Challenges Faced when Seeking to Strike Out Potentially Unmeritorious Claims
15 Dec 2017
A recent Court of Appeal 1 judgment highlights the difficulties facing a defendant who seeks to have proceedings struck out which he/she considers to be unmeritorious.
The plaintiff and her former husband ("MH") were the joint owners of two properties; known as "Brooklawns" and "Rutland".
In 2002, the plaintiff and MH re-mortgaged Brooklawns and gave irrevocable written authority to the second defendant, their solicitor (the "Solicitor"), to register a first legal charge on the property in favour of the first defendant, Ulster Bank Ireland Limited (then, First Active) (the "Bank").
In 2004, the mortgage on Brooklawns was redeemed.
In 2008, the Solicitor, acting solely for MH (whose relationship with the plaintiff had, by that time, broken down), advised the Bank that the Brooklawns mortgage had been redeemed in error and that it had been intended to redeem the Rutland mortgage. The Solicitor asked the Bank to correct the error.
The Bank warned the Solicitor that the reactivation of the Brooklawns mortgage would leave his clients with a larger mortgage debt than that which they then owed, as well as substantial arrears (as no payments had been made since 2004). The Bank also insisted that the Solicitor register the first legal charge on Brooklawns in its favour, which he had not done in 2002. The Solicitor duly complied.
The Brooklawns arrears were not met and the Bank commenced possession proceedings against the Plaintiff and MH in 2013.
In March 2014, the plaintiff issued proceedings against the Bank and the Solicitor, alleging that the discharge of the Brooklawns loan account in 2004 had not been an error but a deliberate act arising from an agreement between her and MH that, upon their separation, she could have Brooklawns clear of debt. She further alleged that the Solicitor had acted without her consent when he reactivated the Brooklawns loan in 2008.
Application to Strike Out the Proceedings
The Solicitor applied to have the plaintiff's case struck out on the bases, first, that it disclosed no cause of action against him and, in the alternative, that it was bound to fail.
The High Court (Ms Justice Murphy) held that the plaintiff's claim was prima facie valid and dismissed the application.
Court of Appeal Decision
The Court of Appeal upheld the High Court decision and examined the requisite proofs for a defendant seeking to strike out what they perceive to be a hopeless case against them:
Failure to disclose a cause of action
Ms Justice Irvine noted that the Court must make its determination in respect of this ground solely by reference to the plaintiff's pleaded case and on the basis that any statement of fact contained therein is true and will be proved by the plaintiff in due course. When the Court does so, it must ignore any affidavit evidence that may have been filed. In other words: the Court must take the plaintiff's case at its absolute height.
Of the Amended Statement of Claim which had been served on behalf of the Plaintiff during the High Court hearing, the Court of Appeal observed that, while the claim was 'somewhat short on specifics' and would likely be 'hotly contested', it could not be said that it did not disclose a cause of action.
Case bound to fail
The Court observed that its inherent jurisdiction to strike out claims as bound to fail must be used sparingly and only in clear cases. Before it could strike out a claim as bound to fail, the Court said that it would have to be confident that, no matter what might arise from discovery or at trial, the claim could not succeed. In other words: the Court can only grant such an application where the applicant can establish that, even if it admits all of the facts pleaded, the action cannot succeed. Moreover: if an amendment to the proceedings would save the claim, then the application to strike out should not succeed.
The Court did note, however, that it can review documents outside of the pleadings, where such documents govern the legal rights and obligations of the parties, in order to determine whether the plaintiff's claim is bound to fail. Even, in that scenario, however, Irvine J cautioned that the Court must still explore whether there is nonetheless a risk that, outside of that documentary record, there could realistically be evidence that which might bear upon the rights and obligations identified in the documents.
In this case, the Court found that the application could only have succeeded had the High Court rejected the plaintiff's evidence that the Brooklawns loan was discharged by agreement between her and MH. In the Court of Appeal's view, there was nothing before it to contest the existence of that agreement, save for a bald assertion to the contrary. In particular, there was no affidavit from MH to suggest otherwise.
The Court of Appeal concluded, therefore, that the High Court could not have decided that no evidence would emerge to support the plaintiff's pleas as to the agreement reached with her husband.
An important factor underlying the Court's decision was the fact that the Solicitor had reactivatied the Brooklawns mortgage in 2008 on the authority of MH only and without the consent of the plaintiff, in circumstances where the agreement was clearly advantageous to MH. The Court noted that it was not unstateable that the Solicitor was under a legal obligation to advise the plaintiff as to the agreement which the Solicitor proposed to reach with the Bank when he knew, or must have known, that this had serious implications for the plaintiff.
The decision of the Court of Appeal makes it clear that:
- In applications to strike out proceedings as disclosing no cause of action, the Court is confined to the four corners of the plaintiff's pleaded case and must assume that every pleaded fact will be proved in due course;
- In applications to strike out proceedings as bound to fail, the Court must similarly take the plaintiff's case at its height and can only strike it out where the action cannot succeed even if the defendant were to admit to every fact pleaded; and
- Even where documentary evidence supports the striking out of the proceedings as bound to fail, the Court must assess whether or not there might be evidence in existence not then before it which would bear upon the rights of the parties, and, additionally, whether or not an amendment to the claim might save the proceedings.
As a result, the hurdles facing a defendant seeking to cut short a case that they consider doomed to fail are very high. The judicial reluctance to exercise this discretion is readily apparent from this judgment, and applications for strike out will only succeed in rare circumstances.
 Hosey v Ulster Bank Ireland Limited & Brendan Weldon practising under the style and title of Brendan Weldon and Company  IECA 257
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