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Fagan v. McQuaid [1998] IEHC 69 (12th May, 1998)
THE
HIGH COURT
No.
1997 No. 2296
P
THE
HIGH COURT
BETWEEN
STEPHEN
FAGAN
PLAINTIFF/RESPONDENT
AND
LIAM
McQUAID
DEFENDANT/APPLICANT
JUDGMENT
of Mr. Justice O'Higgins delivered the 12th day of May 1998
.
This
is the Defendant's Motion to strike out the proceedings pursuant to
1. Order
19 Rule 28 of the Rules of the Superior Court or alternatively pursuant to the
inherent jurisdiction of the Court to do so.
2. The
Plaintiff's action is to set aside an Order of the High Court made on
the
12th day of March, 1996 and an Order of the Supreme Court dated the 20th day of
February, 1997 affirming the High Court Order, on the grounds that the Orders
were procured by fraud, to wit the perjury of a witness in the proceedings.
The Orders sought to be set aside were made in proceedings under Section 298 of
the Companies Act entitled:
3. In
the Matter of Greendale Developments Limited (in liquidation) and
4. In
the Matter of the Companies Acts, 1963-1990. The proceedings were heard over 3
days commencing 30th January, 1996 before the then President of the High Court,
Mr. Justice Costello who delivered judgment on the 12th March, 1996. The
matter was appealed to the Supreme Court and was argued over a number of days.
The judgment of the Supreme Court was delivered by Keane J. on 20th February,
1997.
THE
LAW
5. It
is not disputed that the Court has jurisdiction to strike out or stay
proceedings in an appropriate case either pursuant to Order 19 Rule 28 of the
Rules of the Superior Court or pursuant to its inherent jurisdiction.
6. The
Court's jurisdiction to strike out a Plaintiff's claim which is frivolous or
vexatious or as an abuse of the process is usefully summarised in the judgment
of Murphy J. in the case
Bruno
Tassan Din and Arbourfield Ltd. Plaintiffs -v- Banco Ambrosiano S.P.A. and Others
1991 1 I.R. page 569 at page 572. He said as follows:-
"There
is no room for debate as to approach which this court should take in dealing
with an application of that nature. It is set out clearly in a series of
decided cases.
In
Blair
-v- Crawford
[1906] 1 I.R. 578 at 586 Pallas C.b. said:
'....in
acting under that summary jurisdiction to stay proceedings upon the ground that
they are an abuse of the process of the Court, and before making a summary
order to stay, which deprives a plaintiff of that which is, prima facie, his
legal right, i.e. his right of having his action brought to trial, the Court
ought to be astute to see that there is no real question capable of being
tried'................
In
Barry
-v- Buckley
[1981] I.R. 306 Costello J. advised the same cautious approach in staying
proceedings and also adverted to the right to refer to documentation other than
the pleadings of the parties in the following terms at p. 308 of the judgment
:-
'But
apart from Order 19, the Court has an inherent jurisdiction to stay proceedings
and, on applications made to exercise it, the Court is not limited to the
pleadings of the parties but is free to hear evidence on affidavit relating to
the issues in the case: see Wylie's Judicature Acts (1906) at pp. 34-37 and
The Supreme Court Practise (1979) at para. 18/19/10. The principles on which
the Court exercises this jurisdiction are well established. Basically its
jurisdiction exists to ensure that an abuse of the process of the Court does
not take place. So, if the proceedings are frivolous or vexatious they will be
stayed. They will also be stayed if it is clear that the plaintiff's claim
must fail; per Buckley L.J. in
Goodson
v. Grierson
at p. 765.
This
jurisdiction should be exercised sparingly and only in clear cases; but it is
one which enables the Court avoid injustice, particularly in cases whose
outcome depends on the interpretation of a contract or
agreed
correspondence. If, having considered the documents, the Court is satisfied
that the plaintiff's case must fail, then it should be a proper exercise of its
discretion to strike out proceedings whose continued existence cannot be
justified and is manifestly causing irrevocable damage to a defendant'"
7. Later
in the same judgment Murphy J. said as follows:-
"Put
another way the application to dismiss the present action on the grounds that
it is vexatious or an abuse of the process the Court must proceed on the
assumption that the Plaintiffs will be able to prove (and should have an
opportunity of attempting to prove) any allegation of fact on which they
reasonably rely (p. 575). "
8. In
the same judgment at page 582 the learned judge went on:-
"Again
in the
ampthill
peerage
case 1977 AC 547 Lord Wilberforce in considering the nature of the fraud or
collusion which would justify setting aside a judgment of the Court commented
(at P. 571) as follows:
'..
- What is fraud for this purpose? Learned Counsel for John Russell without
venturing on a definition suggested that some kind of equitable fraud, or lack
of frankness, was all that is meant, but I cannot accept so anaemic an
ingredient. In relation to judgments, and this case is surely afortiori or at
least analogous, it is clear that only fraud in a strict legal sense will do.
There must be conscious and deliberate dishonesty,
and
a declaration must be obtained by it. Authorities as to judgments make clear
that anyone wishing to attack a judgment on the grounds of fraud must make his
allegation with full particularity, must when he states it be prepared to prove
what he alleges and ultimately must strictly prove it
'
(emphasis
added)
9. The
Authorities therefore establish the following propositions:
(a) A
judgment obtained by fraud in any court may be set aside
(b) In
adjudicating on an application to have the proceedings stayed, as in the
present case, the Court must proceed on the assumption that the Plaintiff will
be able to prove the matters contained in the Statement of Claim.
(c) The
Court must not adjudicate on the merits of the case, but must judge as to
whether, if the Plaintiff proves those allegations, he has a reasonable chance
of success.
10. A
number of legal issues were argued before me for consideration in applying the
principles set out above.
1. In
order to set aside a judgment for fraud does that fraud have to be the fraud
of
the successful party or his agents?
2. If
the fraud has to be the fraud of a successful party to the litigation - do
different considerations apply to a court appointed Liquidator?
3. Does
the material on which the application to set aside the judgment is based, have
to consist of facts discovered since the judgment, and which could not
reasonably have been ascertained beforehand?
4. Is
the material before this court capable of being "new evidence"?
5. Having
regard to the decision of the High Court and the decision of the Supreme Court
is the matter res judicata?
11. There
were further grounds on which it was argued that judgment
should
be set aside. It was contended that the trial was in contravention of Article
6.1 of the
12. Convention
in Human Rights insofar as the trial was unfair because of the refusal to grant
an
adjournment
in the High Court. It was also submitted that the decision of the Supreme
13. Court
on the ultra vires point was per incurium. I declined to adjudicate on these
points on
the
basis that they are matters that have been argued before and adjudicated on by
the
14. Supreme
Court and were not, therefore, appropriate matters for my consideration.
15. It
seems appropriate to see what part of the judgment obtained by the Liquidator
is in dispute in these proceedings, and to examine those matters to ascertain
whether the judgment obtained in respect of these sums was dependant on the
evidence of Mr Burgess which is alleged to be perjured. If it appears that the
evidence of Mr Burgess sought to be impugned could not reasonably be held to
have had decisive bearing on, or could not reasonably have altered the judgment
obtained, the motion of the Defendants should succeed regardless of the
determination of the other legal issues. If, on the other hand, the challenged
evidence of Mr Burgess, as set out in the statement of claim, could be held to
give the Plaintiff a reasonable chance of success in having the judgment
obtained set aside, the Plaintiff is entitled to continue his proceedings
(subject to being able to surmount the other legal obstacles). Dr Forde argues
that this is an incorrect approach, and that if any part of the judgment was or
could be held to have been obtained by fraud the whole of the judgment must be
set aside. He relies on a passage in
Jonesco
and Beard
1930 Appeal Cases at p. 298 whereat page 301 Lord Buckmeister said
"Fraud
is an insidious disease and if clearly proved to have been used so that it
might deceive the court, it spreads to and infects the whole body of the
judgment"
.
That case, however, concerned a dispute between two parties about a claim for
a share of eight named horses. In addition the Plaintiff claimed that money
was due to him for the sale of two other racehorses. The alleged fraud there
would contaminate both parts of the judgment since it was inextricably tied up
with the veracity of a party. The situation seems to me quite different
however, where, (as in this case), some parts of the judgments are not, and
cannot be, attributable to any of the evidence sought to be impugned. In my
view, the findings of the High Court affirmed on appeal by the Supreme Court,
and which are not in any way dependant on the matters alleged in the
Plaintiff's claim, should be differentiated from matters allegedly dependant on
the Plaintiff's claim. In that context the matters agreed to be at issue
between the parties are as follows:
1. Cheque
payments made on behalf of Mr. and Mrs. Fagan £145,357.
2.
Legal
fees discharged by the company on behalf of Mr. and Mrs. Fagan
(part
of) £26,098.
3. Credit
card expenses of Mr. Fagan discharged by the company £30,487.
4. Payments
made by the company to Mr. Fagan's brother, to Stephen Fagan trading as
Classical Architectural Stone, and a number of payments to Ulster Bank for the
benefit of Mr. Fagan £34,189.
5. Springfield
monies (part of) £129,714.58.
16. I
propose to deal with these matters seriatim.
1. THE
SUM OF £145,357
CHEQUE
PAYMENTS MADE ON BEHALF OF MR. AND MRS. FAGAN
17. It
is not in dispute that cheques to the value of £255,894 were identified by
Mr. Fagan himself in his Statement of Affairs in the proceedings under Section
298 of the Companies Act as being cheque payments made to or on behalf of
Stephen Fagan and Mai Malone. From this sum, prima facie due, the Plaintiff
deducted a sum of £77,800 in respect of monies paid to Stephen Fagan from
1st June, 1989 to the 8th August, 1994 in respect of wages and a further sum of
£32,737 in respect of payments made by Stephen Fagan trading as Classical
Architectural Stone leaving a balance of £145,357. Mr. Fagan claimed that
extra monies were due to him as wages. He had no documentation to support his
claim and PAYE and PSRI was paid on the basis of a £1,200 salary. He said
in his Affidavit and in evidence that an agreement was made that he be paid
£2,000 per month, and that the Liquidator only gave him credit for the
£1,200 a month which was actually paid and not the balance due to him. Mr
Burgess in his evidence denied any such agreement and said that the £1,200
was the sum agreed. The President of the High Court at page 7 of his judgment
said:
"The
Liquidator in my opinion correctly disallowed this claim. There is no evidence
to support it and I accept the evidence of Mr. Burgess that the company never
agreed to pay the wages now claimed by
Mr.
Fagan. The deduction proposed by the Liquidator is therefore the correct one".
18. While
it is reasonable to suggest that the rejection by the Liquidator of the claim
for £2,000 a
month
could stand without the evidence of Mr. Burgess (in view of the finding that
there was
no
evidence to support it, and since there is no documentation to support it),
nevertheless it
seems
to me that the Burgesses' evidence could have been a factor in the decision.
However,
in
the Supreme Court the following statement of law was made in the Section 298
proceedings
by Keane J. at page 35 of the judgment:-
"The
authorities proceed on the basis that the corresponding sections in England for
the Liquidator an expeditious summary remedy to recover monies or property of
the company wrongfully spent or misapplied by an officer and that to allow
cross-claims by the officer to be litigated on such an application would be
inconsistent with the nature of the remedy provided.
I
am satisfied that the submission made on behalf of the Liquidator is correct
and that, even if the sums claimed by Mr. Fagan were recoverable against the
company, they could not properly be set off against the sums found to be owing
by him to the company".
19. On
the basis of that decision the sum claimed for additional wages could not be
recovered in
the
Section 298 proceedings as is set off and accordingly Mr. Burgess' evidence
could not
have
been relevant or decisive.
20. This
is the position notwithstanding the fact that these matters were not dealt with
in the "set
off"
portion of the decision of the High Court and the decision of the Supreme Court.
2. LEGAL
FEES DISCHARGED BY THE COMPANY ON BEHALF OF MR. AND MRS. FAGAN £26,098
.
21. Certain
portions of this are not in dispute. A figure of £1,135.67 in respect of
the legal costs for the sale of Mr. Fagan's private house is not disputed. A
sum of £1,933 in respect of the purchase of 12a Upper Churchtown Road is
not disputed and a sum of £6,993 referable to an action taken against Mr.
Fagan personally is not disputed. What is in dispute is a sum of £16,128
which arises as follows: in the case of
Allied
Irish Banks Plc. -v-
Stephen
Fagan, Mai Malone, Greendale development Limited and Others
fees and outgoings payable to Fergus P. Taaffe & Co. amounted to
£55,234. The Liquidator asserted that 29% of these fees should be
apportioned to Mr. Fagan. The evidence of Mr. Burgess was only of marginal
importance in regard to these fees. It is not disputed that the bank took
proceedings against Mr. and Mrs. Fagan personally concerning certain property.
The Company was later joined in those proceedings. The Defendant got some
benefit because the proceedings against him were terminated. The Liquidator
made certain calculations as to how the benefits obtained by the compromise of
the Bank's action should be apportioned. He put the basis of his calculations
before the Court and the Court accepted that it was reasonable that Mr. Fagan
pay a portion of the fees as he had benefited from the legal action. Mr. Fagan
produced documentation to show it was the understanding of his Solicitors that
the fees would be discharged by the Company, but Mr. McQuaid contested this.
In my view the decision of the Court would clearly have been the same
regardless of what Mr. Burgess said in his Affidavit or under examination.
22. The
finding that Mr. Fagan be personally liable for a portion of the costs which
the Company paid to the Solicitor who acted for himself and the Company, was
entirely reasonable and was not based on any direct evidence by Mr. Burgess.
Furthermore, the decision to hold Mr. Fagan liable for a portion of costs was
based, (inter alia), on the finding that even if Mr. Fagan was entitled to
rescind the contract of sale of Bridgewater House, (a matter hotly contested
between the parties) the circumstances of such rescission amounted
"to
a breach of his duty to the Company and malfeasance. Mr. Fagan should have
been aware of the Bank's equitable interest in the contract for sale, which he
had lodged with it as a security, and should have appreciated that it was
highly probable that the Bank would institute proceedings should it learn of
the recession and that, in all probability the proceedings would be
successful."
That
finding does not depend on the acceptance of Mr Burgess's evidence. If he were
disbelieved that finding would still stand: It is also noteworthy that no
questions were asked of Mr Burgess concerning those fees.
3. CREDIT
CARD EXPENSES OF MR. FAGAN DISCHARGED BY THE COMPANY £30,487
23. The
Liquidator, Mr. McQuaid, in his report analysed the Credit Card expenses
based
on original Visa statements and other documentation. It is clear from that
analysis that
some
of the items were items of personal expenditure and were not attributable to the
company.
At the trial in the High Court the correctness of the analysis was not
disputed by
24. Mr.
Fagan. The reason for the refusal of the Liquidator to disallow the expenses
was that,
despite
requests, Mr. Fagan had failed to provide vouchers and receipts. In his
Affidavit Mr.
25. Burgess
said that the company benefited, at least from some of the trips, and also said
that
26. Mr.
Fagan had used his mobile telephone to make business calls on behalf of the
company.
27. In
those circumstances it does not appear to me that his evidence could have been
in any way
decisive
in having those Visa expenses disallowed. In the judgment of the President of
the
28. High
Court at page 10 the matter is dealt with as follows:
"£30,487.
This claim is in respect of credit card transactions carried on by Mr. Fagan
on his private Visa account but discharged by the company on his behalf. Mr.
Fagan does not deny that this sum was paid between 1991 and 1993 to discharge
his liability on his Visa
account.
He claims, however, that all the sums were incurred by him on behalf of the
company. This is clearly unsustainable as the breakdown of the payments made
by the Liquidator shows.
Mr
Burgess' evidence supports the Liquidator's conclusion. The Liquidator has
asked Mr. Fagan to support his claim by receipts or other documentary or
persuasive evidence and to show what benefits the company received from the
payments it made. But he has failed to do so and he is therefore liable to
account for the full amount as spent on his behalf".
29. It
was clear from the above that the judgment would stand without the evidence of Mr
30. Burgess.
Moreover, insofar as the sums claimed by Mr. Fagan were to be set off against
liabilities
to the company it was not appropriate that they should be claimed in the 298
proceedings.
In so saying, I accept the point made by Counsel that "set off" was only in
relation
to certain items (excluding this one) in the judgments of the High Court and the
31. Supreme
Court. Nonetheless Mr. Fagan is not precluded from recovering these monies if he
can
support his claim.
4. PAYMENTS
MADE BY THE COMPANY TO MR. FAGAN'S BROTHER, TO MR. STEPHEN FAGAN TRADING AS
CLASSICAL ARCHITECTURAL STONE, AND A NUMBER OF PAYMENTS TO ULSTER BANK FOR THE
BENEFIT OF MR. FAGAN TOTAL £34,108.
The
payments to Mr. Fagan's brother, and the payments to the bank are not
now
in issue. The matters in issue now are two payments to Classical Architectural
32. Stone,
one for £7,000 and one for £3,275. Mr. Fagan was ordered to repay
those sums on
the
basis that the company did not receive any benefit from them.
33. It
appears now that the judgment in respect of the sums of £7,000 and
£3,250 obtained against Mr Fagan should properly have been not against
Mr. Fagan but against Classical Architecture Limited . This appears on the
basis of the exhibits contained in the Affidavit of Mr. Fagan sworn on the 18th
day of February 1998. This error was due to the fact that Mr. Fagan denied in
evidence that Classical Architecture Limited had ever traded, as indeed had Mr.
Burgess in his Affidavit of 30th January, 1996. If the Court was misled by
Mr. Burgess on that point it was also misled by Mr. Fagan. However, it appears
to me that the judgment against Mr. Fagan is in part, at least, reliant on the
evidence of Mr. Burgess contained in Paragraph 6 of the said Affidavit that
there was no agreement between Greendale and Classical Architectural Stone that
it would carry out the manufacture of reconstituted stone products for Greendale.
34. In
respect of the judgments for the sums of £7,000 and £3,275 it is
necessary, therefore, to consider whether it is necessary for the evidence
impugning the judgment in those amounts to be newly discovered. In Halsbury's
Law of England 4th Edition Volume 26 Paragraph 561 the following passage occurs:-
"SETTING
ASIDE A JUDGMENT ON FRESH EVIDENCE
An
action will lie to rescind a judgment on the ground of the discovery of new
evidence
which would have had a material effect on the decision of the Court.
It
must be shown (1) that the evidence could not have been obtained with
reasonable
diligence for use at the trial; (2) that the further evidence is such
that,
if given, it would have an important influence on the result of the trial,
although
it need not be decisive; (3) that the evidence as is is presumably to
be
believed".
35. A
further passage from the same edition of Halsbury dealing with estoppel in
Volume 16 at Paragraph 1534 is also relevant:-
"The
mere discovery of fresh evidence as distinguished from the development
of
fresh
circumstances, on matters which have been opened for controversy
in
the earlier proceedings is no answer to a defence of res judicata. Where
this
is applicable, the original cause of action is gone and can only be
restored
by getting rid of the res judicata: and this must be done by an action
or
application, which can only succeed on the same grounds as the former
'Bill
of Review' in the Court of Chancery, namely the discovery of fresh
evidence
which entirely changes the aspect of the case, and was not and could
not
be
by
reasonable diligence have been obtained before".
36. Both
of those passages were cited in the Banco Ambrosiano case by Murphy J.
37. Furthermore,
I was referred to an article in Volume 77 of the Law Quarterly Review by D.M.
Gordon where the learned author says at page 376:-
"Fraud
as a ground for review is no exception to the rules that review can
only
be based on new evidence. The evidence, whether fraud is alleged or not
must
be :
(a) evidence
newly discovered since the trial,
(b) evidence
that could not have been found by the time of the trial by
exercise
of reasonable diligence,
(c) evidence
so material that its production at the trial would probably
have
effected the outcome: and when the fraud charged consists of
perjury,
then:
(d) the
evidence must be so strong it would reasonably be expected
to
be decisive at a re-hearing, and if unanswered must have that
result".
38. And
later at page 549 in the same article the author says:-
"Where
the claim to review is based on perjury, the Court will be vigilant to
see
that the action is not aimed at re-trying the same cases as tried before,
though
this is guarded against by the general requirements that the evidence
must
be newly discovered and strong".
39. The
position from these authorities appears to be that there must be some new
material not discoverable by reasonable diligence at the time of the trial
which would have an important bearing on the outcome of the proceedings.
However, I have been referred to the judgment of Barrington J. in the case of
Waite
& Anor. -v- House
of
Spring Gardens Limited, Armourshield Limited and Michael Saccs
,
unreported, 26th June, 1985. At page 5 of the judgment he says as follows:-
"The
annual practice for 1985 at page 1047 Paragraph 71-9-2 says that in an
application
to set a judgment on the grounds that it was obtained by fraud it
is
immaterial that the facts on which the defendants relied to establish fraud
were
known to them and could have been raised in the original proceedings.
(See
Syal
-v- Heyward & Anor.
1948-49 TLR page 476; 1948 2 AER page
576).
This appears to be the law at any rate where a fraud on the Court is
true".
40. It
appears to me, however, that that is referring to setting aside of judgment of
foreign
Courts for fraud. The head note in
Syal
-v- Heyward
reads
"Foreign
Judgment - Registration in High Court - Setting Aside Registration - Judgment
Obtained by Fraud on Foreign Court - Facts Relied on Known to Defendants at
Time of Proceedings in Foreign Court - Order for Trial of Issue of Fraud -
Condition that Defendant should bring money into Court - Foreign Judgments
(Reciprocal Enforcement) Act, 1933 (See 13) Section 41A (iv) RSC Order"
.
41. In
that case, it was argued, inter alia, that where a judgment was sought to be
set aside on the ground of fraud, the fraud must have been discovered by the
applicant since the date of the judgment. That was his fourth proposition.
42. Cowan
L.J. said at page 579:-
"Be
that as it may, Counsel's real difficulty is in his fourth proposition. For it
he
relied on
Boswell -v- Coaks
(2) a decision of the House of Lords applied
in
Birch
-v- Birch
(3).
These cases, no doubt, established that in
proceedings
to set aside an English judgment the defendants cannot ask for a
re-trial
of the issue of fraud as between them and the plaintiff on facts known
to
them at the date of the earlier judgment, but in cases under S.4, the question
is
not one of fraud on the Plaintiff, but of fraud on the Court, and it seems to
us
to be clearly established by authority binding on us that, if the defendant
shows
a prima facie case that the Court was deceived, he is entitled to have
that
issue tried even though, in trying it, the Court may have to go into
defences
which could have been raised at the first trial (see
Abouloff
-v-
Opinhimour
as
explained in
Vadala
-v- Laus
)".
43. Lord
Cowan quoted Lindley L.J. in that case as follows:-
"I
cannot fritter away that judgment and I cannot read the judgments without
seeing
that they amount to this: that if the fraud upon the foreign Court
consists
in the fact that the Plaintiff has induced that Court by fraud to come
to
a wrong conclusion you can re-open the whole case even though you will
have
in this Court to go into the very facts which were investigated, and which
were
in issue in the foreign Court".
In
Kerr
on Fraud and Mistake
,
7th
Edition at page 418, the following passage occurs:-
"FOREIGN
JUDGMENT OBTAINED BY FRAUD
A
foreign judgment can be impeached, if it be made to appear that it was
obtained
by a fraud on the Court. When a question between the parties has
been
decided by a foreign Court, with jurisdiction the decision is, as a general
rule,
conclusive, and cannot be opened on its merits; but if the foreign
judgment
was
obtained by fraud that would appear to be an answer to any
proceeding
founded on the judgment ............... As the fraud to be proved is a
fraud
on the Court it is in these cases immaterial that the fraud was known
to
the party defrauded".
44. At
page 416 in the same edition under the heading
English
Judgments
Obtained
by Fraud
the following passage occurs:-
"Fraud"
said De Gray C.J." is an intrinsic, collateral act, which vitiates
the
most solemn proceedings of Courts of Justice. Lord Coke says it avoids all
judicial acts ecclesiastical and temporal. Behind this rule it matters not
whether the judgment impugned has been pronounced by an inferior or by the
highest Court of judicature in the realm but in all cases alike it is competent
for every Court, whether superior or inferior, to treat as a nullity any
judgment which can be clearly shown to have been obtained by manifest fraud,
discovered
after the judgment".
45. At
a footnote to page 377, in the article in the last Laws Quarterly Review
already referred to, it is stated that the need for newly discovered evidence
had its source in Bacon L.C.'s rule (1619) which required review to be upon
"some
new matter which hath arisen in time after the decree, and not any new proof,
which might have been used when the decree was made".
46. In
my view, to set aside a judgment on the basis of fraud, it is necessary that
the material be newly discovered, and not to have been in existence and
available by exercise of reasonable diligence at the time of the trial. In
relation to the payments of £7,000 and £3,275 in issue in the present
case, the evidence relied on consists of receipts which are exhibited in the
Affidavit of Mr. Fagan dated the 18th day of February 1998, and on the
contents of the Affidavit of Mr. Smith who said he worked for Mr. Fagan's
company. It is clear that the existence of the documentation on which he
relies was or should have been well known to Mr. Fagan well prior to the
hearing in the High Court. No explanation has been given by him for the
failure to produce these receipts. Furthermore, in his Affidavit of 18th
February 1988, Mr. Fagan does not make the case that the documentary evidence
concerning Classical Architectural Stone Ltd was unavailable at the trial, or
that he did not know about it. In my opinion, therefore, Mr. Fagan has no
reasonable chance of succeeding in having this part of the judgment set aside
on the basis of the alleged fraud of Mr. Burgess. I will refer again later to
these sums of £7,000 and £3,275.
5. SPRINGFIELD
MONIES £129,714.58 (PART OF)
47. In
the proceedings in the High Court the amount of the money in relation to
48. Springfield
House was not challenged and the only issue was whether Mr. Fagan was obliged
to
repay it. The finding of the High Court upheld on appeal in the Supreme Court
that the
sums
were due under several different headings set out in the judgment of Costello
J. It was
held
that the reasons as set out in the judgment of Mr Justice Costello at pages 30
and 31 and
follows:-
"In
relation to the 1993 transaction I accept Mr Burgess's evidence that Mr. Fagan
changed his mind concerning the Springfield property and decided in 1993, that
he would like to reside in the house and develop only a portion of the site. I
also accept his evidence that it was possible at that time for the company to
complete the purchase as it had a substantial income from its Islandbridge
properties and it owned Bridgewater House which a month later, in May 1993,
according to Mr. Fagan's evidence, it sold to himself and his wife for
£250,000. It follows that the 1993 transaction was entered into in breach
of Mr. Fagan's fiduciary duty and he is liable to account to the company for
monies paid for his benefit. In addition the money is due under contract.
There was no agreement that Mr. Fagan would get the benefit of the sums paid by
the company to the vendor and accordingly, the monies paid are recoverable
under a term which should be implied into the contract ..........
As
to the sums paid by the company in pursuant of the second 1994 transaction,
these sums are, again, recoverable from Mr. Fagan arising from the breach of
his fiduciary duty to the company. Even if the company could not then complete
the second contract. Mr. Fagan owed a duty to the company to endeavour to
ensure that the company got the benefit of the contract and instead of so doing
he took the property himself and raised a balance of the purchase price on the
security of the land. Furthermore, I accept Mr Burgess's evidence that Mr.
Fagan agreed to repay the company the sum it had advanced on the purchase of
"Springfield", and so the money is due under an express contract. In the
further alternative there must be a term implied in his contract with the
company that he would repay to it the sum it had paid to the vendor for his
benefit".
49. As
appears from the foregoing, the judgment against the Plaintiff in relation to
'Springfield'
was based on a number of alternative grounds, many of which were not based on
the
evidence of Mr Burgess. In these proceedings Counsel has conceded that
approximately
50. £100,000
is owing. Dr. Forde, however, argues that the penalty and interest amounting to
approximately
£30,000 is recoverable. However, no single question was put to Mr. Burgess
in
relation to the penalty or interest, judgment was obtained on the basis that
the company
expended
money for which it got no return. Whether or not the company could have raised
the
money for the purchase of 'Springfield' is irrelevant to that finding the
judgment. In those
circumstances
it seems to me that, were Mr Burgess's evidence proved to be false, the
judgment
would not be set aside in relation to those monies. Furthermore the basis on
which
the
case was argued in the High Court was that none of the money was owing.
51. For
the reasons I have outlined above, even if the entire contents of the
52. Statement
of Claim were proven, I do not consider that there is any reasonable chance
that the
judgment
in respect of 'Springfield' would be set aside.
53. I
have decided most of the issues on the basis that even should the allegations
made in the Statement of Claim be proven, there would be no reasonable chance
of the judgment being set aside. In the case of the Classical Architectural
Stone Ltd monies, the decision was on the basis that the evidence on which it
is now sought to rely was or should have been available at the time of the
trial, and no adequate explanation was given for the failure to produce it
then. It is unnecessary, therefore, to consider the other legal submissions
save as follows:
54. It
is further argued by Dr. Forde that it would be somehow unconscionable for
the
Liquidator to stand over the judgment, even if the Plaintiff was unsuccessful
in law on
other
grounds in seeking to have the judgment set aside. There is no evidence that the
Defendant
"
knew
or ought to have known that substantial and highly material portions of
evidence
given in Court by Rory Burgess was false (sic)
"
as
was claimed in the original Statement of Claim". There is no evidence "
that
the Defendant knows or ought to know that substantial and highly material
portions of the evidence given to the Court by Rory Burgess was false (sic)
"
as is claimed in the amended Statement of Claim. There is no evidence of any
mala fides or impropriety on his part.
55. A
considerable part of the cross-examination of the Liquidador was directed
towards showing that he was partial as between Mr. Fagan and Mr. Burgess.
There was criticism of Mr. McQuaid for not trying harder to obtain Mr. Burgess'
diaries. Questions were also directed as to his failure to pursue Mr. Burgess
for his failure to keep proper records. Questions were also asked as to why it
was Mr. Fagan rather than Mr. Burgess who was pursued by the Liquidator.
56. I
am satisfied on the evidence before me that there has been no want of
impartiality between the parties on the part of the Liquidator, and that he
dealt even-handedly with Mr. Fagan and Mr. Burgess. The question of pursuing
Mr. Burgess for inadequate record-keeping is under consideration. The decision
not to resolve the conflict between Mr. Fagan and Mr. Burgess by having them
cross-examined in the Master's Court was a policy decision taken by the
Liquidator on good grounds. The decision to pursue Mr. Fagan rather than Mr.
Burgess was justified on the basis that Mr. Fagan was the beneficiary of the
monies. In circumstances where I find that there has been no unfairness or no
partiality on behalf of the Liquidator, it is not necessary to consider in what
circumstances, if any, the Liquidator might be precluded from standing over a
judgment he obtained for want of impartiality.
57. That
does not entirely dispose of the matter however. At paragraph 7 of his second
supplemental affidavit dated 10th day of March 1998 Mr. McQuaid states:
"The
Plaintiff has produced documentation in these proceedings which shows that
£7,000.00 for which I have obtained judgment was not paid to him
personally but to a limited company by the name of Classical Architectural
Stone Limited. The reason I debited Mr. Fagan personally was that he indicated
to me that Classical Architectural Stone was a business operated by him and was
unable to show what the monies were expended on. He specifically confirmed
this to the High Court where he expressly stated that the said limited company
never traded. Accordingly, judgment was obtained against him because of the
fact that he mislead me and the Court. However, in the light of this new
evidence (which has nothing to do with the evidence of Rory Burgess) I am
prepared to look into the matter and if I am satisfied that these monies were
indeed spent for the benefit of the company, I will allow
Mr.
Fagan credit for the said sum of £7,000.00 against the amount for which I
have obtained judgment and credit also for any element of interest under the
Courts Act included in the judgment on that sum."
58. The
Liquidator got judgment against Mr. Fagan for monies paid to Classical
Architectural Stone Limited a separate legal entity. Mr. McQuaid's qualified
offer to allow Mr. Fagan credit is, in my view, an inadequate response.
Likewise, in my view, it is likely that the £3,275 was also money that was
recoverable (if at all) against the company and not Mr. Fagan - I will discuss
with Counsel the form of order that should follow this finding.
59. Having
carefully considered all the relevant matters, therefore, and applying the law
as set down aforesaid, it seems to me that the action should be stayed (subject
to a suitable order being made concerning the £7,000, and £3,275).
© 1998 Irish High Court
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