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Cite as: [2013] IEHC 362
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Judgment Title: Harlequin Property (SVG) Ltd & ors -v- O'Halloran & anor Neutral Citation: [2013] IEHC 362 High Court Record Number: 2010 6443 P & 2010 223 COM Date of Delivery: 25/07/2013 Court: High Court Composition of Court: Judgment by: McGovern J. Status of Judgment: Approved |
Neutral Citation: [2013] IEHC 362 THE HIGH COURT COMMERICAL [2010 No. 6443 P]
[2010 No. 223 COM] BETWEEN HARLEQUIN PROPERTY (SVG) LIMITED AND HARLEQUIN HOTELS AND RESORTS LIMITED PLAINTIFFS AND
PADRAIG O’HALLORAN AND DONAL O’HALLORAN DEFENDANTS JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 25th day of July 2013 1. In these proceedings, the plaintiffs’ claim against the first named defendant is in essence that he misappropriated large amounts of money paid by the plaintiffs to him in connection with a construction project to build a luxury hotel and resort in the Caribbean. The plaintiffs seek declarations that monies held by him in certain bank accounts in the State are held by him as constructive trustee for the benefit and to the use of the plaintiffs and that the funds constitute unjust enrichment by the first defendant at the expense of the plaintiffs. The plaintiffs also seek restitution or damages (including exemplary damages) for fraud and/or fraudulent misrepresentation and a declaration that the plaintiffs and each of them are joint beneficial owners of a dwelling house in County Cork which, the plaintiffs allege, was purchased by the first defendant out of monies misappropriated from the plaintiffs. 2. The second named defendant is the father of the first named defendant and the plaintiffs’ claim against him is that he received money from the first named defendant from sums misappropriated by the first named defendant from the plaintiffs. 3. These proceedings are part of a multi-jurisdictional fraud claim arising out of a construction project to build a luxury hotel and resort at Buccament Bay in Caribbean islands of St. Vincent and the Grenadines (“SVG”). The events in issue before the court took place between 2008 and 2010. 4. The plaintiffs claim that during that period, approximately US$50m was paid by or on behalf of the plaintiffs (together hereinafter referred to as “Harlequin”) to companies owned and controlled by the first named defendant. These companies were ICE (SVG) Ltd. (“ICE”), Cellate Caribbean (SVG) Ltd. (“Cellate SVG”) and Cellate Caribbean Ltd. (“Cellate”), which are collectively known as “the ICE Group”. It is the plaintiffs’ case that they were the only significant source of income for the ICE Group at that time and they allege that despite receiving more than US$50m from the plaintiffs, the value of construction carried out by the ICE Group companies between 2008 and 2010 was approximately US$22.4m. 5. The ICE Group of companies had taken over work on the site after a previous contractor Ridgeview Construction (SVG) Ltd. (“Ridgeview”) had been dismissed following serious differences between it and the plaintiffs over the works being carried out and alleged misappropriation of funds. 6. There is no agreement between the parties on the precise terms of the contract between the plaintiffs and the ICE Group. I will deal with the differences between the parties on this issue later in this judgment. 7. The development was to be built in stages. After the ICE Group took over the site from Ridgeview, some changes were made to the design of the resort and as time went by, the plaintiffs became concerned about delays in completing Phase 1 of the development. The plaintiffs allege that after numerous meetings between the parties, the ICE Group agreed to complete phase one by 1st July, 2010. Specifically, the plaintiffs allege that the first named defendant gave an absolute assurance that this would be done and the plaintiffs marketed the development on that basis. In order to achieve that opening date, a revised schedule of payments was agreed between the parties. The plaintiffs marketed the development at a major trade fair in London and arrangements were put in place to bring tour operators and investors to the site for the opening. The plaintiffs allege that not only was that deadline not met by the ICE Group, but at a time when they had been pumping ever-increasing sums of money into the ICE Group for the purpose of meeting the deadline, the first named defendant was simultaneously misappropriating large amounts of money for his own benefit. 8. The plaintiffs claim that between 2008 and 2010, the first named defendant misappropriated for his own personal benefit a sum in excess of US$13.5m that should have been deployed on the Buccament Bay project or other authorised Harlequin projects and which was paid by Harlequin to the ICE Group for that purpose. The plaintiffs claimed that the first named defendant lived a very lavish lifestyle at the expense of the plaintiffs and spent their money, inter alia, on purchasing a private jet, renting an expensive mansion in Sandy Lane, Barbados, buying a racetrack in St. Lucia, purchasing a quarry in SVG and buying expensive gifts for his girlfriend. Although the plaintiffs claim these were illegitimate payments and expenditure, they do not form part of the Irish proceedings other than being offered as evidence corroborating his misappropriation of funds. 9. The plaintiffs claim that the first named defendant diverted approximately US$2,283,600 to Ireland for his own use, including a sum of US$226,800 for a wedding that was planned but never took place. 10. The first named defendant denies that he misappropriated any money and claims that all of the sums expended by him were either for the benefit of the Buccament Bay project or the ICE Group of companies in facilitating their work on the project, and that insofar as some of the payments made were for him personally, he was entitled to make these payments as part of his remuneration for the work which he was doing. Legal Issues
(ii) whether the fact that the first named defendant utilised corporate vehicles (the ICE Group) to carry out the alleged fraudulent scheme offers him a personal exemption or immunity from suit in respect of that fraud; (iii) further, or in the alternative, whether the monies advanced by Harlequin were held on a “Quistclose” trust by the ICE Group and can now be traced to the accounts and assets of the defendants and each of them; (iv) In the event that the court holds there is no direct claim in fraudulent misrepresentation and/or fraud against the first named defendant, whether the court is entitled to lift the corporate veil so as to enable the plaintiffs to claim directly against the first named defendant in respect of that fraud? (v) If the ICE Group is insolvent, is the first named defendant liable to the plaintiffs on the basis of a breach of duty owed by him as a director to the company’s creditors? (vi) Whether the assets of the first named defendant, which are the subject of this action, are held on trust to the benefit of the plaintiffs; and (vii) Whether the second named defendant knowingly received monies that were disposed of fraudulently and/or in breach of trust, or whether the second named defendant is in any event liable to pay those monies as monies had and received by him to the use of the plaintiffs. 12. The first named plaintiff is registered in SVG and was involved in overseeing the construction of Buccament Bay Resort. Mr. David Ames and his wife, Mrs. Carol Ames, are the directors of the company. The business of the company is to buy land and build and operate luxury hotels and resorts in the Caribbean. The company sells villas and hotel units to property investors. 13. The second named plaintiff is registered in Grand Cayman and is the operator of the Buccament Bay and other resorts in the Caribbean. Mr. David Ames is the owner and sole director of the company. 14. The first named defendant was at all material times the CEO of a number of construction companies based in Barbados and SVG and which comprise the ICE Group. 15. Before the ICE Group was contracted to work on the Buccament Bay site, Ridgeview Construction (SVG) Ltd. (“Ridgeview”) had been employed to construct the development. The ICE Group had been subcontractors to Ridgeview in the period between March 2007 and July 2008. 16. The development at Buccament Bay is in an area of approximately 60 acres and is the largest private development so far undertaken in SVG. At its height, approximately 1,000 workers were engaged on development. The site is located on land adjoining the sea and accommodation is arranged in apartment blocks and cabanas or villas which vary in size from one to four bedrooms. Some are detached and some are semi-detached. 17. The resort was pitched at the luxury end of the market and, as one would expect in a development of this nature, there were to be a number of different restaurants and sporting and leisure facilities. 18. The development was to be built in a number of phases. This dispute is primarily concerned with Phase 1 of the development. The original agreement was that Phase 1 would be built by 1st March, 2010. This date was later extended to 1st July, 2010. While the scope of Phase 1 altered to some extent over time, it can be summarised as follows:-
(b) By 26th May, 2009, the parties were working towards an opening day of 1st July, 2010, and the scope of Phase 1 was set out in an email of 26th May, 2009, from Mrs. Carol Ames in which she stated that Phase 1 “. . . will consist of a 362-room key 5-star resort”. Included in the opening would be a marina, dive shop, reception, beach bar and restaurant, galleon ship, ‘Trader Vic’s’ restaurant, steak and fish restaurant, Asian fusion restaurant, fine dining Italian restaurant and a buffet restaurant. Further details as to the types of suites and rooms and their dimensions were set out in the email. It also appeared from that email that the “water’s edge” area was to be finished. (c) On 23rd and 24th November, 2009, a project progress meeting took place at the site and the key decisions taken at that meeting were set out in minutes which were circulated by an email on 14th December, 2009. It is not necessary to set out all the details of Phase 1 as therein recorded. What is important is that at the commencement of the minutes, it is stated “the meeting began with a review of the overall site plan to establish the exact extent of works for Phase 1 that is to be completed by July ’01 2010”. (d) A further project progress meeting took place on 25th and 26th January, 2010, and the minutes of that meeting set out the scope of works in Phase 1 to be delivered by 1st July, 2010. Although the completion date is stated to be “July 3rd 2010”, the parties are agreed that that was an error. While there is some lack of precision in what was agreed (for example, the reference to “approx 150 cabanas”), the general scope of Phase 1 is set out. It included the cabanas, a waterfront village, including four restaurants and ancillary works, a beach bar, a retail village building, pool areas, a marina boardwalk and jetty with breakwater and beach works, Apartment Block 1 and Apartment Block 2 to be fully completed externally but left as a shell and core standard internally, certain works to be carried out in Apartment Block 3 and some temporary backup house buildings. Some further matters are also referred to in those minutes. (e) 18th May, 2010. A reduced scheme of works to comprise Phase 1 is set out in a memorandum of a meeting on that date. This includes two restaurants (with some uncertainty about “Trader Vic’s” being completed on time), a swimming pool, 60 cabanas for guests and other cabanas to be used on a temporary basis for other purposes, Apartment Block 2 to be completed for accommodation (but hotel staff to reside in cabanas until available), some sports facilities, Apartment Block 3 to be completed to 5th floor with roof frames fitted, waterfront village and retail village. There are other matters referred to in the memo. 19. Extraordinarily, for a development of this size, there was no written contract. Mr. David Ames said that he was persuaded not to have a written contract by Mr. Martin MacDonald who had become a close and trusted advisor and confidante. Throughout the proceedings, Mr. MacDonald was generally referred to by the soubriquet of “Mac”. Mac was a partner in the accountancy firm of Wilkins Kennedy. Mrs. Ames got to know him when she was employed with Patten Pools (Construction) Ltd. As the plaintiffs’ business grew, they needed someone who could advise them on financial matters and Mac became the point of contact between the plaintiffs and Wilkins Kennedy. But he was more than that. He eventually became de facto the Chief Financial Officer of the plaintiff’s company as he carried out work going way beyond the role of an accountant. He also became a close personal friend of Mr. and Mrs. Ames and they trusted him absolutely. Although Mr. MacDonald played a pivotal role in the events giving rise to this litigation, it is of some significance that he was not called to give evidence, nor did he supply a witness statement. 20. For whatever reason, Mr. Ames did not see the need for a written contract and he appears to have willingly gone along with the suggestion that the parties to the building contract for the resort at Buccament Bay would work things out on an ad hoc basis as they went along. As matters transpired, this turned out to be a very poor decision on his part. 21. The plaintiffs claim that the ICE Group agreed to undertake Phase 1 of the building work at a rate of US$96 per sq. ft. The plaintiffs agreed to make regular interim payments to fund the construction costs. Mr. Ames gave evidence that the rate of US$96 per sq. ft. was agreed in respect of the cabanas and apartment blocks, but conceded that the waterfront village area had not been costed, although he claimed that the rate was never questioned in relation to the restaurants. Although his evidence varied somewhat on the issue, he came down on the figure of US$96 per sq. ft. for the whole of the Phase 1 contract. In his witness statement, he stated that the rate remained US$96 per sq. ft. for all building costs with a reduced rate for pools, decking and car parking. This was corroborated by Mac’s handwritten endorsement on a document which was contained in Appendix 4 of Mr. Ames’ statement and was put in evidence. 22. The first named defendant contends that in the pleadings, both parties have asserted that the contract price was US$76m. 23. Paragraph 16 of the amended statement of claim says that figure was “. . . to complete the Buccament Bay project based on an agreed price per square footage for works due to be competed by 1 July 2010”. At paragraph 7 of the amended defence and counterclaim, the first named defendant denies that the ICE Group agreed to undertake the building works at an agreed price of US$96 per sq. ft., but states that the price per sq. ft. varied for different areas of the project from US$57 to US$102 per sq. ft. and that the total agreed was the price of US$76,208,132 plus the cost of any variations requested as described by the scope of works. 24. There is no doubt that even when the statement of claim was amended, the figure of US$76m was not altered. Furthermore, in an affidavit sworn on 11th April, 2011, in these proceedings, Mr. Ames refers to a figure of US$76,843,396. In the course of his evidence, Mr. Ames sought to resile from that figure. 25. Mr. Ames said that the price of US$96 per sq. ft. was to cover all the services to the accommodation including finished plastering, painting, tiling, sanitary ware and connection of utilities so as to leave the premises ready for the hotel operator to put in furniture, pictures, TVs and matters of that kind. Mr. Simon Taylor, who works on business and brand development with Harlequin, and Mr. David Campion, an architect (formerly with Murray O’Laoire and now working for Harlequin) both confirmed that a rate of US$96 per sq. ft. was agreed. In his evidence, Mr. Campion said that the first named defendant confirmed that this was his agreement with Mr. Ames. Mr. Campion said that the remark was made in the context of a discussion about the cabanas, apartment blocks and joinery tenders for the restaurants. While there is some uncertainty as to the precise basis for calculating the contract price, the evidence established that - whether one takes the plaintiffs’ figures or the defendants’ figures - the profit margin on the job would be tight. Indeed, there was a body of evidence to suggest that the work simply could not have been done for a rate of US$96 per sq. ft. 26. The court heard evidence from Mr. Campion and Mr. Sanjay Amin, a quantity surveyor retained by the plaintiffs, to the effect that it would simply have proved impossible for the ICE Group to deliver the resort at that rate. Mr. Amin estimated that a rate of US$154 per sq. ft. may more reasonably have been expected in 2010, although even this rate would result in little profit accruing to the defendants. Mr. Amin was of the view that profit margins for construction contracts in the Caribbean typically come to between 8% and 15%. 27. While there are disputes on the exact costings for the project, these disputes are not critical to the issues which I have to decide because this is not a building contract case. The figures may be of some importance in tending to support the position of one party rather than another, but it is a peripheral issue. Whether the contract was for a fixed lump sum, as contended for by the defendants, or a fixed amount, as contended for by the plaintiffs, is somewhat tangential to the main issues that arise in this case. What is clear on the evidence is that there was an agreement that monies would be paid on a periodic basis. The plaintiffs contend that while these sums varied from time to time, they were - by and large - paid as they fell due, up to the date of termination of the defendants’ contract. Payments made by Harlequin to ICE Group 29. Is worth remarking that at the commencement of his cross-examination, counsel for the first named defendant acknowledged that there was no great dispute between the parties as to the figures set out in his reports, but that the dispute arose in relation to the characterisation of certain payments as “misappropriation”. Mr. Jacobs acknowledged that in relation to one of the Irish payments there was a duplication involved in relation to a payment to Adare Manor Hotel and ‘Weddings by Franc’. That amounted to a double counting of US$25,800. When Mr. Jacobs discovered that duplication, he corrected the figure in Appendix 10 of his report. 30. I am satisfied that Mr. Jacobs’ analysis of the books and records which he examined and the conclusions which he reached are fair and reasonable and I accept his evidence. 31. Mr. Jacobs expressed the view that 94% of the income of the ICE Group came from Harlequin. In other words, apart from one or two small projects, they were entirely dependent on Harlequin. The evidence which I heard in this case overwhelmingly supports that view. Furthermore, the evidence proffered showed that Buckley Meadows and Harmony Hall, the two other construction projects with which the ICE Group was involved in the Caribbean, independently of the plaintiffs, were unlikely to turn a profit. Indeed, the Buckley Meadows project was described by Mark Wallerson, former financial director of the ICE Group as a “loss leader”. Having considered the evidence available to him, including the figures provided by BCQS in a report, Mr. Jacobs concluded that the ICE Group was effectively insolvent at the time of the termination of their contract by Harlequin. 32. Quite apart from that evidence, it was clear, from the evidence as a whole in this case, that the ICE Group was never going to make a substantial profit out of the completion of Phase 1 of the development. It seems to me that this is a relevant consideration in evaluating the Irish payments which are at the heart of these proceedings. Misappropriation 34. At a meeting on 1st September, 2008, that took place at the plaintiffs’ office at Basildon in the UK, Harlequin agreed to make weekly payments to the ICE Group. The first payment of US$100,000 was transferred on 4th September, 2008, and this was followed by payments of US$125,000 per week thereafter. The agreement was that that sum would be paid per week for 12 weeks. At some time around 13th October, 2008, Mr. Ames was informed by Mr. MacDonald that the ICE Group was doing a very good job on the project and that the weekly payments should be increased to US$165,000 until Christmas in order to speed up construction. Mr. Ames agreed to increase the weekly payment accordingly. The project continued in this way until early 2009. 35. On 17th March, 2009, Harlequin’s payments to the ICE Group increased to Stg.£400,000 per week with effect from 19th March, 2009. This increase was linked to discussions between Mr. Ames, Mr. MacDonald and the first named defendant on site at Buccament Bay in late February 2009. In May 2009, Mr. Ames committed to making increased payments and, specifically, to make 43 weekly payments of Stg.£450,000 in return for the complete delivery of Phase 1 on 1st July 2010. Mr. Ames’ understanding was that those payments would enable Phase 1 to be completed. The price did not include the fit out or furnishing of the restaurants. The weekly payments of Stg.£450,000 continued with some variations until 23rd February, 2010. At a meeting in November 2009, the plaintiffs agreed a revised and reduced scope for Phase 1 to be completed by 1st July, 2009. It was agreed that some remaining elements of Phase 1 would be delivered after 1st July, 2010. By 28th January, 2010, Harlequin had paid 41 of the 43 weekly payments agreed with the ICE Group in May 2009. 36. On 23rd February, 2009, a new payment plan was agreed which involved payments of Stg.£600,000 per week to be made and which were to be supplemented by additional ad hoc payments as and when required to ensure Phase 1 was delivered by 1st July, 2010. These payments were agreed at a time when Mr. Ames was becoming increasingly concerned that the 1st July, 2010, deadline would not be met. The first of the Stg.£600,000 payments was made on 24th February, 2010, and weekly payments in that sum continued until 18th May, 2010. Meanwhile, on 10th May, 2010, a payment of US$435,000 was made by Harlequin to ICE Group. 37. On 18th May, 2010, a meeting took place at Harlequin’s offices in Basildon. By this time, the plaintiffs were extremely concerned about the lack of progress on the development and felt they had been misled. Desperate to ensure that an opening could proceed on 1st July, 2010, Mr. Ames agreed that the plaintiffs would make seven payments of US$1m per week to the ICE Group. On the day following the meeting, Harlequin paid US$1m to the ICE Group, and on 27th May, 2010, they paid another US$1m. That was the last payment made before the ICE Group was dismissed from the site. 38. Mr. Paul Jacobs, in his report and evidence, stated that from August 2008 until June 2010, payments of US$9,942,633.59 were made from ICE Group bank accounts in respect of matters which the plaintiffs claim were totally unrelated to the Buccament Bay project. These included monies spent in relation to the purchase of a jet aircraft, the purchase of a Hertz franchise in St. Lucia, the purchase of racetrack and the purchase of a quarry in SVG. There were also monies paid in respect of a Romanian ski resort project in which the first named defendant was involved with Mr. Noel Tynan. The first named defendant maintains that some of these payments were for the benefit of the Buccament Bay project, for example, the purchase of a jet aircraft and the quarry. He sought to justify the purchase of the jet aircraft on the basis that there was no scheduled air service between the Caribbean Islands and other destinations where the first named defendant was required to travel on Harlequin related business. With regard to the quarry, the first named defendant claims that this was a purchase which would save costs in the sourcing of raw material for use on the Buccament Bay building project. 39. This case is concerned with payments which were allegedly misappropriated and paid into Irish accounts. So far as the Irish payments were concerned, they were made from the ICE Group, primarily to bank accounts of the first named defendant with the exception of a sum of US$201,000 to ‘Weddings by Franc Ltd’. 40. The first named defendant had two accounts in Ireland which are relevant to these proceedings. One was a Bank of Ireland Account No. 72907584 (“the 584 Account”) and the other was with TSB, Account No. 15434479 (“the 479 Account”). The second named defendant had an account with Permanent TSB in Ireland which bore the Account No. 16111530 (“the 530 Account). 41. The plaintiffs contend that the evidence of Mr. Jacobs establishes that between January 2009 and May 2010, the ICE Group transferred US$2,283,600 into bank accounts in Ireland which had nothing to do with ICE Group’s business, much less the Buccament Bay project. This is disputed by the first named defendant who claims that some of these monies were connected with his plan to set up offices for the ICE Group within Ireland. In the last month alone, before the contract with the ICE Group was terminated in June 2010, the Group transferred US$350,000 into the first named defendant’s own personal bank accounts in Ireland at a time when the plaintiffs claim the Buccament Bay project urgently required supplies to be purchased to complete the building of Phase 1. 42. The Irish payments started in January 2009 and continued through to the conclusion of the contract in June 2010. As the payments increased in amount, the plaintiffs allege that the first named defendant siphoned off ever-larger sums for non-Buccament Bay project items in the Caribbean and also transferred ever-larger sums to his Irish accounts. 43. Mr. Roberts’ evidence shows the following Irish payments having been made:-
February 2009: Transfer to Bank of Ireland Account (the 584 Account) US$5,000 March 2009: Transfer to Bank of Ireland Account (the 584 Account) US$10,000 April 2009: Transfer to Bank of Ireland Account (the 584 Account) US$60,000 June 2009: Transfer to Bank of Ireland Account (the 584 Account) US$50,000 July 2009: Transfer to Bank of Ireland Account (the 584 Account) US$38,000. Transfer to PTSB (the 479 Account) US$100,000. October 2009: Transfer to Bank of Ireland Account (the 584 Account) US$150,000. Transfer to PTSB (the 479 Account) US$100,000. November 2009: Donal O’Halloran (second defendant) US$358,000. Transfer to Bank of Ireland Account (the 584 Account) US$150,000. Transfer to PTSB (the 779 Account) US$150,000. Weddings by Franc Ltd. US$72,000. December 2009: Adare Manor US$25,800. Transfer to Bank of Ireland Account (the 584 Account) US$50,000. Transfer to PTSB (the 779 Account) US$50,000. Weddings by Franc Ltd. US$25,800 (to be deducted as same payment in respect of Adare Manor December 2009). February 2010: Transfer to Bank of Ireland Account (the 584 Account) US$300,000. March 2010: Weddings by Franc Ltd. US$129,000. May 2010: Transfer to Bank of Ireland Account (the 584 Account) US$350,000. 44. In the meantime, the first named defendant was making substantial payments in the Caribbean in respect of other matters which the plaintiffs allege were quite unconnected with the Buccament Bay project. These have been referred to earlier and include such matters as the purchase of a Falcon Jet aircraft, a racecourse in St. Lucia, the Hertz franchise in St. Lucia and a quarry in SVG. There were other items referred to in the course of the evidence. The Schedules appended to the witness statement of Mr. Paul Jacobs and supported in his evidence show that the level of payments for what the plaintiffs claim were matters unrelated to Buccament Bay increased in the latter half of 2009 and the beginning of 2010. While these payments are not part of the Irish proceedings, they are relevant to establish a pattern of behaviour on the part of the first named defendant and high levels of expenditure at a time when more and more money was required to complete the construction of Phase 1 of the development. In the course of his evidence, Mr. Paul Jacobs referred to a study which he undertook to show in percentage terms what monies paid by Harlequin to the ICE Group were paid out on items which are shown in the ‘Misappropriation Schedule’ to his report which includes both Irish and Caribbean payments. He noted that there was an increase in the proportion of monies being used for items on the Misappropriation Schedule as time went by, and in particular, he noticed an uplift in relation to the period of October and November 2009. He calculated that approximately 26% of the monies paid to the ICE Group by Harlequin in respect of the Buccament Bay project were paid out on items specified in the Misappropriation Schedule. 45. Looking specifically at the purchase by the first named defendant of a house at Shippool, Innishannon, County Cork for €790,000, Mr. Jacobs was able to identify a total of €761,000 which was lodged by four transactions lodged into the account of the solicitor for the first named defendant in the deal. Of that sum of €400,000 was comprised in a bank draft that preceded the Bank of Ireland mortgage loan offer. Mr. Jacobs was satisfied that this sum came from the first named defendant’s bank account and that 98% of the lodgements into the bank account came from the ICE Group. Other than that, he was not able to say precisely how the €400,000 was actually funded. 46. A total of US$1,673,000 was sent by the ICE Group to the first named defendant’s bank accounts in Ireland to establish what was referred to as “Irish operations”. In February 2010, there were three payments US$100,000 sent to the first named defendant’s Irish accounts. One was sent on 11th February, 2010, one on 17th February, 2010, and one on 24th February, 2010. They were described as management fees. It was also put to the first named defendant that between October 2009 and February 2010, US$950,000 had been sent to his Irish accounts excluding repayments made to loans alleged to have been made by the second named defendant. The first named defendant said that the funds were sent to set up an operation in Ireland. He stated that the money was ring fenced for expenditure on Harlequin projects. He stated that the ICE Group intended to set up an operation in Ireland which would support the Caribbean operations. When asked how this would do so, his evidence was vague and unclear. Although he claimed that the monies were ring fenced for that purpose, some of the monies included the substantial sum of US$201,000 to ‘Weddings by Franc’. The first named defendant admitted that insofar as some of these payments were stated to be for discharging invoices and some were stated to be for management fees or salary, that they were not in fact for that purpose. While he did give some evidence about negotiating for the lease in respect of offices at Penrose Wharf in Cork, no lease was ever signed and it was difficult to understand how his business, which was predominantly in the Caribbean at that stage, was going to be helped by relocating offices to Cork. The first named defendant admitted that an ICE Group company had been incorporated in the UK on 2nd October, 2008. Therefore, if the Group required a European based company to handle its affairs, one wonders why it could not have been done by the UK company. In any event, it was clear that at the time when many of these payments were made, the Buccament Bay project was stalling and required substantial injections of cash to meet the opening deadline. 47. The only conclusion one can come to is that the monies were sent to Ireland under bogus descriptions of “invoices” or “management fees” or “salary” so as to conceal their true purpose. While there was evidence that certain steps had been taken with a view to setting up an Irish office for the ICE Group, there would be no need for such a charade had these funds had been legitimately and properly diverted for this purpose. Furthermore, such an undertaking was entirely unconnected with the Buccament Bay project. 48. I am satisfied that some negotiations had taken place with a view to renting premises in Cork. A sales note of 1st June, 2010, from the agent states:-
Control over ICE Group 51. Ms. Quammie gave evidence that the first named defendant would chose what was paid and what was not. Apart from the monthly payroll, there was no set payments system. Everything other than payroll was paid on an approval basis by him. 52. In April 2010, Ms. Quammie was becoming very concerned about the cash flow position at the ICE Group and the amount of money which was being spent on matters unrelated to the Buccament Bay project. She was aware that there was constant negotiation between various members of the ICE Group and the first named defendant to try and get payments for the Buccament Bay project. As the agreed opening date for Phase 1 became closer, she found herself dealing more and more with pressure and queries from creditors. Especially, from around March 2010 until the ICE Group was dismissed from the site, a lot of creditors were calling about payments and she could not pay invoices or bills without approval from the first named defendant. At the same time, she was being directed to make regular and substantial payments from the ICE Group’s bank accounts to the first named defendant’s personal bank accounts in Ireland. By way of example, she said that on 16th February, 2010, she received an email from Mr. David Wallerson, the corporate accounts manager for the ICE Group, to send US$100,000 to Mr. Padraig O’Halloran’s Bank of Ireland account “when the transfer hits tomorrow” and on 5th March, 2010, she received an email from the first named defendant saying that €50,000 needed to be sent weekly to his Irish bank account. At the end of May 2010, a sum close to US$1m was received from Harlequin and the majority of payments paid out immediately thereafter were for matters which Ms. Quammie said were unconnected with the Buccament Bay project. US$250,000 was sent to the first named defendant’s own bank account in Ireland. She had no doubt that the person who controlled the ICE Group and the financial disbursements made on its behalf was Mr. Padraig O’Halloran, the first named defendant. Because of the position which she held within the ICE Group and her areas of responsibility, she was in a unique position to give such evidence and I accept that evidence. 53. She was cross-examined about the retention by her of emails and she stated that she did so as she was concerned to protect her position. She said that as time went by, she would submit requests for payment of various creditors. While these would be turned down, she would “. . . get ad hoc instructions for stuff as planes, stuff as money to Mr. Padraig O’Halloran and items that were not exactly related where the actual expenses remained outstanding from (sic) my own personal benefit, in the event that it ever got out of control, I retained my emails”. 54. I found this evidence to be compelling. While Ms. Quammie was cross-examined robustly about her characterisation of certain payments, and in particular the purchase of KLB, a company involved in selling and/or hiring plant and machinery, no ulterior motive was ascribed to her for giving evidence which suggested many of the payments made by the ICE Group were to the first named defendant’s personal bank accounts or were for matters unrelated to the Buccament Bay project. 55. Quite apart from the testimony of Ms. Quammie, the evidence as a whole supports her view that the first named defendant was the controlling hand over the ICE Group and all significant decisions concerning expenditure were made by him. Representations made by the First Named Defendant 57. On numerous occasions, the first named defendant promised the plaintiffs that the ICE Group would deliver Phase 1 of the Buccament Bay resort by 1st July, 2010. These representations were made orally at many meetings and also in frequent emails. When these representations were made by the first named defendant, he knew that the deadline was of great importance to the plaintiffs. The first named defendant linked the delivery date with ongoing payments, stating that if the plaintiffs kept up the payments then the ICE Group would deliver Phase 1 by 1st July, 2010. 58. It is not necessary to outline all the occasions on which these misrepresentations were made as the transcripts of evidence are replete with these matters. Oral representations by the first named defendant assuring the plaintiffs of delivery of Phase 1 by 1st July, 2010, were made at meetings on the following dates:-
The First Named Defendant’s State of Mind 61. The evidence in this case established that from October 2009, legitimate requests for information by Mr. Ames to the first named defendant in the ICE Group were not being dealt with. Mr. Ames gave evidence of sending frequent emails to which he received no response. In January 2010, the first named defendant promised to send weekly site reports but these were not sent. Mr. Ames found that he was not being kept abreast of developments. As Mr. Ames continued to look for information, the first named defendant sent an email on 15th January, 2010, to Mr. Mark Coggle and Mr. Kevin Webster which was copied to Mr. Stephen McConaghy and Mr. Gilbert Aquino, the text of which is quite revealing. He stated:-
Please don’t give Dave Ames any information, please direct the information through me! . . .” 63. In January 2010, Mr. Kevin Webster, the project manager for the ICE Group at Buccament Bay, produced a ‘Gantt chart’ (a bar chart illustrating a project schedule) setting out a realistic schedule of works and a timeframe for completion of Phase 1. The achievable completion date was shown on this chart as being April 2011, and not 1st July, 2010. In Mr. Campion’s account, this chart was shown to the first named defendant who rejected it out of hand and instructed his staff not to tell Harlequin what the realistic date for delivery would be. 64. Mr. Sean O’Connor, who is an experienced project manager, gave evidence as to what system should be in place in a construction project of the size of the Buccament Bay resort. He was astonished that there was no bill of quantities or schedule of works, and when he arrived on site after the ICE Group contract had been terminated, he said the “site was an absolute mess” and “there was a lack of essential supplies on site”. He found that suppliers had not been paid and credit lines under the ICE Group had dried up. Mr. Gilbert Aquino, an architect, also confirmed that he was firmly of the view that the works could not be completed by 1st July, 2010, and that he had this view since the summer of 2009. He knew that Mr. Webster was also of that view. 65. It is of some importance to note that when Mr. Webster asked the first named defendant on 5th May, 2010, how he should respond to a request from Mr. Ames for an update on progress, that the first named defendant sent an email to Mr. Webster stating that his response should be “. . . nice and simple, along the lines that we are working towards the required deadlines, don’t spook him”. Clearly, the first named defendant did not intend Mr. Ames or the Harlequin companies to become aware of the actual prospects of an opening by 1st July, 2010. If they knew the true position, they were unlikely to keep putting money into the project. 66. The court heard evidence that in certain respects the works resembled a ‘Potempkin village’, with the façade of progress belying the fact that essential infrastructure had not been put in place. It emerged that while open areas around the cabanas had been fully landscaped, the requisite waste water drainage systems had not been put in place, such that sewage was found to have escaped into the soil. Mr. O’Connor described this state of affairs as “almost incomprehensible”, and gave evidence that, upon Harlequin’s taking control of the site in June 2010, all of the landscaping works had to be dug up and the appropriate waste water works installed. While Mr. O’Halloran’s evidence is that this approach was taken due to the need for the landscaping to bed in, and that it would require a small team only seven days to take up the sod and lay the pipes, it is impossible to avoid the conclusion, given the weight of corroborative evidence, that the true reason had been to convey a false impression as to the extent to which the construction works had been completed. 67. It emerged in the evidence, also, that Mr O’Halloran and key advisors, including Mr. Newman, had sought advice in February of 2010 from Knowles, a consultancy firm specialising in construction disputes. In Mr. Newman’s evidence the meeting was primarily concerned with assessing the possibility of the ICE Group “discontinuing” its involvement with the Buccament Bay project at short notice. However, it appears that they were advised that this would not be possible. The first named defendant claimed in evidence that the company had sought this advice because of failures on the part of the plaintiffs to make payments on schedule. Indeed, the first named defendant claimed that the ICE Group is owed a significant sum of money by the plaintiffs. However, there was no evidence of complaints having been made by the ICE Group or The first named defendant regarding purported difficulties in obtaining payment from the plaintiffs. Indeed, the meeting with Knowles took place in the same month that an agreement was reached with the plaintiffs for an increase in the payments to be made in pursuance of the Buccament Bay project. Around this time, also, the first named defendant and his senior advisors travelled to the UK, Jordan, Romania and Morocco canvassing for new business. It appears that a ticket had been purchased for Mr. MacDonald, but that he had ultimately not travelled with the other members of the party. RLB Reports 69. A careful reading of the reports indicates that the authors considered that a soft opening for Phase 1 was achievable but was “ambitious”. In their closing submissions, the plaintiffs draw attention to what they argue is a significant qualification of the January 2010 report, where it is stated “in the absence of any financial information relating to project cash flow requirements or procurement programmes, these elements have not been considered in forming our conclusion”. The plaintiffs argue that these elements are absolutely essential in determining the question as to whether or not the project would be delivered by 1st July, 2010. Mr. David Campion, a development director with the plaintiffs, was consultant architect for the ICE Group at the relevant time and said at that no time did RLB speak to him about the contents of the reports or discuss any of the issues arising therein. He said that he would have expected that the author of the report would speak with the architect for the project before completing it. 70. In its final report of 21st May, 2010, RLB concluded:-
71. There is undoubtedly a conflict between the evidence given by a number of witnesses on behalf of the plaintiffs and the evidence of the first named defendant himself and what is contained in the RLB reports. However, under cross-examination, the first named defendant admitted that in March 2010, it was wrong to give an assurance to Mrs. Ames that Phase 1 would be open on 1st July, 2010, as he required further information from Mr. Ames and assurances as to what would be done by the plaintiffs to facilitate that opening date. At the very least, he agreed that at the meeting of 25th and 26th March, 2010, it would have been wrong for him to give an unqualified answer that Phase 1 would have been finished by 1st July, 2010. To that extent, there is some difference between his evidence and what is contained in the RLB report. But what I think is of more importance is the fact that no witness from RLB was called to give evidence which would have led to the contents of the report being tested. This is against a background where Mr. Campion said that RLB never discussed any of the matters contained in the report with him, even though he was the project architect. 72. Mr. Rupert Spencer, a quantity surveyor who worked for Tower Consultants Ltd., gave evidence on behalf of the first named defendant and prepared a valuation report on the works executed by ICE Group at Buccament Bay. He received instructions from Cellate which was part of the ICE Group and his instructions were to prepare a report with the objective of providing an independent and expert opinion as to the value of the construction work executed by the ICE Group at Buccament Bay. Tower Consultants Ltd. had done work for Ridgeview Construction in or around the years 2006 and 2007, and the company had a one-third interest in RLB up to July 2009. Some evidence was presented to the court suggesting there may have been a relationship of sorts between the first named defendant and RLB. On 15th May, 2009, an email from Mr. Mark Williamson, the managing partner of RLB, to Mr. Stephen McConaghy, an employee of the ICE Group, and the first named defendant commenced with the following sentence:-
73. Having considered all the evidence in this case, I am satisfied that from some time in the summer of 2009, it was clear to the first named defendant that it was unlikely that Phase 1 would be completed by 1st July, 2010. The position was abundantly clear by November 2009, from which time the first named defendant was making assurances about the delivery date. I do not accept that the RLB report is of sufficient weight to give comfort to the first named defendant because of the information deficit which existed when they prepared the report, and because there are unresolved disputes about the accuracy of that report and the independence of RLB. Reliance placed by Harlequin on Representations of First Named Defendant
(b) Harlequin employed a large number of managers and staff in SVG to prepare for the opening on 1st July, 2010; (c) Bookings had been made and commitments were made to investors and 397 people were booked to visit the resort in July 2010; (d) From March 2010, Harlequin took steps to ensure that the hotel would be ready and operational by 1st July, 2010. Recruitment interviews took place and rooms were hired in other local small hotels to establish temporary offices in order to conduct training for new staff to run the resort; (e) The plaintiffs committed to purchasing all of the food and beverage items necessary for the opening. This required considerable logistical commitment and expense to bring in stores from Miami to SVG in refrigerated containers. 75. Wilkins Kennedy had been accountants to a business run by Mrs. Carol Ames and subsequently became accountants to Harlequin. The contact between Harlequin and Wilkins Kennedy was Mr. Martin MacDonald (“Mac”). Mac became more than a member of an accountancy firm retained by Harlequin. He became a close friend and confidante of Mr. and Mrs. Ames and, as time went by, Mr. Ames relied more and more on his assistance. Eventually, he became, to all intents and purposes, the Chief Financial Officer of Harlequin. Mr. Jeremy Newman was retained to give tax advice to Harlequin. After some time, he became involved in giving advice to the ICE Group. This was a matter of concern to Mr. Ames, who was reassured that sufficient safeguards were put in place to avoid any conflict of interest on the part of personnel within Wilkins Kennedy. On 23rd November, 2012, Mr. Newman resigned from Wilkins Kennedy and has now gone into business with Mr. Padraig O’Halloran. Together, they have set up a new construction and civil engineering company in Jordan. 76. Again and again, throughout this lengthy trial, evidence was produced which showed what a pivotal role Mac played in the day-to-day business of Harlequin. What also emerged in the course of the trial was the growing relationship that developed between Mr. Padraig O’Halloran and Mac. It developed to such a point that Mac attended the stag party of the first named defendant at Monte Carlo during the Grand Prix weekend in 2010. Although Mr. Newman gave evidence in the trial, Mr. MacDonald did not. He neither turned up at the trial nor furnished a witness statement. 77. I am satisfied that the evidence establishes that by the spring of 2010, Mr. MacDonald was working in league with the first named defendant and he had a serious conflict of interest in continuing to act for Harlequin. Mr. Ames felt very let down by Mr. MacDonald, and with some justification. By that time, Mr. Newman was also working for the ICE Group. 78. Mr. Newman gave evidence about the manner in which the Harlequin Group was funded, pointing out that it did not avail of loan facilities, but rather, brought in investors into the project. In the course of the trial, there were oblique references to Ponzi schemes and investigations in the UK into the way in which the companies were financed. These are matters for the appropriate authorities in another jurisdiction and are not relevant to the matters which I have to decide. A great deal of this trial was taken up with matters that were peripheral to the issues which I have to decide and did little more than add colour. Conclusion on the Facts
(ii) The ICE Group failed to complete Phase 1 within the agreed time. (iii) A series of substantial payments were made by the plaintiffs to the ICE Group on specific representations made by the first named defendant that Phase 1 would be completed by 1st July, 2010, when he knew or ought to have known that this was not true. (iv) The payments made by the plaintiffs to the ICE Group for the completion of Phase 1 ought to have been sufficient for that purpose but would not have provided significant profit to the ICE Group. (v) At a time when the ICE Group should have been applying the monies received from Harlequin towards the completion of Phase 1 of the Buccament Bay development, the first named defendant diverted substantial sums of money to bank accounts which he held in Ireland using false invoices and descriptions in respect of the transfers. Detailed and persuasive evidence was also given to show that the first named defendant was also diverting substantial sums of money for other matters unconnected with the Buccament Bay project which are not part of these proceedings and involve other jurisdictions. (vi) Some of the monies paid by the plaintiffs to the ICE Group were diverted to the account of the second named defendant. There was no evidence establishing any connection between these monies and the Buccament Bay project. While the defendants claim that these monies involve the repayment of loans made by the second named defendant to the first named defendant, the evidence in support of that claim was vague and unspecific. (vii) The only effective source of income of the ICE Group was the plaintiffs. (viii) The ICE Group was effectively under the control of the first named defendant who made all the significant decisions about financial disbursement. (ix) From the beginning of 2010, the first named defendant ensured that Mr. David Ames and the plaintiffs were not kept fully informed as to the progress of the building works at Buccament Bay despite requests for information and he sought to ensure that all such information going to Mr. Ames and the plaintiffs would be directed through him. His determination to control this information was to ensure that the plaintiffs did not ascertain the true position with regard to the works at Buccament Bay. (x) Harlequin had made the payments required of them under the contract up to the date of termination (apart from an insignificant number of occasions when some payments were delayed for a matter of days). Harlequin successfully built out the remainder of the first phase of the resort for a soft opening on 1st August 2010, albeit with the scope of works having been substantially reduced, and subsequently built out other parts of the resort. 80. In paragraph 11 of this judgment, I set out the legal issues which arise for consideration in this case. It is necessary to look at the legal principles which should be applied to these issues and the findings of fact which I have made. Fraudulent Misrepresentation
(b) that the defendant was the person who made the representation; (c) that the plaintiff was the person to whom the representation was made; (d) that the representation was both false and fraudulent; (e) that the representation was a material inducement to the claimant to act on it; (f) that the plaintiff did in fact alter his position on foot of the representation; (g) that the plaintiff thereby suffered damage.
83. The defendants rely on Cecil v. Bayat [2010] VWHC 641 (Comm.) where at p. 26, Hamblen J., sitting in the High Court of England and Wales, adopted the following formulation:-
85. The plaintiffs argue that the position in this case was similar to that in Edgington v. Fitzmaurice (1885) 29 Ch D 459, where it was held that a prospectus was deceptive when it contained false statements of what the company intended to do with the investor’s money once they had got it. In that case, a company issued a prospectus seeking subscriptions by way of debenture bonds, which were purportedly to be applied towards development and expansion of the trade of the company. In fact, the funds were put towards discharging existing liabilities. Furthermore, the plaintiff erroneously came to the belief that the debentures would incorporate a charge over the property of the company. The monies were advanced by the plaintiff and the company subsequently became insolvent. The court held that the representation as to the purpose for which the monies would be applied was capable of operating as a “material misstatement of fact” capable of giving rise to a tortious action in deceit. Personal Liability of a Director for Deceit/Fraudulent Misrepresentation
89. While there was some argument addressed to the issue of the standard of proof required to establish fraudulent misrepresentation, it seems to me that the ordinary civil burden of proof applies, namely, proof on the balance of probabilities. That is not to diminish the seriousness of making a claim of fraudulent misrepresentation and the consequences which may flow from failing to prove such an allegation where it is pleaded. The issue was canvassed in Banco Ambrosiano SPA v. Ansbacher & Company Ltd. [1987] ILRM 669, where Henchy J. stated at p. 701:-
Conclusion on Fraudulent Misrepresentation 91. The actions of the first named defendant illustrate that he did not intend to deliver the project as agreed and on time. I accept the evidence from expert witnesses which shows that basic elements of a major construction contract had not been put in place by the ICE Group in order to enable the works to be completed on time. There was no detailed breakdown of costs similar to a cost plan, bills of quantities or a schedule of builder’s quantities, a project programme or schedule or a detailed procurement plan. I also accept the evidence of those who entered on the site after the ICE Group was dismissed from the project and who found that the site was not in the condition one would have expected if there had been a genuine intention to finish the project on time. Essential building materials were not on site and when Harlequin took over the site in June 2010, many essential supplies had neither been ordered nor paid for and essential equipment was found to be in a poor state of repair or not operational. The evidence established that the ICE Group was in a financially insolvent position and did not have the capital required to meet its contractual obligations to Harlequin and honour the representations made by the first named defendant. Yet, at the same time the first named defendant continued to divert substantial sums of monies paid by Harlequin for the completion of the project when he must have known that by doing so, Phase 1 could not have been delivered on the agreed date. 92. All the evidence points to the conclusion that the first named defendant misappropriated significant sums of money paid to the ICE Group for the completion of Phase 1 and that the level of misappropriations increased significantly in the last few months prior to the ICE Group being dismissed from the site. While there was some dispute between the parties on the question of whether or not the first named defendant was entitled to draw down some of the monies paid by Harlequin to the ICE Group for his own purposes, whether by way of salary or otherwise, there could be no justification for the very substantial payments diverted from the project to the first named defendant’s Irish accounts and to the second named defendant to repay loans which were alleged to have been made by him to the first named defendant some years earlier. First Named Defendant’s Duty to the Plaintiffs as Creditors of the ICE Group
Quistclose Trust 99. The parties are agreed that the recent statement of the nature of the Quistclose Trust in Bieber v. Teathers Ltd. [2012] EWCA Civ 1466 should be adopted. In that case, Patten L.J. reviewed and distilled the principles set out in Quistclose Investments and in Twinsectra Ltd. v. Yardley [2002] UKHL 12, as follows:-
Second, the mere fact that the payer has paid the money to the recipient for the recipient to use it in a particular way is not of itself enough. The recipient may have represented or warranted that he intends to use it in a particular way or had promised to use it in a particular way. Such an arrangement would give rise to personal obligations but would not of itself necessarily create fiduciary obligations or a trust: Twinsetra at [73]. Thirdly, it must be clear from the express terms of the transaction (properly construed) or it must be objectively ascertained from the circumstances of the transaction that the mutual intention of payer and recipient (and the essence of their bargain) is that the funds transferred should not be part of the general assets of the recipient but should be used exclusively to effect particular identified payments, so that if the money cannot be so used then it is to be returned to the payer: Toovey v. Milne (1819) 2 B&A 683 and Quistclose Investments at 580 B. Fourth, the mechanism by which this is achieved is a trust giving rise to fiduciary obligations on the part of the recipient which a court of equity will enforce: Twinsetra at [69]. Equity intervenes because it is unconscionable for the recipient to obtain money on terms as to its application and then to disregard the terms on which he received it from a payer who has placed trust and confidence in the recipient to ensure the proper application of the money paid: Twinsetra at [76]. Fifth, such a trust is akin to a ‘retention of title’ clause, enabling the recipient to have recourse to the payer’s money for the particular purpose specified but without entrenching on the payer’s property rights more than necessary to enable the purpose to be achieved. It is not as such a ‘purpose trust’ of which the recipient is a trustee, the beneficial interest in the money reverting to the payer if the purpose is incapable of achievement. It is a resulting trust in favour of the payer with a mandate granted to the recipient to apply the money paid for the purpose stated. The key feature of the arrangement is that the recipient is precluded from misapplying the money paid to him. The recipient has no beneficial interest in the money: generally, the beneficial interest remains vested in the payer subject only to the recipient’s power to apply the money in accordance with the stated purpose. If the stated purpose cannot be achieved, then the mandate ceases to be effective, the recipient simply holds the money paid on resulting trust for the payer, and the recipient must repay it: Twinsetra at [81], [87], [92] and [100]. Sixth, the subjective intentions of payer and recipient as to the creation of a trust are irrelevant. If the properly construed terms upon which (or the objectively ascertained circumstances in which) payer and recipient enter into an arrangement has the effect of creating a trust, then it is not necessary that either payer or recipient should intend to create a trust: it is sufficient that they intend to enter into the relevant arrangement: Twinsetra at [71]. Seventh, the particular purpose must be specified in terms which enable a court to say whether a given application of the money does or does not fall within its terms: Twinsetra at [16].”
104. Applying these principles to the present case, it seems to me that although Harlequin clearly provided payments on an agreed schedule to the ICE Group for the completion of Phase 1, it cannot be said that there was an intention that the particular funds advanced from time to time were for a specific purpose and no other purpose. Undoubtedly, the monies advanced were for the general purpose of completing Phase 1 of Buccament Bay. But that would not be sufficient to establish a Quistclose Trust. If, for example, Harlequin had paid to the ICE Group a specific and precise sum intended to discharge an invoice for an essential piece of equipment on the clear understanding that the monies would be used by the ICE Group for that purpose and no other purpose, a Quistclose Trust could be said to arise. But it seems to me that that is not what actually happened. The funds which were advanced by Harlequin to the ICE Group for the completion of Phase 1 were for that general purpose and to ensure completion by 1st July, 2010. In my view, the plaintiffs have not established that the facts of this case fit within the ambit of a Quistclose Trust. Constructive Trust/Knowing Receipt
Whether the action be framed at common law for money had and received or (as here) in equity for an amount of money held as a constructive trustee for the plaintiffs, I would hold that, in the absence of countervailing circumstances . . . such money may be recovered.”
. . . The accessory's liability for having assisted in a breach of trust is quite different. It is fault-based, not receipt-based. The defendant is not charged with having received trust moneys for his own benefit, but with having acted as an accessory to a breach of trust. The action is not restitutionary; the claimant seeks compensation for wrongdoing. The cause of action is concerned with attributing liability for misdirected funds. Liability is not restricted to the person whose breach of trust or fiduciary duty caused their original diversion. His liability is strict. Nor is it limited to those who assist him in the original breach. It extends to everyone who consciously assists in the continuing diversion of the money.” 110. Notwithstanding the foregoing, regard should be had to Keane’s comment in his text on ‘Equity and the Law of Trusts in the Republic of Ireland’ (2011, 2nd Ed. Bloomsbury Professional) at p. 245, that the approach of Blayney J. in Re Frederick Inns was such that:-
112. In ‘Equity and the Law of Trusts in the Republic of Ireland’, Keane (2011) 2nd Ed. Bloomsbury Professional) at p. 370, the author states:-
114. If I was to make a decision in this case based on constructive trust, it would have consequences for the second named defendant as he would be a recipient of monies to be fixed with such a trust. In the course of the trial, I formed the view that he had been unwittingly dragged into the proceedings by the action of the first named defendant. 115. The second named defendant may have lent money to the first named defendant some years ago. Such evidence as was available on the issue was unsatisfactory. But it was clear that if loans were made, most of them were made prior to the Buccament Bay project and all were quite unrelated to it. In giving his evidence, the second named defendant presented as an elderly man who was in frail health and seemed somewhat confused. I am quite satisfied he was not knowingly a party to any misappropriation of the plaintiffs’ funds. 116. If he was paid out of misappropriated funds, then, as a matter of justice, any liability for that misappropriation should rest with the first named defendant. At the time the first named defendant procured the payment of those sums from the ICE Group accounts to the second named defendant’s account, the first named defendant knew or ought to have known that the monies concerned should have been expended on the Buccament Bay project and not to discharge any possible private indebtedness he might have to his father. 117. I am therefore satisfied that powerful countervailing factors operate in this case against the imposition of a constructive trust in relation to the second named defendant. With regard to the first named defendant, the plaintiff has established an entitlement to an effective remedy at law, such that it is unnecessary for the court to exercise its equitable jurisdiction. Conclusion on the Law Damages 120. Between 29th June, 2009, and 31st May, 2010, 22 payments were made from the ICE Group accounts to the first named defendant’s personal bank accounts in Ireland. These payments totalled US$1,488,000. In addition, the following payments were made by the ICE Group to ‘Weddings by Franc’ in respect of a wedding planned by the first named defendant at Adare Manor, County Limerick, but which never took place:-
17th December 2009 €20,000 8th March 2010 €50,000 12th March 2010, Eastern Caribbean equivalent of €50,000 Total: US$72,000 Plus €120,000
20th November 2009 US$179,000 122. In assessing damages, I have regard to all these payments which were misappropriations of funds paid by the plaintiffs to the ICE Group as a result of fraudulent misrepresentations made by the first named defendant. I measure the damages to which the plaintiffs are entitled from the first named defendant against those sums. Those sums, in summary, are US$1,918,000 and €120,000. The US Dollar sum will be converted on the date of this judgment and I will hear counsel as to the precise sum in respect of that figure before pronouncing judgment. The judgment shall be against the first named defendant alone.
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