The Leopardstown Club Ltd (plaintiff) v Templeville Developments Ltd and Phillip Smyth (defendants)
Practice and procedure - Appeal from master's order granting summary judgement for arrears of rent - Defendants accepting calculation and entitlement of plaintiff to rent due - Defendants asserting defences by way of set off and counterclaim - Whether defences exist for a tenant who contracts to pay rent without set off of any kind - Rules applicable in situation where no defence but there is a counterclaim
In the High court (before Mr Justice O'Sullivan) judgment delivered on May 4th, 2006.
The mere assertion of claims is not of itself sufficient to ward off summary judgment. Final judgment should be exercised on an application for summary judgment with caution and only when the court is satisfied to rule out a fair or reasonable probability of the defence having real or bona fide defence.
The High Court so held in setting aside the order of the Master of the High Court granting summary judgment to the plaintiff for arrears of rent, interest and costs; and substituting therefore an order giving the defendants leave to defend the proceedings and adjourning the case for plenary hearing.
John Gordon SC with him Brian Farren BL for the plaintiff; Michael Cush SC with him Peggy O'Rourke BL for the defendants
Mr Justice O'Sullivan stated that this was an appeal by the first and second defendants as tenant and part guarantor of rent due to the plaintiff under a lease dated June 5th, 1998, against a summary judgment for arrears of rent, interest and costs by the Master of the High Court. When the matter came before the Master there were no replying affidavits as the defendants were out of time for that purpose. In the appeal which was a rehearing before Mr. Justice O'Sullivan there were extensive replying affidavits and responses thereto. The defendants accepted the calculation and prima facie entitlement of the plaintiff to the rents. The defendants however referred to a number of complex ongoing disputes arising out of their occupation of a significant portion of the plaintiff's property at Leopardstown, Co. Dublin. The defendants accordingly asserted defences of set off and also a counterclaim. They sought to have the plaintiff's claim remitted for plenary hearing.
The background to the case was then set out. The plaintiff owns and operates a racecourse over a large tract of land at Leopardstown, Co. Dublin. By lease of June 5th, 1998, the first defendant occupied part of these lands upon which are constructed, inter alia, a large and complex sports facility, several outdoor tennis courts and indoor tennis courts underneath two air filled domes and ancillary buildings. The first defendant also enjoys, in common with the plaintiff, the right to have their patrons park their cars in two identified car parks at all times and on "race days" (somewhere between twenty and thirty days per annum) on further car parks designated by the defendant and on non-race days on the residue of a parcel of land referred to in these proceedings as "the yellow hatched lands". These lands lie between the buildings referred to and the south eastern motorway. The first defendant's entitlement to occupy the yellow hatched lands was made subject to part occupation thereof of the south eastern motorway and the arrangements made between the parties on 5 June 1998 anticipated the provision by the plaintiff of a "new site" to be provided by the plaintiff in replacement of any of the first defendant's entitlements under the said lease which would be affected by the motorway. Because in June 1998 the anticipated CPO had not been served, the parties were unable at that time to identify particular areas which would be affected by it. Accordingly the arrangements then were temporary in nature. It was generally intended that suitable alternative facilities would be granted to the first defendant to replace those lost to the CPO.
Mr Justice O'Sullivan then stated that events had moved on. The CPO had been served and the road had been built. Mr. Justice O'Sullivan noted that there were injunction proceedings which were dealt with by him on December 10th, 2003, when he granted the first defendant (as plaintiff in those proceedings) an injunction restraining the building of a ramp intended for construction in connection with the then proposed motorway, portion of which trespassed onto lands over which the first defendant had rights. The injunction was granted in the context of a then anticipated imminent arbitration dealing with a number of disputes. It proved impossible, subsequent to the granting of the injunction, for the parties to agree the questions to be referred to arbitration. As a result of the delay the injunction was ultimately discharged by Murphy J. on July 30th, 2004, the ramp had subsequently been completed. These difficulties and delays continued. Mr. Justice O'Sullivan stated that on the same day as this judgment, he gave a separate judgment ruling on the issues relating to the arbitrator's jurisdiction. Mr. Justice O'Sullivan stated that the background as set out above was relevant in the instant context, however, because the claims (and losses) which had been referred to arbitration were relied upon by the first defendant by way of defence to the plaintiff's claim for rent.
Mr Justice O'Sullivan noted that the defendant's claim was set out in a fifty four paragraph affidavit of the second defendant, a director of the first. This elicited an extensive response and further replying affidavits were sworn in due course before the matter came on for hearing. The hearing took substantial parts of two days devoted to legal submissions and there were voluminous exhibits to the affidavits with these being read in the main outside of the hearing by learned judge by arrangement with the parties. The first defendant claimed that construction vehicles trespassed onto its area for two days in January 2002 and that there was a loss of thirty one car park spaces obliterated by the construction of a ramp, portion of which trespassed on the defendant's portion of the yellow hatched area (after allowing for the CPO "take"). The first defendant claimed damage to an airlock at the corner of one of the two domes covering indoor tennis courts, and further damage to the sub-floor and foundations supporting this dome by the team engaged in constructing the ramp. There was a further claim complaining that portion of the land occupied by this dome was wrongly conveyed by the plaintiff to the acquiring road authority. Another complaint related to the inadequacy of the "new site" offered by the plaintiff to replace the facilities lost because of the CPO. The first defendant contended that an area of parking amounting to 5.5 acres should have been included in the new site but was not. This because an equivalent area was taken for the new road. This issue had been referred to arbitration. There were claims by the parties alleging the other's delay in progressing the arbitration but these were not particularly relied upon in Court. Mr. Justice O'Sullivan stated that the first defendant relied upon the background that, with its cooperation, the plaintiff made a compensation claim to the road acquiring authority which yielded "almost €30 million" - the cooperation being a waiver by the defendant of its own claim for compensation in favour of merging it with the plaintiffs.
Mr Justice O'Sullivan stated that in response to these complaints the plaintiff's second affidavit (the first being in support of the claim for summary judgment for rent and interest) pointed out that the first defendant had been in continued occupation of the premises demised to it under lease and despite this the plaintiff did not receive rent for three years. The defendant had continued to operate its sports and fitness business and no liquidated sum was due to it. All of the disputes were hotly contested and the relationship between the parties had reached a very low ebb. The vast bulk of the issues had been referred to arbitration. A background of non-co-operation by the first defendant was set out including an allegation that the first defendant initially delayed referring the issues to arbitration and having agreed, subsequently had failed to service an amended statement of claim in relation to the balance of the issues before the court. Criticism was made of the defendant's conduct in relation to the injunction proceedings relating to the ramp. Reference was made to a rent review arbitration and service charge arbitration which result in the defendant not having to pay any increased rent or service charges until these were concluded. The plaintiff contested the claims in a subsequent affidavit and the second defendant continued engagement in regard to a number of matters. These included that the defendant would be entitled to compensation "which amount would be well in excess of the arrears of rent allegedly due". A response from the plaintiff noted that all the second defendant had was a claim of belief as to the first defendant's entitlement to compensation - significantly the second defendant had omitted to provide any evidence whatsoever of any claimed loss whatsoever. It was accepted by both counsel that this was a throwing down of the gauntlet to the second defendant to quantify the claim and he did so in a replying third affidavit. Essentially, the second defendant claimed that as a result of the repeated "egregious" conduct of the plaintiff towards the first defendant, the first defendant had sustained considerable financial loss and expense which would form part of its claim/counterclaim for damages. The second defendant attributed a loss of circa €700,000 since January 2002 to the complained of actions of the plaintiff and he said that the claim for damages is substantial and may exceed any claim for arrears.
In his submissions counsel for the plaintiff submitted that none of the defences were available to the defendant because the covenant in the lease provided for payment of rent "clear of all deductions". This precluded a defence of either legal or equitable set off or a defence based on an equitable right to set off unliquidated claims, assuming, which was not admitted, that the latter two defences exist in Irish law. Accordingly, these defences were unavailable because the defendant as tenant had contracted to pay the rent without set-off of any kind. Counsel submitted that if this point was correct this was the end of the matter and judgement should be marked. If this was not correct then under S. 48 of Deasy's Act as interpreted in Irish law, a tenant may avail himself only of a set-off in relation to a liquidated amount. Further counsel submitted that, in relation to the question whether an equitable right of set-off in common law survives s. 48 of Deasy's act there is no Irish case since the foundation of the State which allows such a right. Finally, it was submitted that it is only if all of these arguments fail that the court would proceed to apply the usual rules applicable to defences raised in summary judgment applications as set out, for example, by the Supreme Court in the judgments in Aer Riannto Cpt v Ryanair Limited 4 I.R. 607. Counsel relied also on a judgment of Murphy J. in First National Commercial Bank Pic. v. Anglin 1 I.R. 75 quoting the principle laid down in Banque De Paris v. DeNaray 1 Lloyd's Rep. 21, saying "The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the court had to look at the whole situation to see whether the defendant had satisfied the court that there was a fair or reasonable probability of the defendants having a real or bonafide defence." Counsel submitted that there was not a bonafide defence in the present case having regard to his earlier recited observations in relation to the facts. He also relied in particular on the last of the (xii) principles referred to by McKechnie J. in Harrisrange at pg. 8 to the effect that the overriding determinative factor, bearing in mind the constitutional basis of a person's right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be. The principles enunciated by Barrington J. in Agra Trading Ltd v. The Minister for Agriculture (Unreported May 19th, 1983) should apply were the court to conclude that there was no defence but that there was a counterclaim. He submitted that under these principles the particular reference to the apparent strength of the counterclaim and the answer suggested to it, the conduct of the parties and the promptitude with which they had asserted their claims, the nature of their claims and also the financial position of the parties and bearing in mind that the claim for rent was admitted subject only to the existence of the defences and counterclaim, the plaintiff should be entitled to mark judgment for rent and interest.
Counsel for the defendants responded that if the court was satisfied that a defence had been raised then the ordinary summary judgment principles should apply as, for example, enunciated by the Supreme Court in Aer Rianta Cpt. v. Ryanair Ltd. Alternatively if such defence was not available but that a counterclaim existed then the court should apply the principles set out in Agra Trading Limited.. With regard to the raising of defences in response to the plaintiff's counsel that the rent was to be paid by agreement without any deductions (and therefore without any reference to set-off or counterclaim) the comment in Wylie at para. 12.09, to the effect that there was a distinction between a right of set-off and a right of deduction did not in fact support this argument. There was at least an arguable case that a defence existed which invoked an equitable right to set-off the un-liquidated claims of the tenant against the claims for rent. Counsel submitted that in order to defeat such an argument the plaintiff would have to show two things, namely that the deduction or set-off referred to in s. 48 of Deasy's Act was confined to liquidated claims (a proposition admittedly supported by two Irish decisions of the High Court dealing with appeals from the Circuit) but also that no independent right of equitable set-off exists in Ireland, or, in other words, that without saying so s. 48 of Deasy's Act abolished such an independent right of set-off. Counsel stated that this precise point had never been raised in this jurisdiction before. If the court were simply to accede to it on this summary application, it would, inter alia, be ignoring the analysis advanced by Professor Dowling in the article referred to at pg. 275 where he suggested after such an analysis that it would be very unlikely that a court would hold that such equitable right of set-off had been abolished by s. 48. The learned author continued that, accordingly, there existed in favour of a tenant both a legal right of set-off under Deasy's Act and an equitable right of set-off where the circumstances were such that the tenant's claim impeached the title to the plaintiffs demand. The latter concept appeared to be a reference to a close connection between the claims of the defendant as tenant and the plaintiffs demand as landlord. Counsel then submitted that there were some substantial and indeed untried points of law not suitable for determination on an application for summary judgment. The matter should be referred for plenary hearing notwithstanding the criticism of the plaintiff having regard to the existence of substantial claims. An incidental advantage of plenary hearing would be that the plaintiff could claim for all rent as distinct from being confined to rent due only at the time of the initiation of the summary summons.
Mr Justice O'Sullivan in his decision referred to the Aer Rianta case where Mr. Justice Hardiman's view was that "The fundamental questions to be posed on an application such as this remain: is it 'very clear' that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant's affidavits fail to disclose even an arguable defence?" This in his view was the general principle as distinct from cases where credibility arises starkly for example where defence affidavits were mutually contradictory or flatly contradicted by a private detective or indisputable documentation. Mrs. Justice McGuiness concluded when remitting the proceedings for plenary hearing in the same case that the probability remained open on the affidavit evidence then before the court that the defendant had a real or bonafide defence, or that what was put forward by him was credible. According to her the matters which were so acutely at issue between the parties required to be resolved in a full hearing.
Mr Justice O'Sullivan stated he had considered not only the claims raised by the defendant but also the rejection of them in the plaintiff's affidavits and the criticism of these claims by counsel for the plaintiff. Could he be satisfied, as a result, that he could exclude a fair or reasonable probability of the defendant having a real or bona fide defence, to use the language of McGuiness J. in Ryanair Cpt. at pg. 617? Alternatively was this a case, to use the language of Hardiman J. in the same case at pg. 605 where the length, complexity and subtlety of the competing arguments, factual and legal, on affidavit and in court, recalling the observations of O'Brien C.J. and his colleague in Crawford v. Gillmor L.R. Ir. 238, to the effect that the case has been so long at argument -and he did not think that it had been argued at unnecessary length - showed that it was not a case for final judgment upon an interlocutory motion because judgment should not be given on a motion for final judgment in any case where any serious conflict as to matter of fact or any real difficulty as to matter of law arises. Mr. Justice O'Sullivan stated that it was noteworthy that Hardiman J. referred not only to length, complexity and subtlety of competing arguments of fact but also of law. Mr. Justice O'Sullivan was of the opinion that with one qualification he thought the foregoing applied to the instant case and therefore, concluded that this was not a case appropriate for summary judgment. The one qualification was that none of the authorities referred to or indeed advanced in argument appeared to deal directly with the situation which arose in the instant case where claims which were allegedly exaggerated and contingent on the outcome of arbitration were made by the defending tenant. Mr. Justice O'Sullivan noted references in the authorities to the fact that the mere assertion of claims was not of itself sufficient to ward off summary judgment. Mr Justice O'Sullivan was of the opinion that it could not it be the law that the mere multiplication of paperwork and reiteration of argument and grievance could of itself protect a tenant from a landlord's right to summary judgment for rent. Mr. Justice O'Sullivan stated that if that were all that were contained in the defendant's lengthy affidavits and exhibits he would be justified in making an order for summary judgment. However there was more than that in the material advanced by the defendant. Mr. Justice O'Sullivan stated that the claims sounded in general damages and were indeed in part contingent on the outcome of an arbitration. Mr. Justice O'Sullivan was of the opinion that the linkage between the complaints and the claimed losses was less than compelling.
Mr Justice O'Sullivan stated that on the authorities final judgment should be exercised on an application such as the instant one only with caution and only when the court was satisfied to rule out a fair or reasonable probability of the defence having a real or bonafide defence. He was not so satisfied. He concluded that on the contrary to use the wording of Hardiman J. in Aer Rianta it was not very clear to him that the defendant had no case. The issues were not "simple and capable of being easily determined." Mr. Justice O'Sullivan was concerned at the lack of material quantification of the defendants' claims and, in that regard, discussed with counsel the question of terms pending final hearing.
Mr Justice O'Sullivan made an order setting aside the order of the Master of 15 March 2005, and substituted an order giving the defendants leave to defend the proceedings. The matter was adjourned for plenary hearing.
Solicitors: Linda O'Shea Farren for the plaintiff (Dublin) ; P.C.L. Halpenny for the defendants (Dublin)
Ola Ladenegan, barrister