Limited Availability of Preliminary Issue Trial Confirmed

The limited circumstances in which the trial of a preliminary legal issue will be ordered by the Irish courts has been confirmed by a recent decision of the High Court. Our Commercial Disputes team examines the decision.

The trial of a preliminary issue is where a specific legal or factual question is decided by a court before the main trial proceeds. It is usually something that is likely to determine whether the case needs to go forward to a full trial at all, or at the very least would significantly narrow the scope of the trial. For legal issues, these tend to be stand-alone matters – such as questions of jurisdiction, standing (locus standi), whether the claim is statute-barred or possibly a central point of contractual interpretation - which are decided in the context of agreed or established facts. Trials of preliminary issues of fact are much rarer and involve parties agreeing to have specific factual issues decided without formal pleadings. The relevant case here, and therefore this article, addresses the application of the law regarding trials of preliminary issues of law.

The trial of a point of law as a preliminary issue is something which is provided for in two of the Irish Rules of the Superior Courts. The mechanism permits a court to determine a legal issue as a preliminary matter, without the need to conduct a full trial.[1] Although it potentially represents a time and cost-effective way to resolve legal points without the need for a full trial, the case law demonstrates that the courts are slow to allow trials of preliminary issues. The issue must truly present a legal question with no dispute about the facts. In addition, the court must be satisfied that allowing the application would result in real savings by dealing with all or a substantial portion of the main action. In a recent case before the High Court, an application to have two proposed preliminary issues determined was rejected.[2] In refusing the application, Ms Justice Bolger usefully recited the law and explained why it did not support the applicants in the case before her.

Background

The case was brought by the plaintiff, a property company, which had borrowed from Bank of Scotland Ireland (BOSI) between 2003 and 2008. When the borrowers took out a further loan in 2008, one of the conditions was that they had to hedge half of the debt. To do this, they bought a three-year interest rate swap, a type of derivative financial product sold by the first defendant. The UK’s Financial Services Authority launched a redress scheme regarding the mis-selling of derivatives in 2012. In September of that year, the second defendant advised the plaintiff it might potentially qualify for the scheme. However, in November 2012 the plaintiff was told that it did not qualify because BOSI was subject to regulation by the Irish financial regulator. The subsequent letter said nothing about the criteria for inclusion within the UK review scheme, or any other reasons for the plaintiff’s exclusion. Shortly afterwards, the sale of the plaintiff’s loans to a fund placed it into receivership. The plaintiff’s proceedings, brought in 2018, related to the derivative product – seeking relief for:

• Breach of contract and negligence regarding the sale
• Breach of a duty of care regarding the acquired product, and
• Negligent misstatement/misrepresentations in the November letter, including the loss of the opportunity to bring a mis-selling claim.

A preliminary objection was raised that the claim was statute-barred and the defendants also pleaded that the product would have been out of scope of the review because the plaintiff did not meet the specified criteria. The plaintiffs disputed those pleas.

The defendants then sought the trial of two preliminary issues:

1. Whether the claim was statute barred, and
2. Whether the plaintiff met the criteria which would have meant it was ineligible for the review

Consideration

Ms Justice Bolger began by noting that, although the parties broadly agreed on the applicable legal principles, they had different views on the application to the facts of the case. As a general principle, the “default position” or “starting point” is a unitary trial.[3] For a trial of a preliminary issue to proceed, “there cannot exist any dispute about the material facts” - although they can be accepted for the purpose of the application. Similarly, before a preliminary issue trial can move forward

“there must exist a question of law which is discrete and which can be distilled from the factual matrix as presented.”

A further key consideration will be whether the preliminary issue(s) will be determined in the substantive proceedings. The determination must involve “questions of pure law where no evidence is needed and no further information is required.”[4] However, where a plea involves mixed questions of fact and law, and the issues of law cannot be determined as discrete stand-alone issues of law on the basis of assumed facts, an application may be refused.[5] Limitation issues have been recognised as one area where the trial of a preliminary issue may “dispose of the entire action or otherwise be likely to lead to a substantial saving in time and cost.”[6] However, even then, where a determination of facts is required, eg fraud, it may not be suitable for determination as a preliminary issue. Even where facts are agreed, the court must be satisfied that they “provide an adequate evidential basis for a just determination of the…. issue.”[7]

Applying the legal principles to the case here, Ms Justice Bolger noted that certain facts pleaded were admitted. However, the defendants did not accept the particulars of breach of contract, negligence, breach of duty and misrepresentation, nor was the asserted right to bring a mis-selling claim accepted. She noted that an experienced English KC had provided a lengthy expert affidavit as to English law on behalf of the defendants. That KC was of the view that an English court would resolve both preliminary issues in favour of the defendants. However, Ms Justice Bolger expressed concern that the level of detail in the affidavit confirmed the issues were

“complex and far from being straightforward”.

That expert affidavit also did not fully address the limitation defence since it did not take account of the plaintiff’s stated intention to amend its case to rely on section 71 of the Statute of Limitations Act 1957 and allege fraudulent concealment. That additionally created a dispute about the facts which meant that the proposed issue was not suitable to be decided as a preliminary issue.

Ms Justice Bolger cited well-known case law to the effect that “foreign law is treated as a matter of fact to be established, in the Irish courts, in the ordinary way by sworn evidence of fact.”[8] She was invited to proceed on the basis that, since the plaintiff had not filed an expert affidavit on English law, there was no factual dispute. Ultimately, however, Ms Justice Bolger was not comfortable in taking that approach. It was clear that the plaintiff did not agree with the defendants’ expert and the factual matrix underpinning the legal questions was not agreed. Expert evidence and possible cross-examination would be required on both sides. The judge was also of the view that both questions involved mixed questions of fact and law, not just discrete questions of law.

Finally, she also decided that, even if the two questions did proceed as preliminary issues, they would not determine all issues in the case. Specifically, pleas based on the letter from November 2012 regarding misrepresentation and misstatements, and the loss of opportunity to pursue a mis-selling claim, would not necessarily be extinguished by a successful limitation defence. Accordingly, for a number of reasons, the application was refused.

Comment

The decision is a useful restatement of the law relating to when the trial of a preliminary issue of law will be directed by an Irish court. The legal issue must be capable of being determined on undisputed facts, or at least on facts agreed for the purpose of the application. If the issue involves mixed questions of fact and law, it will not be suitable. It is also worth bearing mind that foreign law is treated and determined as a matter of fact before the Irish courts. Finally, the issue must be capable of resolving a substantial part, if not all, of the matters before the court. If a – nearly or substantially - full trial will still be required, then any cost or time savings from the preliminary issue being tried separately will not justify not holding a unitary trial to decide all issues. Trials of preliminary issues of law are rare creatures in Irish litigation. A decision to pursue an application for a preliminary issue trial should not be taken lightly, not least because of the risk of an adverse costs award. However, in appropriate cases it can be a useful strategic tool and, where permitted, can result in significant savings in time and costs.

For more information and expert advice on commercial disputes, contact a member of our Commercial Disputes team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Order 25, Rule 1 of the Rules of the Superior Courts provides that either party may apply for a point of law to be determined before the trial of the action, while Order 34, Rule 2 provides that if it appears to the court that a question of law would be convenient to determine before evidence is given it may make directions to that end. The courts have recognised that these rules “cover the same ground” – McDonald v. Bord na gCon [1964] IR 350.

[2] Vico Properties Ltd v Bank of Scotland plc & Lloyds Bank plc [2025] IEHC401

[3] Campion v South Tipperary Co Co [2015] 1 IR 716

[4] Per O’Higgins CJ in Tara Exploration and Development Company v Minister for Industry and Commerce [1975] IR 242.

[5] Dempsey v Minister for Education & Science [2006] IEHC 183

[6] Elliott v ACC Bank [2020] IECA 278.

[7] Smith v Cunningham [2021] IECA 268

[8] Per Clarke C.J. in Walsh v National Irish Bank [2013] IESC 2