Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
Supreme Court of Ireland Decisions
You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Keaney v Sullivan & Ors [2015] IESC 75 (23 July 2015)
URL: http://www.bailii.org/ie/cases/IESC/2015/S75.html
Cite as: [2015] IESC 75
[New search] [Help]
Judgment
| ||||||||||||||||||||||||||||||||||||||
THE SUPREME COURT [Appeal No. 061/2007] Clarke J. Dunne J. Charleton J.
BETWEEN VINCENT KEANEY PLAINTIFF/APPELLANT AND
JAMES SULLIVAN FIRST DEFENDANT JOAN SULLIVAN SECOND DEFENDANT ST. JOHN CULLIGAN THIRD DEFENDANT MICHAEL NOLAN FOURTH DEFENDANT TITANIC QUEENSTOWN TRADING COMPANY LIMITED (IN LIQUIDATION) FIFTH DEFENDANT MAGPIE INTERNATIONAL HOLDING COMPANY LIMITED (IN LIQUIDATION) SIXTH DEFENDANT TITANIC QUEENSTOWN MEMORABILIA LIMITED (IN LIQUIDATION) SEVENTH DEFENDANT ALLIED IRISH BANKS PLC EIGHTH DEFENDANT Q.E.F. GLOBAL LIMITED NINTH DEFENDANT ROGER DUNCAN, GEOFFREY LEWIS, DAVID MARSH, TOM MOORE, DECLAN O’LUANAIGH, NEIL PAYNE, DAVID ISAACSON (CARRYING ON PRACTICE UNDER THE STYLE AND TITLE OF ORMSBY RHODES AND BKR ORMSBY RHODES) TENTH TO SIXTEENTH DEFENDANTS TREGAN PROPERTIES SEVENTEENTH DEFENDANT JULIA NOLAN EIGHTEENTH DEFENDANT Judgment of Ms. Justice Dunne delivered on the 23rd day of July 2015 This is an appeal from the plaintiff appellant (the Appellant) in respect of the judgment of the High Court (Finlay Geoghegan J.) delivered on the 16th January, 2007 and the order perfected on the 26th day of January, 2007 striking out parts of the statement of claim delivered by the Appellant in these proceedings. The order of the 26th January, 2007 was made pursuant to four separate notices of motion issued on behalf of the defendants/respondents (the Respondents) as follows:
2. The eighth defendant (AIB). 3. The first respondent (Mr. Sullivan). 4. The tenth to sixteenth respondents (Ormsby Rhodes).
TQT Company traded as Titanic Bar until December 2002. In July, 2003, the plaintiff and the fourth defendant entered into “heads of agreement legally binding” on 2nd July, 2003 and pursuant thereto entered into a further series of agreements, deeds and share transfers. These included a contract for sale of the plaintiff’s interest in the Titanic Bar premises dated the 24th July, 2003; a deed of assignment between the plaintiff and the fourth and eighteenth defendants of the plaintiff’s interests in the premises; a transfer of the plaintiff’s 49% shareholding in TQT Company to the fourth defendant and a deed of release and other documents referred to in paragraph 62 of the statement of claim. The intended effect of these transactions appears to have been to separate the business and property interests of the plaintiff and fourth defendant. The plaintiff in these proceedings by plenary summons issued in 2006, has brought multiple claims and made many allegations against the 18 defendants arising out of the transactions entered into in 2000, the running of the pub between 2000 and 2003 and the transactions in 2003. He seeks inter alia to set aside all the transactions, deeds and property transfers entered into and effected both in 2000 and 2003. Following commencement of the proceedings the fourth defendant, Michael Nolan, the seventeenth named defendant, Tregan Properties Limited and the eighteenth defendant Julia Nolan, his wife made application for admission to the Commercial List. On the 3rd April, 2006, Kelly J. entered the proceedings into the Commercial List and treated the motion as the initial directions hearing. He further ordered that the plaintiff deliver a statement of claim on or before the 13th April, 2006. On the 24th April, 2006, at a further hearing of the directions motion on complaint from a number of the defendants in relation to the form of the statement of claim delivered Kelly J. ordered that: ‘the plaintiff be at liberty to deliver an amended statement of claim herein by close of business on Monday 8th May, 2006, the said statement of claim to be properly drafted, in the proper form and properly particularised.’ An amended statement of claim was delivered on the 8th May, 2006. The defendants were further given liberty on the 24th April, 2006, to bring notices of motion for orders dismissing or striking out the proceedings within a period of two weeks from receipt of the amended statement of claim.” Judgment of the High Court At the heart of these Respondents’ complaints about the statement of Claim was Order 19, rule 5(2) of the RSC which provides:
5.38 The long established practice of the courts has been to require allegations of fraud to be pleaded with particularity. Rule 5(2) now provides that, in all cases alleging misrepresentation, fraud, breach of trust, wilful or undue influence and in all other cases in which particulars may be necessary, particulars (with dates and items if necessary) must be set out in the pleadings. The rationale of this requirement was explained by Barrington J. in Hanly v. Finnerty in relation to a plea of undue influence as follows:
. . . Particulars. Full particulars of any misrepresentation relied on must be given in the pleading (R.S.C., Ord. 18, r. 12 (1) (a)). The Statement of Claim must show the nature and extent of each alleged misrepresentation (Newport Dry Dock & Engineering Co. v. Paynter (1886) 34 Ch.D. 88) and it must contain particulars showing by whom and to whom it was made, and whether orally or in writing, and if in writing, identifying the relevant document (Seligmann v. Young [1884] W.N. 93). Where the plaintiff alleged that the entries made by the defendant in certain books were false, he was ordered in the first place to give particulars of entries which he alleged to be false, and subsequently to give further particulars showing in what respects each of these entries was false (Newport Dry Dock & Engineering Co. v. Paynter, ante); ‘all the accounts rendered to the plaintiff are untrue’ did not comply with an order for further particulars of fraud (Harbord v. Monk (1878) 38 L.T. 411). Moreover, the necessary particulars of the fraudulent intention relied on must also be contained in the pleading (R.S.C., Ord. 18, r. 12 (1) (b)), and accordingly, the pleadings must set out the facts, matters and circumstances relied on to show that the party charged had or was activated by a fraudulent intention.” Having set out the relevant principles, the learned trial judge proceeded to analyse the claims alleging fraud, deceit, misrepresentation and undue influence alleged against the fourth named respondent in the statement of claim and in particular paragraphs 25, 26 and 28, paragraph 51 and paragraphs 62 to 71 of the statement of claim. By way of example it would be useful to set out paragraphs 25, 26 and 28 of the statement of claim which are in the following terms:
26. In the year 2000 as a result of aggressive and improper conduct and deceit on the part of the First and Fourth Named Defendants and as a result of duress and undue influence including the threat by the First Named Defendant that if the Plaintiff did not enter into an Agreement with the Fourth Named Defendant then, the Manager of the AIB in Midleton would persuade AIB to foreclose on securities including the Plaintiff’s Family Home. The Plaintiff was thus induced to enter into purported Heads of Agreement bearing dated the 27th March, 2000 with the Fourth Named Defendant, which Heads of Agreement in any event the Fourth Named Defendant entirely breached. 28. The said purported Agreement of 2000 was void as it was obtained by deceit and/or impropriety/duress/undue influence, or alternatively on the grounds that it was an unconscionable and improvident bargain in that it was disproportionately disadvantageous to the Plaintiff and utterly failed to protect his existing and legitimate interests and was not complied with in any event by the Fourth Named Defendant, nor was it intended to be.”
The learned trial judge then proceeded to consider the application of the third, fourth, ninth, seventeenth and eighteenth respondents to strike out the claims of those Respondents pursuant to Order 19, rules 27 or 28 or pursuant to the inherent jurisdiction of the Court. She identified the relevant principles applicable as follows:
(i) They disclose no reasonable cause of action against these defendants; and/or (ii) They are frivolous or vexatious; and/or (iii) They must fail or are unsustainable as that term has been used by the Supreme Court in Sun Fat Chan v. Osseous Limited [1992] 1 I.R. 425 and O’Neill v. Ryan [1993] ILRM 557. The first two grounds need no elaboration. The nature of the third ground is clearly set out by Blayney J. in O’Neill v. Ryan where in relation to a similar ground advanced in that case he states at p. 561: ‘The second ground invokes an aspect of the inherent jurisdiction of the court which was defined as follows recently by Costello J. in D.K. v. A.K., High Court, 1990 No. 5306P, 2 October 1992:
The requirement that the High Court only exercise this jurisdiction sparingly derives from the caution expressed by McCarthy J. in Sun Fat Chan v. Osseous Ltd. [1992] 1 I.R. 425 where at pages 428 to 429 he stated: ‘By way of qualification of the jurisdiction to dismiss an action at the statement of claim stage, I incline to the view that if the statement of claim admits of an amendment which might, so to speak, save it and the action founded on it, then the action should not be dismissed. Generally, the High Court should be slow to entertain an application of this kind and grant the relief sought. Experience has shown that the trial of an action will identify a variety of circumstances perhaps not entirely contemplated at earlier stages in the proceedings; often times it may appear that the facts are clear and established but the trial itself will disclose a different picture. With that qualification, however, I recognise the enforcement of a jurisdiction of this kind as a healthy development in our jurisprudence and one not to be disowned for its novelty though there may be a certain sense of disquiet at its rigour.’”
1. The deed of assignment now dated 30th September, 2004, (but alleged to have been executed on 24th July, 2003) between the plaintiff and the fourth and eighteenth defendants in relation to the premises known as Scotts Building; and 2. The transfer of the plaintiff’s 49% shareholding in TQT Company to the fourth defendant.” The learned trial judge proceeded to consider a number of related claims against the fourth named respondent in relation to Titanic Queenstown Trading Company Limited (TQT Company). In this context, the Appellant sought to take derivative actions on behalf of TQT Company. He claimed that the company was never permitted to trade and was “an intentional sham” for the “exclusive profit” of the fourth named respondent (see paragraph 51(ix) of the statement of claim). The argument that the company was a sham was considered by reference to the decision in Snook v. London and West Riding Investments Limited [1967] 1 All E.R. 518 at 528 and Yukong Line Limited v. Rendsburg Investments [1998] 2 B.C.L.C 485. Finlay Geoghegan J. concluded that the Appellant’s claim as pleaded was not capable of supporting the claim that the company was a sham in the sense in which that term is explained in the authorities referred to and therefore she struck out assertions that the company was a sham on the basis that any such claim must fail. Insofar as the Appellant sought to recover damages for the alleged misappropriation of funds of the company or wrongdoing to the company she concluded that there was no basis to “lift the corporate veil”. She noted that what the Appellant was seeking to do was to pursue claims against the fourth named respondent and others for alleged misapplication of funds of the company or wrongdoing to the company. She observed that it was well established that the plaintiff as a shareholder had no entitlement to any assets of the company such as would entitle him to pursue such a claim. She then went on to consider the arguments made on behalf of the Appellant in respect of the non-application of the rule in Foss v Harbottle. She relied on the Supreme Court decision in O’Neill v. Ryan [1993] I.L.R.M. 557 where the rule was explained and considered. She noted that the Appellant was no longer a shareholder in the company and concluded that there were no facts disclosed which would bring the Appellant within what has been described as the “fifth exception” to the rule in Foss v. Harbottle, namely “in the interests of justice”. Therefore, any claim which was in substance a claim for damages on behalf of TQT Company, and thus reliant on the non-application of the rule in Foss v. Harbottle, was struck out insofar as such claim was made against the fourth named respondent and a similar conclusion was reached insofar as any claim was made against the third named respondent on that basis. The Appellant also made a claim based on oppression of the Appellant as a minority shareholder within the meaning of s. 205 of the Companies Act 1963 and that claim was also struck out on the basis that the Appellant was no longer a shareholder of the company. The next section of the statement of claim to be considered was paragraphs 91 to 94. Insofar as those paragraphs contained allegations against the fourth named respondent the claims were permitted to be pursued but not in respect of the seventeenth named respondent. Accordingly those claims were struck out in respect of the seventeenth named respondent. The final claims struck out related to the third named respondent and were in essence claims for damages as a result of an alleged breach of duty to the Appellant as a shareholder by the third named respondent in his capacity as a director of TQT Company. Those claims were set out in paragraphs 41 to 43 and parts of paragraph 44 to 45 of the statement of claim. Having identified the principles as to the duty owed by directors to shareholders set out in Crindle Investments v. Wymes [1998] 4 IR 567 at 591 the learned trial judge concluded that there were no facts pleaded in the statement of claim to sustain such a claim. Accordingly those claims were stuck out. Finally, the claim against the ninth respondent was struck out as the claim against the ninth named respondent was essentially a claim for relief based on the claims against other respondents. As the relevant claims against the other Respondents had been struck out, the underlying basis for seeking those reliefs no longer existed and therefore those claims for relief were also struck out. The application of the first named respondent The application of AIB The application of Ormsby Rhodes The other claim made against Ormsby Rhodes was a claim said to arise by vicarious liability for the alleged wrongdoing of the first named respondent. It is contended by the Appellant that the first named respondent and Ormsby Rhodes had a relationship and/or association with one another. The learned trial judge pointed out that the statement of claim did not, contrary to the requirements of Order 19, rule 3 of the RSC state the material facts upon which the Appellant relied to establish that Ormsby Rhodes was vicariously liable for any alleged wrongdoing of the first named respondent. She referred in detail to evidence on affidavit in respect of this issue. She concluded that:
Thus, as can be seen, a significant number of the claims brought by the Appellant against the Respondents were struck out by the learned trial judge relying on the provisions of Order 19, rule 5(2), Order 19, rules 27 and 28 and pursuant to the inherent jurisdiction of the Court. Not all of the claims of the Appellant were struck out by the learned trial judge. The remaining claims were the subject of a hearing before the High Court (Feeney J.) and resulted in a judgment delivered on the 19th December, 2008. The Appellant failed in all his remaining claims. As that judgment is the subject of an appeal I do not propose to make any further comment on that decision. Submissions The length of the written submissions furnished on behalf of the Appellant is in itself a matter of concern but a matter of greater concern to the Court and indeed, to the Respondents is the content of those written submissions. Written submissions are not for the purpose of making further unsubstantiated allegations against the opposing parties to an appeal. Equally, it is inappropriate to use the submissions to set out a narrative of the Appellant’s complaints against the various defendants in an attempt to provide more information by way of factual background to the matters alleged in the statement of claim. In this case, further allegations are made against some of the parties in the written submissions which were not even made in the statement of claim. For example, in the synopsis of the written submissions and in the longer written submissions at page 85 it is stated as follows:
Further in the synopsis of the written legal submissions the following appears:
For completeness, I should add that I had helpful written submissions from the several Respondents. Discussion on the issues Two central issues in the course of the appeal were first, the role of Order 19, rule 5(2) of the RSC and second, the application of the rule in Foss v. Harbottle. I propose to look at those two issues briefly. In the course of her judgment as set out above, the learned trial judge referred to the judgment of Barrington J. in Hanly v. Finnerty [1981] I.L.R.M. 198, it seems to me to be of such relevance that it is worth reiterating that passage again. Barrington J. at page 202 stated:
It is not suggested on behalf of the Appellant that it is not necessary to particularise the pleas complained of in these proceedings but as I have explained the position of the Appellant is that on a full reading of the statement of claim there are sufficient particulars of the allegations underlying the pleas of fraud, deceit, etc. The rule in Foss v. Harbottle (1843) 2 Hare 461 The central issue in Foss v. Harbottle is whether a shareholder is entitled to prosecute an action on behalf of a company for a wrong alleged to have been done to the company. Such an action is a form of a derivative action. The Appellant in this case relies on the so-called fifth exception to the rule in Foss v. Harbottle, to argue that it is “in the interests of justice that the plaintiff would be allowed to pursue an action on behalf of TQT Company for alleged damage to that company”. In considering the question of the so-called fifth exception to the rule in Foss v. Harbottle, Blayney J. at page 568 of his judgment said:
‘It remains to consider what are those exceptional cases in which, for the due attainment of justice, such a suit should be allowed. This sentence, however, is preceded by the following sentence which makes it clear that the types of case he was dealing with were cases concerned with providing a remedy for an injury to a corporation and not for an injury to the shareholding of a particular corporator. The preceding sentence is as follows: ‘If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained except that of a suit by individual corporators in their private characters, and asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principles so forcibly laid down by Lord Cottenham in Wallworth v. Holt and other cases would apply and the claims of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which corporations are required to sue.’ It is clear from this and particularly from the last phrase “respecting the mode in which corporations are required to sue” that the exceptional cases which Sir G. Jessel M.R. had in mind were cases of injury to a corporation for which it would be entitled to sue so that the remedy being given was a remedy for such injury and not for an injury to the alleged rights of an individual corporator which is what is in issue here.”
‘In our judgment the personal claim is misconceived. It is of course correct, as the judge found and Mr. Bartlett did not dispute, that he and Mr. Laughton, in advising the shareholders to support the resolution approving the agreement, owed the shareholders a duty to give such advice in good faith and not fraudulently. It is also correct that if directors convene a meeting on the basis of a fraudulent circular, a shareholder will have a right of action to recover any loss which he has been personally caused in consequence of the fraudulent circular; this might include the expense of attending the meeting. But what he cannot do is to recover damages merely because the company in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a ‘loss’ is merely a reflection of the loss suffered by the company. The shareholder does not suffer any personal loss. ‘Loss’ is through the company, in the diminution in the value of the net assets of the company, in which he has (say) a 3% shareholding. The plaintiff's shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property. The deceit practised upon the plaintiff does not affect the shares; it merely enables the defendant to rob the company’. And at page 224 the Court said: ‘A personal action would subvert the rule in Foss v. Harbottle and that rule is not merely a tiresome procedural obstacle placed in the path of a shareholder by a legalistic judiciary. The rule is the consequence of the fact that a corporation is a separate legal entity. Other consequences are limited liability and limited rights. The company is liable for its contracts and torts; the shareholder has no such liability. The company acquires causes of action for breaches of contract and for torts which damage the company. No cause of action vests in the shareholder. When the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company and that he can only exercise his influence over the fortunes of the company by the exercise of his voting rights in general meeting. The law confers on him the right to ensure that the company observes the limitations of its memorandum of association and the right to ensure that other shareholders observe the rule, imposed upon them by the articles of association.’ In my opinion that is a correct statement of the law in regard to the status of a shareholder in a limited liability company. What is also a relevant consideration in addition to the matters referred to in the two passages cited are the consequences which would flow from giving shareholders in a company a personal action against a party causing damage to the company. It would enable a multiplicity of actions to be brought and deprive the company itself of the ability to control them. So it would be both harmful to companies and very much against the public interest in opening the door to irresponsible litigation. For these reasons also I am satisfied that a personal claim by a shareholder should not be permitted. I am satisfied, accordingly, that even if the plaintiff were still a shareholder in Ryanair he would have no cause of action against the last four defendants. A fortiori he has none since he is no longer even a shareholder.” Decision
By way of conclusion, I want to make it clear that I have carefully read the statement of claim herein. I have considered the judgment of Finlay Geoghegan J. in respect of the motions brought by the respective Respondents. I have considered the written and oral submissions of the parties on this appeal. I am satisfied that each of the grounds relied on by the respective Respondents in support of their applications to strike out parts of the statement of claim was carefully considered by the learned trial judge. The relevant principles of law were set out in the course of her judgment. There is no suggestion that she erred in any way in identifying those principles. I can see no basis for suggesting that Finlay Geoghegan J. erred in any way in her application of the relevant principles to the facts and circumstances of this case. On the contrary, it is clear from her judgment in this matter that she carefully and properly considered all the issues before her. Finally, I do not think that this is a case in which the Court should give any consideration to the possibility of an amendment of the statement of claim. The statement of claim at issue in these proceedings was the third statement of claim to be delivered. It is worth recalling that Kelly J. had directed that the second statement of claim should be delivered in circumstances where the complaint made at that time was the failure to particularise the claims being made against the various respondents. The comments of McCarthy J. in Sun Fat Chan v. Osseous Limited [1992] 1 I.R. 425 at page 428 must always be borne in mind where he stated:
In all the circumstances of the case I would dismiss the appeal. | ||||||||||||||||||||||||||||||||||||||