A firm of insurance brokers is entitled to damages against a Cork-based firm of solicitors over negligent handling of litigation, the Court of Appeal has ruled. The amount of damages will be decided later by the High Court.

Coakley Moloney Solicitors, South Mall, Cork, had denied negligence.

Emerald Isle Assurances and Investments Limited, with registered offices at Togher, Cork, and its two directors, Timothy Maverley and James Morey, who each hold a 50 per cent shareholding of the company, sued over the solicitors’ handling of a legal action brought by Emerald over termination of its contract with Hibernian Life Ltd.

In that action, Emerald alleged the late 1994 termination was unlawful, ruined Emerald’s business and caused the loss of 80 jobs. It brought proceedings against Hibernian seeking damages and other reliefs and the case ultimately settled in 2010 for €300,000 including costs.

In its action against the solicitors, Emerald alleged the case against Hibernian settled at an undervalue due to negligence by the law firm.

While dismissing the claim of negligence in a 2012 judgment, the then President of the High Court, Mr Justice Nicholas Kearns, said both sides had “a culpability”.

He found Sylvester Duane of the law firm gave various warnings between 2003 and 2006 which were not appropriately heeded by the Emerald side, including a risk an application would be brought to have the proceedings halted for want of prosecution.

While satisfied no elaborate warning was given and there was a breach of duty concerning the advice given insofar as Mr Duane was concerned, Mr Justice Kearns also found a more elaborate warning would not have brought about any other result.

Giving the three judge appeal court’s judgment granting Emerald’s appeal against that 2012 decision, the president of the court, Mr Justice Sean Ryan said it was clear from late 2003 there was a major disagreement between Emerald and a forensic accountant, Des Peelo, about the value of the Emerald claim. Mr Peelo suggested the maximum value was €2.8m while Emerald argued it was three times that.

What happened over the next four years was “an unimpressive display of solicitors professional practices”, he said.

Mr Duane could be faulted for allowing discussions and debate between the Emerald side and Mr Peelo continue for four years without any resolution. From 2003 on, Mr Duane and Emerald had been given a “wake up call” and could not afford to be complacent about further delay.

Mr Duane should have explicitly warned the Emerald side the longer things went on without some agreement concerning presentation of the claim, the greater was the risk of another strike-out motion and a real risk the entire action would be struck out.

Mr Duane had various options, including getting senior counsel’s opinion about how to deal with the impasse between the accountant and Emerald over the damages claim, insisting on engaging another accountant or proceeding on the basis of an in-house accountant who had produced the figure of €6.2m damages while advising of the risks involved.

Mr Duane displayed “a woeful pattern of sporadic ineffectual efforts” to make progress without proper appreciation of the danger the case would become impossible and was inexorably becoming untenable as time wore on.

Mr Duane never sent a clear explicit letter outlining the danger the case could be struck out for want of prosecution unless the situation was resolved by a decision. Letters from him confirmed the impression he had a “wholly unrealistic” view of the circumstances and was “not on top of the situation at all”.

Mr Duane’s negligence goes far beyond the failure to give an elaborate warning to Emerald, the judge held.

He also ruled the High Court erred in finding, even if an explicit warning was given, the Emerald side would not have paid any attention to it. The failure was not just about the precise terms of a particular letter but involved a failure of advice and a course of conduct that simply failed to address a particular issue or difficulty that had arisen and that it was not an impossible or intractable problem, but one with many options and consequences, he said.