Irish Court of Appeal

 

THE COURT OF APPEAL

 

Approved

No Redaction Needed

 

Record Number: 2024/77

High Court Record Number: 2021 76 R

 

Whelan J.

Binchy J.

O'Moore J.

 

BETWEEN/

JOSEPH HOWLEY

PLAINTIFF/RESPONDENT

-AND-

 

UNA MCCLEAN

 

DEFENDANT/APPELLANT

 

 

Record Number: 2024/78

High Court Record Number: 2021 66 R

 

BETWEEN/

JOSEPH HOWLEY

PLAINTIFF/RESPONDENT

-AND-

 

PAUL HOWARD

 

DEFENDANT/APPELLANT

 

 

 

JUDGMENT of Mr. Justice O'Moore delivered on the 28th day of March, 2025.

1.             The central issue in this appeal is whether or not the arrangement between Revenue and its solicitors was a champertous one and, if it was, what consequences would flow from such a finding. 

2.             That question is comprehensively addressed in the judgment of Binchy J., with which I fully agree.  I wish to add some comments of my own on a secondary issue in these proceedings, which is the allegation of fraud made by the defendants/appellants ("the taxpayers") against the plaintiff/respondent ("Revenue").  This claim of fraud has been made in the Defence delivered in these proceedings and maintained right up to the hearing of the appeal, at which counsel for the taxpayers sought unsuccessfully to stand over this very serious allegation. 

3.             In this judgment, I consider at a high level the potential consequences of maintaining a claim for fraud where no such claim can properly be made. 

4.             The making of an allegation of fraud, of fraudulent misrepresentation or of deceit, is a very serious step to take in any litigation.  This arises from the nature of any such claim.  It is, in essence, that the fraudster has by use of dishonesty attempted to obtain some benefit from the defrauded individual.  This is clear from the ingredients of the tort, which were authoritatively set out by Shanley J. in Forshall v Walsh [1997] IEHC 100.  Shanley J. held: -

"A Plaintiff seeking to establish the commission of the tort of fraud or deceit must prove-

            (i)         the making of a representation as to a past or existing fact by the Defendant

(ii)        that the representation was made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false

(iii)       that it was intended by the Defendant that the representation should be acted upon by the Plaintiff

(iv)       that the Plaintiff did act on foot of the representation and

(v)        suffered damages as a result."

5.             The judge added: -

"Where fraudulent misrepresentation is alleged it must be established that the representation (as defined above) was intended to and did induce the agreement in respect of which the claim for damages arises."

6.             While the very serious nature of such an allegation is plain from this description of what it involves, two other indicators emphasise the care that must be taken by any lawyer in advancing a claim of fraud in any circumstances. 

7.             Firstly, the current version of the Code of Conduct for the Bar of Ireland contains a provision which has been a consistent feature of the Code for many years.  In its current form, the requirement reads: -

"5.8.    A Barrister shall not settle a pleading claiming fraud without express instructions and without having satisfied himself that there is or will be available at the trial of the action evidence to support such a claim."

I will return to this provision shortly.

8.             Secondly, the effect on persons accused of fraud can be significant.  An allegation of fraud, even if not actually proven at trial, can nonetheless be significantly damaging to the reputation of the person accused of deceitful or fraudulent behaviour.  Particularly from the point of view of someone engaged in business or in a profession, an allegation formally made in court proceedings that such an individual has acted fraudulently is of the greatest seriousness.

9.             It is because of the uniquely grave nature of the allegation (at least in civil proceedings) that both counsel and solicitor should act with the greatest of care in making such a claim.  The Code of Conduct of the Bar of Ireland, to which I have referred, merely embodies the professional obligation to act carefully and responsibly in alleging fraud.  It does not create it. 

10.         In the current case, the fraud alleged against Revenue is that, were it to present a bill of costs to either of the taxpayers, Revenue would be representing that it owed more in legal costs than it actually did.  However, Revenue had not (at the time of the hearing of the appeal) at any stage presented a bill of costs for payment by either of these taxpayers.  The taxpayers had been aware for some considerable time of the precise arrangements between Revenue and its solicitors.  Indeed, according to counsel for the taxpayers in his submissions to the High Court,  the relevant agreement between Revenue and its solicitors was not only publicly available on the Revenue website but was also provided directly to the solicitors for the taxpayers when they requested it.

11.         In my view, it is impossible in those circumstances for a claim of fraud, or deceit, or fraudulent misrepresentation to be made out.  The taxpayers were fully aware of the arrangements between Revenue and its solicitors. In the event that any bill of costs was presented for payment by these taxpayers it was and is open to them to argue before any costs adjudicator that the bill of costs should be reduced because of the arrangement that Revenue has with the solicitors instructed by it. 

12.         At the hearing of the appeal, counsel for the taxpayers was asked about the precise fraudulent misrepresentation allegedly made by Revenue.  He stated: -

"MR. DIXON:     The other is that there is representation at the point of adjudication that there is a higher sum due which is not the case at that point because it is only due if it is ever collected.

MR. JUSTICE O'MOORE:         But your solicitor is fully aware, sorry your client, I beg your pardon, is fully aware of the arrangement that Revenue has.  So, how could they be subject to a misrepresentation?

MR. DIXON:        I say my client -- I say the agreement couldn't make any sense.  First of all, my client wouldn't know until after the bill of costs is delivered --"

13.         Counsel then accepted that there had been no bill of costs delivered by Revenue at the time of the hearing of the appeal.  The topic was returned to (at p. 26 of the Transcript) as follows: -

"MR. JUSTICE O'MOORE: Just explain to me, Mr. Dixon, how the presentation of a bill of costs in the fullness of time, in the event that Revenue have an opportunity to do that, given that your clients are fully aware of the arrangement between Revenue and their solicitors could be a fraud on your clients?

MR. DIXON:        It can't be now because... Well in so far as if they do deliver such a bill it would be."

14.         Finally, on the same page of the Transcript, I asked counsel to confirm that he had accepted that the allegation of fraud could not possibly be logically credible.  He answered:-

"MR. DIXON:     Well that's now because -- that's because of the agreement has now been proven."

15.         In response to questions from the other members of the court, counsel rested on this proposition: -

"But the very fact of such an agreement, I say, is wrong in principle and can't be just simply left to come out in the wash at some point, which is what is now being submitted that the cost accountant, the costs adjudicator might find it or might not or might call for the document to be produced or the Defendant might seek to have it examined.  That's downstream, this is at the point that the bill is delivered.  There will would (sic) be a representation at that point that there's a higher sum owed.  I say that can't be correct and it can't be simply not a fraud because someone is going to find it or might find it, which is, if it was a taxpayer submitting a return that was below the amount claimed and saying 'well, if the Revenue discover it's wrong I'll pay higher, therefore I am not committing a fraud'. Or to say that 'the Revenue will find it anyway, I'll have to pay what I eventually owe', that doesn't make it any less of a fraudulent return."

16.         There is a lot to unpick in that answer.  There is clearly a qualitative difference between (i) a taxpayer making a return which is knowingly incorrect but believing that this is acceptable on the basis that Revenue will eventually discover its inaccuracy, and (ii) the current situation in which the taxpayer is fully aware of all relevant arrangements between Revenue and its solicitors at the time the bill of costs is presented.  The existence of the agreement between Revenue and its solicitors is not something which might or might not feature in the adjudication of the bill of costs presented by Revenue.  It is something which, as a matter of fact, these taxpayers have known about for some considerable time. This is why, of course, the taxpayers were able to allege that the arrangement was champertous.  Given that the taxpayers have full knowledge of all relevant arrangements between Revenue and its solicitors, and moreover are fully cognisant of the significance of these arrangements, it cannot logically be said that there is any misrepresentation (still less a fraudulent misrepresentation) on the part of Revenue.

17.         This basic reality has not stopped the taxpayers (through their lawyers) doggedly asserting fraud where none exists.  In the Defence of the taxpayers, it is pleaded (at para. 16): -

"It is also the case that the contract between the Plaintiff and his solicitor instruction (sic) in the within proceedings is contrary to public policy in that it provides for a scheme of remuneration where the solicitor is paid a fee for work done but then represents to the Defendant that work has been done on a different basis and seeks a higher payment.  Such payment amounts to a contingency fee arrangement and provides that the solicitors (sic) remuneration is only paid if the sums alleged to be due if (sic) actually collected and amounts to a fraud on the paying party since he is being informed that a particular sun (sic) is due to the Plaintiff when that is not the case since the Plaintiff will never collect any sum greater than the sums actually paid out by him prior to the order for costs."

18.         The claim of fraud is made in these proceedings. It must be maintained on the facts of this particular case and not on some hypothetical basis. I have already explained why, on these facts, no fraud could possibly have arisen.  This analysis is supported, ironically, in the submissions made to the trial judge (Quinn J.) by counsel for the taxpayers.  At p. 44 et seq. of Day 2 of the Transcript, the following submission is made: -

"MR. DIXON: So I say therein is a fraud.  Because under this --

MR. JUSTICE QUINN: Fraud?

MR. DIXON: -- one bill has gone to the -- there has been an invoice issued and paid for and here we have another invoice, with representation to the recipient, 'This is what I owe'.  Then the matter goes to the costs adjudicator.  And it is fundamental in costs adjudication that a party cannot recover more than their outlay.  So there is a representation to the costs adjudicator 'This is what I owe my solicitor'.

So, I say that what happens is that the Respondent in the costs adjudication is in ignorance of what has happened with regard to the earlier invoice.  They are being told, and the cost adjudicator is being told by the Plaintiff in these proceedings, 'This is what I owe' and there's then a dispute about whether these are reasonable costs following the normal costs adjudication process."

19.         Of course, the fatal flaw in this submission is that the taxpayers in this case are not "in ignorance" of the full arrangements between Revenue and its solicitors.   As elaborated upon by counsel for the taxpayers in the hearing before the High Court, an essential part of the claim of fraud is that the arrangements between Revenue and its lawyers are suppressed and kept from the taxpayer.  This is simply not true here.  It is difficult to understand how this submission was made in circumstances where these taxpayers had full knowledge of the relevant arrangements.  If, as may be the case, counsel was seeking to make a hypothetical argument to the effect that in circumstances different to the current cases a fraud would or may have occurred, then this should have been made clear. However, even this form of submission seems to me quite inappropriate, if indeed that was what was intended. I do not think it responsible to allege that a party would have committed fraud on facts radically different to those of the case actually being litigated.

20.         In his very full judgment, the trial judge dealt with this allegation of fraudulent misrepresentation in three paragraphs.  They are worth quoting in full.  They read: -

"123.        The defendants first accessed the details of the terms of the contract through the website of the plaintiff in the 'Value for Money' section of its website. They then requested from the plaintiff a copy of the particular contract with Ivor Fitzpatrick & Company, the solicitors representing the plaintiff in this case. This was furnished immediately on request.

124.          The defendants submit that the effect of the Contract is that the Legal Costs Adjudicator will be misled when presented with a bill of costs prepared in accordance with O. 99. The defendants go so far as to submit that this is to perpetrate a fraud.

125.          This proposition assumes that the plaintiff would at an adjudication withhold or conceal the existence of the terms of engagement with his solicitors. I am not willing to determine this case on the basis of an assumption that the plaintiff would so mislead the Legal Costs Adjudicator, even if doing so were possible, which for other reasons described below is not the case."

21.         The "reasons described below" appear at para. 132 of the judgment, and are: -

(1)        the fact that the terms of the engagement of Revenue's solicitor were accessible on a public website;

(2)        the fact that the taxpayers were furnished with a copy of the Contract with Ivor Fitzpatrick and Co;

(3)        the finding by the trial judge that the proposition pleaded by the taxpayers to the effect that the Contract permits of a fraudulent misrepresentation was "unstateable".

22.         Notwithstanding this concise and conclusive rejection of the claim of fraud, this issue was reventilated on the appeal before this court.  This is notwithstanding the fact that, in the Notice of Appeal, the phrases "fraudulent misrepresentation", "fraud" or "deceit" are nowhere to be seen.  The closest that the Notice of Appeal appears to go in challenging the findings of the trial judge on this issue is Ground of Appeal 6, which reads: -

"The learned judge erred in fact and in law in holding that it was legitimate for a party to litigation to submit a Bill of Costs for adjudication on the basis that some of the costs would only become due if actually collected."

23.         For the sake of completeness, I should also set out Ground of Appeal 7, which reads: -

"The learned judge erred in fact and in law in relying on a matter not proved in evidence that the contract between the Plaintiff and his solicitors was on a publicly available website and this was sufficient protection for any Defendant served with a Bill of Costs seeking a higher sum that that (sic) originally agreed between the Plaintiff and his solicitor and which would only be paid in the event of the higher sum actually being collected."

24.         However, nowhere in the Notice of Appeal is there any engagement with the reasoning of the High Court judge in concluding that the claim of fraud was "unstateable".  Equally, in the written submissions of the taxpayers there is no attempt made to explain why the trial judge's analysis of the fraud claim was wrong. At para. 23 of his written submissions, counsel for the taxpayer says: -

"Any representation to the opposing party or the Costs Adjudicator that there is a liability on the part of the Plaintiff to pay the costs in such circumstances constitutes fraud."

The only part of the written submission which may be thought to impinge upon the trial judge's view about the fraud claim is the argument (at para. 24 of the written submissions) that the finding that the taxpayers had obtained a copy of the Contract between Revenue and its solicitors from a publicly available website was not proven in evidence, nor was there any evidence that the taxpayers had sought a copy of the Contract from Revenue's solicitors, who immediately provided it.  However, these complaints do not go to the heart of the decision of the trial judge on this point.  In any event, the complaints are also completely without merit.  At p. 63 of Day 2 of the hearing before the High Court, counsel for the defendants volunteered the following: -

"Mr. Dixon:  Well, what happened in fact, Judge, was that the agreement was on the Revenue website at one stage for a period and a copy of the document on the Revenue website was exhibited in the leave to defend application."

25.         It is difficult to criticise the trial judge for accepting, without formal evidence, a statement made by the taxpayers' counsel.  With regard to the making available of the Contract to the taxpayers by Revenue's solicitors, it was accepted by the taxpayers' counsel before the High Court that this occurred.  Importantly, the agreement was provided before there was any question of a bill of costs being presented by Revenue for payment by the taxpayers. 

26.         Notwithstanding the threadbare nature of the taxpayers' appeal against the finding that the allegation of fraud was unstateable, this did not prevent counsel for the taxpayers persisting in alleging fraud at the hearing of the appeal.  I have already given a flavour of counsel's submissions on that point. 

27.         In all of this, I have focused on what was said by counsel.  It cannot be forgotten, of course, that counsel acts on instructions from his clients, communicated through his solicitor. 

28.         In this case, quite plainly, the claim of fraud is just hopeless.  It should never have been made.  It has not become unstateable as a result of some information which has become known to the taxpayers or their legal team after the delivery of the Defence.  It simply never made any logical sense.  The making of a speculative claim in the pleadings that a fraud might in certain circumstances have occurred is not permissible.  However, what is unforgivable is that the allegation of fraud was pressed in the submissions before the High Court, was maintained in the written and oral submissions before this court, and was at no time abandoned. 

29.         It might be thought that the making of a claim which is doomed to fail can be satisfactorily met by the frequently utilised provisions of the Rules which allow such a claim to be struck out, possibly at quite an early stage in an action.  If that happens, the likelihood is that the costs involved in meeting such a case will be awarded against the party which has abused the processes of the court by bringing a claim which is bound to fail.  This ignores a number of realities.  In the first place, the party and party costs are unlikely ever to meet the full cost of obtaining the strike out of such a claim.  Secondly, in terms of the court's resources it is plainly undesirable that claims which are bound to fail are tolerated.  Finally, and to return to the theme explored earlier in this judgment, the making of an allegation of fraud is so toxic that, even if struck out at an early stage, it is quite likely to result in lingering but palpable damage to the reputation of the person or institution accused of fraud. 

30.         When an allegation of fraud is made in circumstances where it simply cannot succeed, the court may have a number of options available to it.  The first is, of course, to refer the papers to the relevant professional body if it feels there has been a breach of the rules of that body.  However, it would clearly be preferable that the professional or regulatory institution whose job it is to ensure that standards are maintained would police these standards, rather than have the courts do so.  I am not saying that this involves an obligation on a professional or regulatory body to conduct a slavish trawl through every judgment in order to check for conduct that is potentially unprofessional. However, where a court finds that such conduct appears to have occured and where this comes to the attention of the relevant institution it is difficult to see why the professional or regulatory body would not take the matter further.

31.         Secondly, there is the possibility that costs will be awarded on a full indemnity basis (or some higher basis than the norm) against parties making such groundless allegations of fraud.  Such an approach would be consistent with the important judgment of Kelly J. (as he then was) in Geaney v Elan  [2005] IEHC 111, where he awarded costs on a solicitor and client basis against a party which had failed to comply with an order for discovery, and did so in order to express the displeasure of the court at such behaviour. 

32.         Thirdly, given that the people who reach for groundless allegations of a particularly toxic sort are often individuals who do not have the available assets to meet an award of costs at any level, it may be appropriate to consider whether or not in certain circumstances the lawyers ventilating such groundless claims could be responsible for holding harmless  the persons against whom such allegations are made. The jurisdiction to make orders against solicitors and, quite probably, against counsel is set out by Noonan J delivering the judgment of this Court in Ward v Tower Trade Finance (Ireland) Ltd [2022] IECA 70.

33.         Far too frequently over the last number of years litigants, either acting by themselves or represented by lawyers, have resorted to the making of vitriolic but groundless allegations in defending or advancing their position.  These allegations have been made against other litigants, against lawyers (whether solicitors or counsel) and against judges.  Where possible, pertinent and proportionate steps should be taken to address and deter such activities. In this judgment I have set out some weapons in the armoury of the court which may be deployed where it is appropriate to do so.

Result:     Appeal dismissed.