(c) if the cross-claim amounts to an independent claim, then judgment should be entered on the claim but the question of

whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to

the principles set out by Kingsmill Moore J. in Prendergast v. Biddle (Unreported, Supreme Court, 31st July, 1957).”

16. In the above Clarke J. was of course considering a cross claim for a monetary amount. On the facts of that case he considered

the cross claim to be an independent claim, entered judgment for the amount claimed and then in accordance with the approach in

the judgment of Kingsmill Moore J. in Prendergast v. Biddle (Unreported, Supreme Court, 31st July, 1957), considered whether there

should be a stay on the plaintiff’s judgment pending determination of the claim to be arbitrated. On the particular facts he placed a

stay on the execution of any sum in excess of €100,000 until the determination of arbitration in respect of the claims made by the

defendant relating to defective construction or further order. He gave liberty to apply.

17. The potential counterclaim identified on this appeal is an independent cross claim and one which could not give rise to a set off

against the sum claimed. A High Court judge hearing an application for summary judgment under O. 37 of the Rules of the Superior

Courts, in my view, has jurisdiction to place a stay on part or all of a judgment or a stay on execution or enforcement against certain

identified property pending the determination of a cross claim which has been identified and which is permitted to be pursued in the

summary proceedings. Nevertheless, where it is an independent claim and could not give rise to a monetary judgment against the

plaintiff it would be an unusual application and would have to be carefully addressed and considered in relation to the specific facts in

order that a judge could properly determine in accordance with the established principles (including the considerations suggested by

Kingsmill Moore J. in the well known passage from Prendergast v. Biddle albeit in a context of a monetary counterclaim ) whether he or

she should exercise discretion in favour of granting any form of stay on a judgment to which it is considered the plaintiff is entitled

pending the determination of the independent cross claim. It would also probably be necessary for the judge to make an assessment

of the counterclaim or cross claim sought to be pursued in order to properly exercise his or her discretion.

18. Accordingly, whilst I am satisfied that the defendant did contend before the trial judge that he intended pursuing both a defence

and counterclaim, I am also satisfied that there was no distinct submission made that in the event, the trial judge concluded that

there was no real or bona fide defence to the plaintiff’s claim that the defendant should be permitted to pursue a counterclaim

seeking reliefs in relation to the entitlement of the plaintiff to execute the judgment against certain properties of the defendant,

pending which there should be a stay on all or part of the judgment or against execution of the judgment against specified properties.

Accordingly, the alleged failure of the trial judge to consider such a counterclaim or cross claim of the defendant is not a sustainable

ground for allowing the appeal against the judgment granted. In substance he had addressed the counterclaim asserted in the High

Court in considering the intended defence.

19. The remaining question is whether this Court should exercise its jurisdiction, which it is accepted it has, on appeal in the interests

of justice, to vary the High Court order so as to permit the pursuit of a counterclaim or cross claim in the summary proceedings and

place a stay on some or all of the judgment or on execution against certain properties pending the pursuit of the counterclaim. The

issue by the defendant of the separate plenary proceedings on the 12th June, 2014, i.e. after the High Court hearing, but before

judgment was granted, seeking inter alia, reliefs which potentially might form part of the counterclaim now contended for and the

subsequent application in these proceedings for a stay on the judgment pending the determination of the separate plenary

proceedings are relevant.

20. The separate plenary proceedings appear to have included claims which go beyond claims relating to the non enforcement against

properties identified in the McCabe letter. As appears from the trial judge’s second judgment of the 31st July, 2014, (which is not the

subject of an appeal) certain of those claims included matters which required leave of the court for issue pursuant to s. 182 of the

National Asset Management Agency Act 2009. Whilst much of that claim was struck out as no leave had been obtained pursuant to s.

182 of the 2009 Act , nevertheless the trial judge did consider and conclude that he should not grant a stay on the enforcement or

execution of the summary judgment pending the determination of those proceedings. Whilst I recognise he did so by application of

principles which might be considered different at least in part to those which a court might apply if the application was for a stay in

the summary judgment proceedings pending the determination of a counterclaim or cross claim, nevertheless that stay having been

applied for and having been refused and there being no appeal against that, it does not appear to me appropriate that the Court of

Appeal would now embark upon a consideration as to whether or not the defendant should be given leave to counterclaim in the

summary judgment proceedings and a stay imposed on enforcement or execution of that judgment pending the determination of the

counterclaim. Further as I have already pointed out it would be an unusual application and require both to be carefully grounded and

considered and should be done first in the High Court. The matter is further complicated by s. 182 of the NAMA Act 2009, as it is

agreed that one of the properties which is the subject matter of the McCabe letter is a Bank Asset within the meaning of that Act

and accordingly any counterclaim in the summary judgment proceedings would require leave of the court. Section 182(8) only applies

to a counterclaim brought in proceedings in rem. The summary judgment proceedings are not proceedings in rem, they are personal

proceedings only against the defendant.

21. Finally, I do not consider that there is any injustice to the defendant in his not being permitted to counterclaim in the summary

judgment proceedings for reliefs which would restrain the enforcement of the judgment granted against the assets identified as being

the subject of non enforcement in accordance with the McCabe letter. The Court was informed that judgment mortgages have been

registered against certain properties. However, no realisation of a judgment mortgage can be achieved without a further application

to the court. That will be a proceeding in rem against the relevant property and s. 182(8) of the NAMA Act 2009, expressly permits a

counterclaim in those proceedings without leave of the court under that Act. Hence the defendant will be entitled to have his claim

that NAMA or the plaintiff is precluded from enforcing his acknowledged debt to it against the identified properties determined by a

court before any enforcement by a realisation of the asset can take place. Similarly any attempt by NAMA to petition for the

defendant’s bankruptcy will be the subject of proceedings before a court in which the issue may be determined.

Relief

22. For the above reasons I propose that the appeal of the defendant be dismissed.