Joint Stock Company Togliattiazot v Eurotoaz Ltd

Factual and Procedural Background

The Plaintiff, a substantial undertaking operating in the Russian Federation and described as the world's largest producer of ammonia, brought proceedings against the Defendant, a limited liability company registered in Ireland. The dispute concerns the Defendant's alleged entitlement to a shareholding in the Plaintiff, with the Defendant claiming shares originally amounting to 10% of the Plaintiff’s shareholding, later diluted to 4.4%. The Defendant does not conduct business in Ireland or elsewhere and appears to have minimal assets beyond the claimed shares.

In October 2009, the Defendant sent letters in Russian to administrative entities in Russia asserting entitlement to shares and alleging fraudulent rejection by the Plaintiff. Subsequently, in May 2010, the Defendant initiated proceedings in Russia to establish its rights to the shares ("the Russian proceedings"). The Plaintiff commenced proceedings in Ireland in July 2010 ("the Irish proceedings"), claiming damages for defamation arising from the publication of the letters in Russia, as well as relief under Russian law and an injunction restraining further defamatory publications.

The Irish proceedings involved various interlocutory motions including a challenge to jurisdiction by the Defendant, which was struck out. The Plaintiff sought trial by judge alone, which was ordered by the High Court and appealed by the Defendant. The appeal was eventually struck out in November 2018 with costs awarded to the Plaintiff. Following this, the Plaintiff indicated an intention to discontinue the Irish proceedings, which the Defendant opposed, leading to the current application for leave to discontinue.

Parallel to this, the Russian proceedings saw several rulings, including a favorable decision for the Defendant in October 2010, subsequent appeals, and a final decision by the Russian Supreme Court in March 2016 determining that the Defendant has no current entitlement to be registered as owner of the shares. The Defendant disputes the effect of certain rulings and intends to reopen proceedings upon conclusion of related criminal complaints.

The current motion to discontinue is supported by an affidavit from the Plaintiff's solicitor, which contains hearsay evidence relating to decisions by the Plaintiff's chairman and board. The Defendant objects to the admissibility of this evidence. The Defendant's affidavit, sworn by one of its directors, disputes many assertions made by the Plaintiff's solicitor.

Legal Issues Presented

1. Whether the Plaintiff should be granted leave to discontinue the proceedings pursuant to Order 26, Rule 1 of the Rules of the Superior Courts.
2. The admissibility and weight of hearsay evidence in interlocutory applications for discontinuance.
3. The extent of the court's discretion in granting leave to discontinue, particularly where serious allegations have been made but the Defendant opposes discontinuance.
4. Whether discontinuance may be refused on grounds of abuse of process or to protect the Defendant’s interests.
5. The appropriate terms and undertakings to be imposed if leave to discontinue is granted.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff seeks leave to discontinue the proceedings under Order 26, Rule 1, relying on the discretion of the court to grant such leave.
• The Plaintiff's solicitor’s affidavit sets out reasons for discontinuance, including decisions by the Plaintiff’s board and chairman, although this evidence is hearsay.
• Hearsay evidence should be admissible in interlocutory applications, as per the rules and relevant case law.
• The Plaintiff proposes to discontinue without seeking enforcement of previous costs orders against the Defendant and offers undertakings not to pursue further proceedings arising from the same cause of action.

Defendant's Arguments

• The Defendant challenges the admissibility of the Plaintiff’s hearsay evidence, contending the application is final in nature and requires admissible evidence of reasons for discontinuance.
• The Defendant argues that serious allegations of defamation made by the Plaintiff entitle the Defendant to have the issues determined by trial rather than allowing discontinuance.
• The Defendant contends the proceedings are an abuse of process and that discontinuance should be refused to prevent injustice.
• The Defendant requests that the Plaintiff’s claim be dismissed on the merits rather than discontinued, to achieve finality and res judicata effect.
• The Defendant opposes discontinuance without costs and wishes the matter to proceed to trial.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Smyth v. Tunney [2009] I.R. 322	Order 26, Rule 1 forms a complete code on discontinuance; the court’s discretion to grant leave to discontinue and considerations of injustice to the defendant.	The court relied on this authority to outline the principles governing discontinuance with leave and the balancing of interests between parties.
Fox v. Star Newspaper Company [1898] 1 Q.B. 639; [1900] A.C. 19	Notice of discontinuance can be an abuse of process; discretion to refuse leave to discontinue to prevent injustice.	Referenced to explain the court’s inherent jurisdiction to prevent abuse of process in discontinuance applications.
Castanho v. Brown & Root (U.K.) Limited [1980] 1 WLR 833	Discretion of the court to grant leave to discontinue on terms, including repayment of interim payments; preventing escape from litigation by “side door”.	Used to illustrate the court’s power to impose terms and conditions on discontinuance to prevent unfairness.
Murray v. Minister for Education and Science [2017] IECA 216	Recognition of the court’s inherent jurisdiction to set aside notice of discontinuance; exercise of discretion in discontinuance applications.	Applied to affirm the court’s discretion and the circumstances in which discontinuance may be refused or set aside.
Cindy Royce Creations Inc. v. Campbell [1992] Lexis Cit. 3182	Refusal of leave to discontinue where serious allegations made require determination to avoid injustice.	Distinguished from the present case, illustrating circumstances where discontinuance may be refused at trial stage.
Re Walker Windsail Systems Limited [2006] 1 All E.R. 272	Leave to discontinue may be granted on terms including payment of costs; balancing interests when one party wishes to continue.	Referenced to show the court’s approach to discontinuance where costs and justice require protection of the opposing party.
Shell E&P Limited v. McGrath [2007] 4 I.R. 277	The court’s discretion in granting leave to discontinue and imposing terms; merits of the case not to be considered in discontinuance applications.	Used to emphasize that the court should not consider merits on discontinuance and to guide the exercise of discretion.
Sean Quinn Limited v. An Bord Pleanala [2001] 1 IR 505	Jurisdiction of the court to dismiss claims for abuse of process.	Noted in context of abuse of process but distinguished from discontinuance application here.
Lonhro plc v Fayed (No 5) [1993] 1 WLR 1489	Abuse of process principles; dismissal of claims improperly brought.	Referenced to demonstrate court’s power to dismiss claims for abuse of process, separate from discontinuance.
White v Spendlove [1942] 1 IR 224	Effect of dismissal as res judicata preventing re-litigation.	Considered in relation to the difference between dismissal and discontinuance and finality of proceedings.
F.&C. Reit Property Asset Management Plc v. Friends First Managed Pension Funds Limited [2017] IEHC 383	Admissibility of hearsay evidence in interlocutory applications; court’s discretion under Order 40, Rule 4.	Applied to assess the admissibility of hearsay evidence in the present interlocutory application and the limits of such evidence.

Court's Reasoning and Analysis

The court began by considering the statutory framework under Order 26, Rule 1, which governs discontinuance and requires leave of the court in this case. It recognized established jurisprudence that a plaintiff should generally be allowed to discontinue unless such discontinuance causes injustice to the defendant. The court acknowledged the Defendant’s objection based on the serious allegations made by the Plaintiff and the Defendant’s entitlement to have those allegations determined by trial. However, the court held that the mere existence of serious allegations does not confer a right on the Defendant to insist on trial once the Plaintiff wishes to discontinue.

The court examined the evidence supporting the Plaintiff’s reasons for discontinuance and found it to be largely hearsay, with no direct evidence from the Plaintiff’s officers. The court agreed with the Defendant’s submission that, even if the application is interlocutory, hearsay evidence should only be admitted in exceptional circumstances, which were not demonstrated here. Nonetheless, the court concluded that this evidential deficiency did not dispose of the application, as the Defendant’s arguments relied inconsistently on the same evidence.

The court reviewed relevant case law, emphasizing that the court’s discretion to grant leave to discontinue is broad and should be exercised to avoid compelling unwilling litigants to continue litigation absent injustice. It distinguished the present case from those where discontinuance was refused at trial stage due to serious allegations requiring determination. Here, the trial had not commenced, and the court found no injustice to the Defendant that would justify refusal of leave.

Regarding the Defendant’s contention that the proceedings are an abuse of process and discontinuance should be refused, the court clarified that abuse of process principles apply differently to notices of discontinuance served as of right, which is not the case here. The court noted that the Defendant has not sought dismissal on abuse of process grounds in a proper motion, and the court cannot consider merits on this application.

The court also considered the difference between dismissal and discontinuance, noting that dismissal would have res judicata effect, which is not available under Order 26, Rule 1. The court proposed to address this by requiring undertakings from the Plaintiff not to pursue further proceedings on the same cause of action.

Finally, the court concluded that the Plaintiff should pay the Defendant’s costs as a default principle, but the Plaintiff should not enforce prior costs orders already obtained. The court found no sufficient reason to depart from these principles.

Holding and Implications

The court GRANTED leave to discontinue the proceedings brought by the Plaintiff against the Defendant under Order 26, Rule 1 of the Rules of the Superior Courts.

The Plaintiff was required to provide undertakings not to enforce any previously obtained costs orders against the Defendant and not to initiate any further proceedings in the jurisdiction arising from the same cause of action. The Plaintiff was to bear the costs of the Defendant in the proceedings to date, consistent with the usual rule that the discontinuing party pays costs.

The decision directly affects the parties by permitting the Plaintiff to end the litigation without trial, subject to the court’s terms, but does not set new legal precedent. It reaffirms established principles that a plaintiff may discontinue absent demonstrated injustice to the defendant, and that hearsay evidence in interlocutory applications is admissible only in exceptional circumstances.