The Governor & Company of the Bank Of Ireland v Conway

Factual and Procedural Background

This interlocutory appeal arises from a long-running commercial dispute, now approximately 14 years old, involving the Appellant, Company A (a bank), and the Respondent, an individual who was a director and sole shareholder of a commercial entity ("the debtor"). Company A initiated proceedings based on a deed of guarantee and indemnity dated 5 November 2008, under which the Respondent purportedly guaranteed payment of sums owed by the debtor to Company A, capped at £200,000. Company A claims approximately £128,000 plus interest under this guarantee.

The Respondent served an amended defence and counterclaim in March 2014, which included denials of the guarantee's validity and allegations of unlawful, negligent, and fraudulent conduct by Company A in relation to debt recovery and the enforcement of the guarantee. The counterclaim sought just under £3 million.

Company A applied to strike out substantial parts of the defence and counterclaim before the Queen's Bench Master, who granted the strike out in full. The Respondent successfully appealed this order to the High Court, which reinstated most of the struck-out elements. Company A then sought leave to appeal to this Court of Appeal.

The procedural history includes a specific discovery summons by the Respondent and multiple hearings before the Master and High Court judges, culminating in this appeal.

Legal Issues Presented

1. Whether the strike out order made by the Queen's Bench Master, which struck out various paragraphs of the Respondent's defence and counterclaim on grounds of no reasonable defence and abuse of process, was correct.
2. Whether the High Court was correct to reinstate the struck-out portions of the defence and counterclaim on appeal.
3. Whether the Respondent's pleadings disclose a reasonable defence or counterclaim, particularly in respect of allegations of negligence, breach of fiduciary duty, unlawful and fraudulent conduct, estoppel, and discharge of the guarantee.
4. The extent to which the court should consider evidential matters and factual strength at the interlocutory strike out stage.

Arguments of the Parties

Appellant's Arguments

• The strike out application was appropriate because the Respondent's pleading disclosed no reasonable defence and was scandalous, frivolous, vexatious, and an abuse of process.
• The High Court erred in reinstating paragraphs which were "obviously and almost incontestably bad," particularly sub-paragraph 4(a) concerning lack of independent legal advice.
• The Respondent's attempt to "re-cast" a plea not originally made was improper.
• The pleading failed to establish a fiduciary relationship or economic duress as a matter of law.
• The appeal to this court should demonstrate a mistake of law or disregard of principle by the High Court judge.

Respondent's Arguments

• The pleadings, taken at their highest, disclose arguable causes of action and defences that could succeed upon evidence at trial.
• The strike out application was opportunistic and followed closely on the Respondent's application for specific discovery.
• The Respondent's evidence at trial may establish breaches of contract, fiduciary duties, and unlawful conduct by Company A, including editing account histories and making false insurance claims.
• Paragraph 4(a) regarding the lack of independent legal advice is properly pleaded and supported by established principles from Royal Bank of Scotland v Etridge (No 2).
• The High Court correctly exercised its powers to allow amendment and recast of the defence.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court of Appeal emphasized that at the interlocutory strike out stage, the pleadings must be taken at their highest and all factual allegations assumed true. No evidence is admitted, and strike out is reserved for plain and obvious cases where the pleading discloses no reasonable cause of action or defence.

The Court observed that the High Court judge correctly distinguished between mere allegations and evidence to be presented at trial, properly refraining from making findings of fact at this stage. The judge also correctly applied established principles, including the need for caution in developing areas of law and the importance of considering all pleaded facts in context.

The Court found no error in the High Court's decision to reinstate the majority of the struck-out paragraphs, including the key allegation that the Respondent entered into the guarantee without independent legal advice, which was supported by relevant authority emphasizing that the effect of such advice is a question of fact for trial.

The Court also noted the Respondent's allegations of unlawful and fraudulent conduct by Company A, which, if proven, might estop enforcement of the guarantee or vitiate it. These allegations were sufficiently pleaded to survive strike out.

The Court rejected Company A's submission that the High Court erred in allowing a "re-cast" of certain pleas, finding that the judge properly exercised his power to permit amendment in the interests of justice.

The Court cautioned against the admission of affidavit evidence in strike out applications and emphasized the need to avoid circumventing the prohibition on evidence through pleading devices.

Overall, the Court concluded that Company A failed to demonstrate any material error in the High Court's judgment or that the pleadings were incurably defective.

Holding and Implications

DISMISSED

The Court upheld the High Court's order reinstating the majority of the Respondent's defence and counterclaim paragraphs previously struck out by the Master. The appeal by Company A was dismissed with costs awarded to the Respondent. The Court granted leave to the Respondent to serve a composite amended defence and counterclaim within 28 days to address potential further amendments.

The decision directly affects the parties by allowing the Respondent's pleaded defences and counterclaims to proceed to trial. No new legal precedent was established; rather, the Court applied well-established principles governing interlocutory strike out applications and the proper approach to pleadings and amendment.