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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Harlequin Property (SVG) Ltd & Ors v O'Halloran & Anor [2019] IESC 76 (01 November 2019)
URL: http://www.bailii.org/ie/cases/IESC/2019/2019_IESC_76.html
Cite as: [2019] IESC 76
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THE SUPREME COURT
[High Court Record No. 6443P/2010]
[Supreme Court Record No. 395/2013]
[Court of Appeal Record No. 969/2014]
O’Donnell J.
MacMenamin J.
Charleton J.
BETWEEN:
HARLEQUIN PROPERTY (SVG) LIMITED AND HARLEQUIN HOTELS AND RESORTS
LIMITED (IN LIQUIDATION)
PLAINTIFFS/RESPONDENTS
V.
PADRAIG O’HALLORAN AND DONAL O’HALLORAN
DEFENDANTS/APPELLANTS
Judgment of Mr. Justice John MacMenamin dated the 1st day of November, 2019
Introduction
1. Harlequin Property (SVG) Limited (“HSVG”), the first-named respondent, was
incorporated in St. Vincent and the Grenadines (“SVG”) as a special purpose vehicle to
build a multi-million dollar resort on the Caribbean island of St. Vincent. The company
made an agreement with the government of SVG to that end. It acquired properties for
the development in the picturesque Buccament Bay area of the island. At its peak, the
project had the potential to employ up to 1,000 construction workers for its duration.
2. Harlequin Hotels and Resorts Limited (“HHR”), the second-named respondent, was
incorporated by the parent group of both respondents to this appeal to operate hotels and
resorts throughout the Caribbean. The company sold villas, hotels and property units to
investors.
3. Once it was opened, the Buccament Bay project would have provided significant long-
term employment on the island. It is the subject matter of this appeal.
4. Harlequin sought and received large sums of money from investors for the project. There
are aspects of these background dealings which were of questionable legality. The project
was described in court proceedings in England as having some of the characteristics of a
[2016] All E.R. (D) 76, at para. 43).
5. Unfortunately, the first-named respondent is now controlled by a bankruptcy trustee; the
second, a company registered in the Cayman Islands, was placed in liquidation by order
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of the courts in that jurisdiction on the 11th September, 2018. Part of the background to
that unhappy situation is set out in the judgment and order under appeal.
6. On the 23rd July, 2013, McGovern J. granted judgment against the first-named appellant
to both respondents (collectively “Harlequin”, save where otherwise appears) in the sum
of €1,575,500 ([2013] IEHC 362). He held that the first-named appellant (“the
appellant”), Padraig O’Halloran, had by fraudulent misrepresentation personally induced
Harlequin to part with large sums of money to the value of the award or more. The
money was transferred to Irish bank accounts under the appellant’s control. McGovern J.
held that there was no evidence that Mr. Donal O’Halloran, the first-named appellant’s
father, had engaged in any unlawful conduct and dismissed the case against him.
7. Mr. Padraig O’Halloran appealed the judgment against him. The matter was subsequently
remitted to the Court of Appeal, but thereafter transferred back to this Court on foot of
Article 64 of the Constitution.
8. Mr. O’Halloran represented himself in this appeal. At the outset of the appeal therefore,
the Court explained the legal and procedural framework within which the case would be
considered. The Court drew attention to the legal principles applicable to findings of fact
made by a High Court judge. By his fluency, command of detail and understanding of the
legal issues, Mr. O’Halloran demonstrated that he was well capable of presenting his case
on the appeal.
9. The essence of the High Court judgment can be stated quite briefly. David Ames and
Carol Ames were directors of the two Harlequin companies. Mr. Ames was the effective
controller of both. Mr. O’Halloran was the director and controller of a group of companies
named the “ICE Group”. Harlequin originally embarked on the large development on the
Buccament Bay site by way of a subcontract to another developer: Ridgeview. After
Harlequin discharged Ridgeview in July 2008, the ICE Group was retained to proceed with
construction of the project.
10. The sums of money involved in this retainer were very substantial. Some of the detail, in
the subsequent hearing before McGovern J., was complex. The case ran for 30 days in the
High Court. Yet, despite these features, what is under appeal is essentially a fact-based
judgment.
11. McGovern J. made a series of findings of fact regarding misrepresentations which Mr.
O’Halloran made, primarily to Mr. Ames of Harlequin. He held that Harlequin relied on
these, and that Mr. O’Halloran ignored advices and information available to him which
indicated that the project simply could not be completed by the set deadline of the 1st
July, 2010. The judge concluded that Mr. O’Halloran induced the two respondent
companies to make a series of payments to the ICE Group, and thereafter unlawfully
extracted the money from the ICE companies and transferred it to Ireland.
12. The first stage of the project was to be completed and ready to take guests on the 1st
July, 2010. Before then, over the period of September 2008 to May 2010, the parties
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made a series of agreements for the purposes of constructing the first element of what
was to be this resort. The project was to include a marina, a number of restaurants, a
diving shop, a reception and a beach bar. The scope of the work, identified in an
agreement made on the 20th May, 2009, underwent a number of subsequent iterations.
In later meetings on the 23rd and the 24th January, 2010, and the 18th May, 2010, it
was altered in scope. By then, the project had been reduced to what was described by the
High Court judge as being two restaurants, a swimming pool, 60 cabanas for guests and
others to be used for various purposes; an “apartment block 2” to be completed for
accommodation, with the hotel staff to reside in cabanas until this was available; some
sports facilities; an “apartment block 3” to be completed up to the 5th floor with roof
frames fitted; and waterfront and retail villages (para. 18(e) of the High Court judgment).
McGovern J. held that Mr. O’Halloran gave undertakings regarding the completion of the
project in a series of meetings up to the time ICE was discharged on the 11th June, 2010.
During the same period, the judge found that Mr. O’Halloran took funding from ICE and
diverted it to his own use.
The Main Legal Considerations
13. Two main legal considerations apply in this appeal. The first relates to the legal status of
findings of fact, the second to the nature of the tort of deceit arising from fraudulent
misrepresentations. In this case, both are closely interrelated. Much depended on how the
judge assessed context, identified what was said and done and analysed the intentions of
the parties to the transactions.
First Legal Consideration: The Status of Findings of Fact
14. The first observation must concern findings of fact. The principles governing these
findings have been set out in numerous judgments of this Court, including Northern Bank
Finance Corporation Ltd. v. Charlton and Ors. [1979] 1 I.R. 149, Hay v. O’Grady [1992] 1
I.R. 707. They are well known and may be dealt with briefly.
15. Such findings can be seen as falling into two categories: those the answers to which give
a factual resolution of conflicting oral testimony, and those the answers to which do not
resolve conflicts of such testimony, but are an evaluation of facts found or admitted
(Northern Bank, per Henchy J., at p. 190). Another brief way of describing these two
categories is, in the first category, findings of fact, and in the second, inferences from
facts. The legal authorities emphasise that an appellate court must proceed on the basis
that it did not enjoy the opportunity of seeing and hearing the witnesses as did the trial
judge who heard the substance of the evidence, and was able to observe both the manner
in which it was given and the demeanour of the witnesses (Hay v. O’Grady, per McCarthy
J., at p. 217).
16. It follows that, where such findings of a trial judge are supported by credible evidence, an
appellate court will generally be bound by them no matter how voluminous and
apparently weighty testimony to the contrary might be (Hay v. O’Grady, at p. 217). An
appellate court will only set aside a finding of fact based on one version of the evidence
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when, on taking a conspectus of all the evidence, it appears to that court that,
notwithstanding the advantages the tribunal of fact may have had in seeing and hearing
the witnesses, the version of the evidence on which the judge acted on could not
reasonably be correct (Northern Bank, per Henchy J., at p. 191). An appellate court
should, therefore, be slow to substitute its own inferences from findings of fact where
such inferences depend on oral evidence heard by the trial judge (Leopardstown Club, per
Denham C.J., at para. 82). It may only do so for a very clear reason. Of particular
relevance to this appeal is that a finding as to the credibility of a witness giving evidence
is a finding of fact (Leopardstown Club, per Denham C.J., at para. 39).
Second Legal Consideration: The Nature of the Tort of Deceit
17. McGovern J. correctly summarised this second legal consideration in the High Court
judgment:
“81. At law, a misrepresentation is made fraudulently if, when he makes it, the
representor knows that the representation is untrue or is reckless as to whether it
is true or not. A person who deceives another fraudulently and thereby
causes loss is liable in damages for the tort of deceit.” (Emphasis added)
At para. 118, he concluded on the law:
“Applying the law to the facts in this case, I hold that the first named defendant
was guilty of fraudulent misrepresentation and deceit and that he is liable to the
plaintiffs in damages.”
18. The elements of deceit can be summarised in this way:
(a) that the alleged representation consisted of something said, written, or done, that
amounted to a representation;
(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 for the plaintiff to act upon it;
(f) that the plaintiff did, in fact, alter his or her position on foot of the representation;
and
(g) that he or she thereby suffered damage.
(see, Forshall and Fine Arts Collections Ltd. v. Walsh (Unreported, 18th June, 1997) High
v. Sun Alliance and London Assurance plc (Unreported, 27th June, 1995) Supreme Court
(Denham J.), at pp. 27-28; and Bryan ME McMahon and William Binchy, Law of Torts (5th
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edn, Bloomsbury Professional 2013), at para. 35.02). These tests were also applied by
this Court in Northern Bank.
19. Each one of these elements is essentially factual. The first three, (a), (b) and (c), consist
of an identification the parties involved, and the words which amount to a representation
as to a particular state of affairs or an issue of fact. The fourth element, (d), is
fundamental: the words used must be untrue and uttered or written with dishonest
intent, motive, or recklessness. As to (e), it must be shown that the representation was
such as to induce the plaintiff to act upon it. To show (f) and (g), a claimant must sustain
detriment or damage in reliance on the misrepresentation. If a judge makes such findings
on a solid basis of fact, a significant onus rests on an appellant to show an appeal court
that a trial judge erred in some very significant way or misdirected himself or herself as to
the law.
20. The task of this Court, therefore, is not to look at and consider the evidence for the
purposes of deciding whether the judge ought to have accepted the particular evidence
which he did. Rather, it is to consider whether there was testimony before the High Court
which supports the judge’s findings and whether such inferences as he drew were fairly
and properly drawn.
21. McGovern J. held that each one of the legal tests as to deceit were satisfied. Looking
again at what was set out at para. 13 above, he found that, on numerous occasions, Mr.
O’Halloran had represented to Mr. Ames that Phase 1 of the Buccament Bay project would
be completed by the 1st July, 2010.
22. It has long been established that the state of a man’s mind is “as much a fact as the state
of his digestion” (Edgington v. Fitzmaurice (1885) 29 Ch. Div 459, per Bowen L.J.).
Critically, in the context of (d), that is falsity. McGovern J. was satisfied that Mr.
O’Halloran made these representations when he knew they were untrue or was reckless
as to their truth (para. 74). He held that, since some time in summer 2009, Mr.
O’Halloran was aware that the project could not be completed by the 1st July, 2010
(para. 73).
23. The judge held that, in reliance upon these statements, Harlequin continued to employ
the ICE Group and poured ever-increasing sums of money into the project (para. 90). He
concluded that the representations were a material inducement to Harlequin to continue
making payments on foot of these representations, at a time when Mr. O’Halloran knew,
both from his own knowledge and from information which he was receiving, knew that
Phase 1 simply could not be delivered by the 1st July, 2010. He found that Mr. O’Halloran
persisted in ignoring all warnings which he received from professionals, such as
architects, surveyors and others involved in the construction project, and that he
continued to press Harlequin for more and more funds (para. 90).
24. The judge heard evidence from expert witnesses called on behalf of Harlequin. This
satisfied him that the basic elements of this major construction project had not been put
in place in order to enable the works to be completed by the deadline (para. 91). Few, if
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any, of the accepted methods for ascertaining costs and compliance were present.
Professional witnesses, who entered on the site after Mr. O’Halloran’s ICE Group had been
dismissed on the 11th June, 2010, found that the site was far from the condition one
would have expected if there had been any genuine intention to finish the project on time
(para. 91). McGovern J. accepted the evidence which showed that substantial work
remained incomplete at a time when the ICE Group was financially insolvent and lacked
the capital required to meet its contractual obligations to Harlequin.
25. The judge also concluded that, during the period from summer 2009 to the date of ICE’s
dismissal on the 11th June, 2010, Mr. O’Halloran continued to divert substantial sums of
money paid by Harlequin for the completion of the project to his own purposes, in what
McGovern J. described as “bogus” transactions (para. 47). He held that Mr. O’Halloran did
so when he must have known that, by his actions, Phase 1 could not be delivered on the
agreed date (para. 91).
26. The judge held that “all the evidence” pointed to the conclusion that Mr. O’Halloran
misappropriated significant sums paid by the ICE Group for the completion of Phase 1,
and that the level of misappropriation increased significantly in the last few months prior
to the ICE Group being dismissed from the site (para. 92). He concluded that, while there
might be some dispute between the parties as to whether or not Mr. O’Halloran was
entitled to draw down some of the monies paid by Harlequin to the ICE Group, whether
by way of salary or otherwise, there could be no justification for the size of the very
substantial payments diverted from the project to his Irish accounts and to those of Donal
O’Halloran. In the latter case, the same were allegedly to repay loans which Donal
O’Halloran had made to the appellant (para. 92).
27. McGovern J. made a series of findings of fact. To set aside the judgment and award
damages, therefore, Mr. O’Halloran faced the task of showing that the findings either
were not based on evidence, or that the judge had not correctly directed himself on the
applicable law, or both. The issue in the case is simple. It is, did Mr. O’Halloran deceive
Harlequin to pay these large sums of money by fraudulent misrepresentations as to the
completion date and then extract the monies for his own benefit?
Were the Findings Based on Evidence?
28. Did the learned trial judge did base his factual findings on evidence? Clearly, on the
respondents’ side, McGovern J. felt that aspects of Mr. Ames’ evidence were not entirely
satisfactory. For example, he held that Mr. Ames’ evidence on the contract price was less
than certain. But on critical issues, such as payments made, withdrawals extracted, and
the progress of the work, there was other evidence upon which the judge also relied.
McGovern J. made a series of adverse findings in relation to Mr. O’Halloran’s evidence on
key material issues in dispute.
The Appellant’s Submissions
29. The appellant informed this Court that his solicitor had been ill and that he had
experienced difficulty in retaining counsel, although he had been fully represented by
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senior and junior counsel in the High Court. At the appeal, he made oral submissions to
the Court as well as relying on the written submissions prepared by his then counsel.
30. First, he raised a point regarding two emails from a Mr. Simon Taylor, which, he
contended, were relevant to the issues and had been claimed as privileged in the
respondents’ affidavit of discovery. It is clear that he was under a misapprehension on
this point. The documents were discovered.
31. This case has a complex jurisdictional background. There have been legal proceedings in
three or more jurisdictions, both in the Caribbean and these islands. The appellant made
a series of submissions based on a judgment of the High Court of England and Wales. It is
necessary to say something more about this case in order to explain his submissions.
32. To understand Mr. O’Halloran’s case, one must know that, as mentioned at para. 4 above,
there have been associated proceedings in the courts of England and Wales against
Wilkins Kennedy (“WK”), a firm of accountants originally retained by Harlequin. Various
parties, including Mr. Ames and the accountants who purported to give him advice on the
project, were sternly criticised in the judgment. None of the principal parties involved
emerge from the affair with their reputations unscathed, or their credibility entirely intact.
33. In the appeal, instead of directly addressing many of McGovern J.’s findings of fact, the
appellant adopted a more oblique approach by selecting some passages from the English
judgment. That judgment has no specific legal status in this appeal, and no application
was made to render it admissible. Nonetheless, the Court was prepared to extend latitude
to the appellant and to consider the judgment de bene esse.
34. In the proceedings in England, the liquidators of Harlequin claimed negligence against
WK. In a very detailed judgment, Coulson J. (as he then was) held that the firm was
liable to Harlequin in the sum of US$11,630,970.50 (para. 895). He held that, although
Harlequin had been guilty of substantial contributory negligence, the liability for damages
nonetheless arose from WK’s breach of duty to the company and, in particular, the breach
of duty by Mr. Martin MacDonald, whose role in this affair requires some further
description.
35. Mr. MacDonald (known as “Mac”) was, at one point, a friend of Mrs. Ames. Ultimately, he
became both financial advisor and auditor to the Harlequin companies. David and Carol
Ames trusted him implicitly. Coulson J.’s judgment describes an evolving situation where,
over a period of two years from 2008 to 2010, Mr. MacDonald moved away from being a
fiduciary advisor to Harlequin to being a close friend and ally of Mr. O’Halloran and ICE.
Rather than acting as a monitor or check on payments made to ICE, he became an
advocate on behalf of Mr. O’Halloran’s companies.
36. In the judgment under appeal, McGovern J. characterised the same situation as being one
where Mr. MacDonald, Mr. Ames’ former friend, was ultimately “in league” with Mr.
O’Halloran (para. 77). McGovern J. described this as a “serious conflict of interest”.
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37. McGovern J. held that, throughout this period, Mr. MacDonald did nothing to restrain Mr.
Ames from paying monies over to Mr. O’Halloran’s companies. In fact, he actively
encouraged him to make these payments. This was at a time when, as both McGovern J.
and the English judgment independently concluded, there was no possibility that the
contract could be fulfilled by the set completion date.
38. In this appeal, Mr. O’Halloran sought to contrast some selected points in the English
judgment with evidence and findings in the Irish proceedings. To take some examples,
Coulson J. placed a somewhat different value on work done on the cabanas from evidence
of the same surveyor witness in the Irish proceedings. Referring to these calculations, Mr.
O’Halloran sought to make the case that this difference indicated that the “area had
changed”. The significance of this point to the issues in this appeal is difficult to follow. If
it was meant to convey that more work had been done on the project than was indicated
in the evidence before McGovern J., the point does not seem to have any direct relevance
to the essence of the case, which concerned representations and the removal of funds. If
it had any other meaning, it is difficult to see how it is material to the key issues in this
appeal.
39. Counsel for Harlequin explained that any difference between the figures in the Irish and
English proceedings arose because in England, the High Court judge had preferred
evidence on the value of the cabanas given in the proceedings by and on behalf of WK.
But this has little bearing on the sums paid over and then removed during the relevant
period from the summer of 2009 to the 11th June, 2010.
40. Mr. O’Halloran submitted that there was an inconsistency between Mr. Ames’ testimony
as recorded in the English judgment and as conveyed to McGovern J. This concerned
whether, in addition to the other payments, Harlequin would also make what is termed a
“bullet payment” to ICE of STG£5 million on completion of the works. In fact, there was
no such inconsistency. Again, even if there was, it is not relevant to the main issues.
41. Mr. O’Halloran drew attention to the fact that Coulson J. found the evidence of a lawyer
acting for Harlequin, Mr Commissiong, to be unreliable. He pointed out that this lawyer
had given evidence before McGovern J. But McGovern J. did not place any reliance on his
evidence and, in fact, did not refer to that testimony in any significant way.
42. It can be said that when Mr. O’Halloran effectively sought to adopt the English judgment
as part of his argument, he deployed a double-edged sword. A number of points emerge
from that judgment with considerable clarity. Mr. MacDonald’s role is described in great
detail. So, too, is the role of another accountant, Mr. Jeremy Newman. The English
judgment makes the point that Harlequin did not own all the land upon which it was
proposing to build (para. 44). Some of the lands remained in the ownership of third
parties.
43. Mr. O’Halloran contended that the trial judge had erred in preferring evidence tendered to
the High Court by a surveyor, Mr. Sanjay Amin, to evidence which had been called on his
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behalf by a Mr. Rupert Spencer of Tower Consultants Ltd. This issue is dealt with at paras.
72-77 below.
44. Mr. O’Halloran also sought to persuade the Court that the trial judge erred by not
identifying the nature of the contract price. Bizarrely, there was never an agreed contract
price for the project. Mr. O’Halloran explained the relevance of this point on the basis
that, had the trial judge made such a finding, he would also have been required to make
findings as to whether or not the contract was, or was not, profitable from the
defendant’s point of view. McGovern J. held that this was irrelevant. In fact, he found that
the sums paid by Harlequin to ICE ought to have been sufficient to complete Stage 1, but
would not have produced significant profit to the ICE Group (para. 79(iv)). In my view,
the High Court judge was correct in holding that this point was immaterial to what he had
to decide.
45. Mr. O’Halloran also sought to submit that the trial judge erred in his identification of the
standard of proof necessary in fraudulent misrepresentation. There is no indication that
the judge misdirected himself on this issue of law.
46. While not strictly speaking relevant to the issues before this Court, the most striking
feature about the two judgments is that, despite the fact that the cases were heard on
different evidence, and although WK were the parties to, and defendants in, the English
case and Mr. O’Halloran was not, the judgments were in total agreement on 15 out of the
16 factual issues dealt with. On the 16th issue, Coulson J. had available evidence from
WK on the bullet payment which was not the case for McGovern J. as WK were not a
party to the Irish proceedings. Whether or not there was an agreement between
Harlequin and ICE on a bullet payment upon completion is again not relevant to this
appeal.
47. Seen as part of a larger canvass, the heart of Mr. O’Halloran’s case was set out in the
submissions prepared by counsel for this appeal. It was that this Court should prefer
evidence proffered on Mr. O’Halloran’s side to that adduced on behalf of Harlequin. This
proposition was based on a premise that this Court might determine some aspects of the
High Court judgment’s findings to be unsustainable. A court could only reach such a
conclusion if there was no evidence to justify the findings. To repeat, the true issue is
whether there was evidence before the High Court which would fairly entitle McGovern J.
to reach the conclusions which he did (see, Hay v. O’Grady, cited at para. 14 above). The
points raised in argument by Mr. O’Halloran, and in the written submissions, simply did
not sufficiently address this fundamental question.
48. One particular point stands out from the judgment under appeal. Much of the appellant’s
case depended on his own credibility as a witness. On the key issues, McGovern J.
indicated he found the appellant to be less than credible. This evidence is criticised at
various points as being vague and general (paras. 46 and 79(vi)). This was an
assessment which the judge was entitled to make. He gave reasons for his conclusion in
considerable detail. This critical issue was not directly addressed in this appeal either.
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Representations
49. The High Court judge carefully examined the nature of the representations which Mr.
O’Halloran made. At para. 58, McGovern J. held that the appellant made representations
assuring Harlequin of delivery by the 1st July, 2010 on the following dates:
“16th-17th May, 2009; 23rd-24th November, 2009; 24th-25th January, 2010; 23rd
February, 2010; 25th March, 2010; 29th March, 2010; 29th-30th April, 2010, and
18th May, 2010.”
50. He held these oral assurances were also repeated in many emails, including those dated
the 16th February, 2010; 15th, 18th, 25th, 28th March, 2010; 5th, 19th and 30th April,
2010; 5th, 7th and 23rd May, 2010 (para. 59).
51. McGovern J. observed:
“To focus on but one of these emails (23rd March, 2010), the first named defendant
stated to Mr. David Ames: ‘Your resort WILL BE OPEN! On 1st July!’”
This was clear evidence. The High Court was entitled to conclude that representations to
that effect were made by Mr. O’Halloran to David Ames and others in Harlequin.
The Evidence as to Payments
52. McGovern J. held that the appellant’s case on the issue of what was actually agreed
between the parties shifted ground more than once. The evidence as to payments actually
made was critical however.
53. The transactions began with a series of payments made in the year 2008. Beginning on
the 4th September, 2008, Harlequin made a payment of US$100,000, followed by
payments each week thereafter for 12 weeks of US$125,000 (para. 34)
54. Mr. Ames’ testimony before McGovern J. was that Mr. MacDonald told him on the 13th
October, 2008, that the ICE Group was doing a very good job, and that, in order to speed
up construction, weekly payments should be increased to US$165,000 per week until
Christmas 2008 (para. 34). Mr. Ames, on behalf of Harlequin, took Mr. MacDonald’s
advice. These payments, and the ad hoc manner in which they were made, must be seen
as the background to the more focused findings relating to further arrangements between
2009 and 2010, the period during which McGovern J. held that the fraudulent
misrepresentations causing damage to the respondents were made, and during which
time he considered Mr. MacDonald’s role as giving rise to the appearance of a conflict of
interest.
55. Mr. MacDonald did not give evidence in the Irish proceedings. The judgment nonetheless
describes his role in some detail. The extent of his new alliance with Mr. O’Halloran is
shown by the fact that he agreed to become Mr. O’Halloran’s best man, and participated
in a lavish stag weekend at the Monte Carlo Grand Prix, all at a time when the
relationship between Harlequin and the ICE Group had begun its final, inevitable collapse
(para. 76 of the High Court judgment. See, also, para. 9 of the English judgment).
Page 11 ⇓
56. Counsel for Harlequin submitted in this appeal that, in the High Court and elsewhere, Mr.
O’Halloran, or those earlier acting in court on his behalf, had posited various versions of
the terms of the agreement(s). These included:
(a) a plea in further related court proceedings in SVG and Barbados to the effect that a
fixed price contract to complete Phase 1 had been concluded on the 19th May,
2009, for the sum of US$58,634,322 to be paid in 43 weekly instalments of
STG£450,000;
(b) an affidavit sworn in the English proceedings where Mr. O’Halloran claimed that, in
fact, there was a contract concluded in September 2008 - but this was solely for
remedial works—and an agreement in relation to construction works which was not
reached until the 19th May, 2009;
(c) the opening submission by the appellant’s counsel, where it was suggested that the
contract was for a fixed price of US$76,043,396, a figure reflected in answers to
interrogations; and
(d) under cross-examination, a statement that a contract was concluded on the 1st
September, 2008, to construct the entire Buccament Bay resort for a fixed price of
US$119m.
This last version had not been referred to prior to the High Court hearing, and,
apparently, was not previously known either to his counsel or his expert witness. Mr.
Rupert Spencer, in his testimony on behalf of Mr. O’Halloran, said that he understood a
bid for US$119m had been rejected. I add here that, at answer 19 in the sworn answer to
the respondents’ interrogatories, Mr. O’Halloran deposed that the ICE Group entered into
a “fixed price contract” with Harlequin, and as such, the ICE Group was not obliged to
apply monies received exclusively toward the Buccament Bay or other authorised
projects.
57. In fact, this Court has been told that, in the course of the High Court trial, Mr. O’Halloran
made a further contention. This was to the effect that a separate agreement, in
September 2008, had been reached for remedial works for an agreed figure of US$4m, on
which he expected to make a 25% profit. This Court was further informed that, under
cross-examination in the High Court, Mr. O’Halloran said that, by May 2009, 85% of the
remedial works undertaken on foot of this 2008 contract had been completed for the
agreed figure. But, in written submissions prepared for this appeal, Mr. O’Halloran’s legal
advisors claimed that a figure of US$9m was actually spent on remedial works which
would have resulted in a loss to the ICE Group. This can only be described as an area
where the appellant’s case did not occupy a fixed point. But it does not provide a firm
foundation for the contention that the judge erred by not making findings on cost or
pricing.
The Relevant Payments and Agreements
Page 12 ⇓
58. There was evidence that in a preliminary agreement, made on the 17th March, 2009, ICE
was to be paid STG£400,000 per week. In May 2009 there was a further agreement to
complete Phase I in 43 weekly payments of STG£450,000 (para. 35). Faced with these
areas of uncertainty as to any fixed price for the entire contract, McGovern J. made the
point in his judgment that the case before him was not a building contract where the
agreed price would undoubtedly be significant (para. 27). He held that although there
might be disputes as to the exact costings of the project, they were not critical to the
issues he had to decide. He described the contract price issue variously as “peripheral”
and “tangential” to the main issues which he had to decide (para. 27). I respectfully
agree.
59. The judge was correct in holding that the contract price was irrelevant. The main issue
was not whether there was an agreed contract price; nor was it whether the contract
would prove profitable. McGovern J. was sceptical as to whether it would have been
profitable, whether priced at figures given in evidence of US$96 per sq. foot or even at
US$154 per sq. foot. Instead, the true questions on this aspect were, first, whether the
monies paid over by Harlequin were sufficient for completion of the work, and, second,
whether the appellant unlawfully misappropriated monies paid to the ICE Group. The fact
that the contract price was uncertain, or subject to variation, was not relevant to the
ultimate issue to be determined, which was that, no matter how calculated, there was no
lawful basis for the monies paid over for the project to be extracted on foot of what Mr.
O’Halloran told Harlequin.
60. The consequence of Mr. O’Halloran’s submission was that it fixed the focus more squarely
on his actions and words during the particular timeframe the judge identified between
summer 2009 and June 2010, the representations he made, and transactions he engaged
in, during that period. There were a series of agreements, each based on a reduction on
the scale of the project, but often with increased rates of payment to ICE.
61. McGovern J.’s critical findings commence with an arrangement made in November 2009.
He held at para. 35 that, at a meeting which occurred in that month, Harlequin agreed
with ICE to a revised and reduced scope for Phase 1 to be completed by the deadline of
the 1st July, 2010, and further agreed that some remaining works would have to be
delivered after that date. He held that, by the 28th January, 2010, Harlequin had paid 41
out of the 43 weekly payments on the basis of ad hoc arrangements made as far back as
May 2009 (para. 35).
62. The trial judge held as a fact that, on the 23rd February, 2010, the parties then agreed to
a new payment plan (para. 36). Under this arrangement, Harlequin was to pay the ICE
Group STG£600,000 per week, which was to be supplemented by additional ad hoc
payments as and when required in order to ensure that Phase 1, as by then defined, was
delivered on the due date.
63. The judge concluded that Mr. Ames agreed to make these additional and larger payments
because he had become increasingly concerned that the set deadline of the 1st July,
2010, would not be met (para. 36). He held that Harlequin continued to make these
Page 13 ⇓
weekly payments of STG£600,000 until the 18th May, 2010, and that, a little more than a
week earlier, on the 10th May, made a further payment of US$435,000 to the ICE Group
(para 36).
64. The judgment records that, on the 18th May, 2010, Mr. O’Halloran met with David Ames,
and his wife, Carol Ames, at Harlequin’s office at Basildon in England. The Ames testified
that by this stage, they were extremely concerned about their perception of the lack of
progress with the works (para. 37). McGovern J. accepted Mr. Ames’ testimony that he
believed that he and his company had been misled, but that in the light of commitments
made, and desperate to ensure that the opening could proceed on the agreed date, he
nonetheless agreed that the company would make an additional seven payments of
US$1m per week to the ICE Group (para. 37). This testimony was borne out by the fact
that, on the following day, Harlequin did make a payment of US$1m to the ICE Group. On
the 27th May, 2010, Harlequin paid another US$1m. This was the last payment made
before the ICE Group was dismissed from the project on the 11th June, 2010.
65. The judge did not, in fact, have to place total reliance on Mr. Ames’ evidence. The fact
that the payments were made was not only found from the evidence of Mr. Ames, but
was corroborated by the evidence of Mr. Paul Jacobs, a consultant forensic accountant
with Grant Thornton. With one exception which Mr. Jacobs himself corrected, McGovern J.
accepted his expert evidence as to the inflow and outflow of funds as being thorough and
comprehensive, especially with regard to Mr. O’Halloran’s withdrawal of monies (paras.
28-30). The appropriations by Mr. O’Halloran were set out in a “schedule of
misappropriation”, which, less this one insignificant feature, the judge held to be
accurate. This was not challenged in the appeal.
Falsity of the Representations
66. The evidence relating to the work actually done during the relevant period from summer
2009 up to the date of ICE’s dismissal on the 11th June, 2010, is a key factor in the
assessment of Mr. O’Halloran’s bona fides. If in the High Court he could have established
as a fact that the work was progressing apace and according to schedule, or even that
there was a real chance of the deadline being met, then clearly his assurances to
Harlequin would not have been false misrepresentations.
67. But, in fact, the judge found there was significant evidence which pointed the other way.
It was to the effect that, on the basis of the work actually done, ICE had no chance of
meeting the deadline, and that this should have been clear from summer 2009 onwards
(para. 73).
68. Mr. Sanjay Amin, a quantity surveyor, testified on behalf of Harlequin in the High Court.
His evidence was that he visited the site on the 11th June, 2010. This was the day ICE
had been dismissed, but 20 days prior to the stipulated deadline of the 1st July. He and
his team of two other quantity surveyors spent a total of nine days on the site. He was
therefore in a position to base his calculations on a thorough assessment of what was
completed by that stage.
Page 14 ⇓
69. The Court has been told that, as of the 11th June, 2010, Mr. Amin estimated that the
cabanas were 69% complete. He considered that Block 1 of the development was 11%
complete, Block 2 was 74% complete and Block 3 was 34% complete. He found that the
infrastructural works were 12% complete and that what was termed the “back of house”
facility was 0% complete. The waterfront village and restaurants were 10% complete, the
spa facilities were 0% complete, and the generator and sewage treatment plant was 0%
complete. Mr. Amin estimated that the cost to complete Phase 1 as of the date of his
inspection would be US$36,060,117 based on the ICE Group rates, or US$70,715,375
based on the likely 2010 market rates.
70. This was extremely telling evidence - unless it could have been rebutted. If accepted, it
indicated the sheer scale of the work which remained to be done, even within three weeks
of the projected completion date. It, and similar testimony, also was evidence upon which
McGovern J. could draw inferences as to the truth or falsity of Mr. O’Halloran’s statements
that the project would be completed on time.
71. Mr. Amin’s evidence went further. It not only indicated that the rate of progress on the
project was slow, but that there had been efforts made to conceal this fact. There was
evidence that some of the work done was effectively the creation of a ‘Potemkin village’;
that is, to put on a veneer that work had been completed when it had not (para. 66). Mr.
Amin’s evidence was that landscaping had been carried out around the cabanas before
engaging in essential drainage works. Mr. O’Halloran denied that this is what occurred,
but the judge held that there was substantial corroborative evidence to the contrary. He
was entitled to draw this conclusion.
72. In this appeal, Mr. O’Halloran invited the Court to prefer the evidence of Mr. Rupert
Spencer, a quantity surveyor, over that of Mr. Amin. Mr. Spencer was employed by Tower
Consultants Limited, a firm which apparently had previously had a business relationship
with Ridgeview, the original contractors, between 2006 and 2007 (para. 72). But there
was also evidence before the High Court that Mr. Spencer had had a prior business
association with Mr. O’Halloran through connections with another surveyors’ firm, Rider
Levitt Bucknal (“RLB”). In fact, at one point, Mr. Spencer’s company, Tower Consultants,
had been a one-third owner of RLB, which, in the past, had been paid US$150,000 by the
ICE Group. There was further evidence before the High Court of other close business
connections between ICE employees and RLB.
73. Applying the legal principles identified earlier as to findings made by a trial judge, there is
no basis for this Court to now conclude that Mr. Spencer’s evidence should be preferred
over that of Mr. Amin. When it comes to inferences, a court will be slow to draw any other
than those drawn by the trial judge. McGovern J. made clear that his findings of fact were
based on the evidence.
74. The evidence in the High Court was that Mr. Spencer had limited experience of providing
expert reports. He conceded that his membership of the Royal Institute of Quantity
Surveyors had lapsed in 2009, and admitted he had not undertaken any quantity survey
work between October 2010 and January 2013. Mr. Amin had visited the site shortly after
Page 15 ⇓
Harlequin took over in June 2010. Mr. Spencer visited the site seven weeks later after
Harlequin’s new contractors had undertaken a great deal of work in order to ensure what
was by then called Phase 1A was ultimately delivered by a new date of the 13th August,
2010.
75. Before the High Court, Mr. Spencer said he did not enquire into, and was not aware of,
the work done since the ICE Group had been dismissed, and apparently had spent less
than one day on the site. He testified in the High Court that he worked from
measurements found in drawings and could not recall which properties he had personally
viewed.
76. Mr. Amin based his calculations on the value of the work done using a rate of US$96 per
square foot. On the other hand, Mr. Spencer sought to value the works on the basis that
the relationship between Harlequin and the ICE Group had started on the wrong footing
and appears to have used his own judgment in determining how to approach what he
considered a unique set of circumstances. Mr. Spencer chose not to attach photographs to
his report, by contrast to Mr. Amin.
77. There is no basis for now rejecting Mr. Amin’s evidence or reversing McGovern J.’s
findings of fact based on that evidence, which was corroborated.
78. In addition to Mr. Amin’s testimony, two witnesses called on behalf of Harlequin bore out
this general account. These were Mr. David Campion, an architect, formerly with Murray
O’Laoire Architects, by then working for Harlequin, and Mr. Sean O’Connor, the project
manager who took over the site in June 2010 after ICE had been discharged. Mr. Campion
graphically described the site at that time as resembling a “graveyard of knackered
machinery”. Mr. O’Connor said that at that stage the site was an “absolute mess” and that
there was a lack of essential supplies (para. 64).
79. The judge rejected Mr. O’Halloran’s testimony to the effect that Harlequin had failed to
provide him with the required finance to complete the work. He held that adequate
payments had, in fact, been made. He also held that the fact that Mr. O’Halloran’s
evidence was implausible on this issue was demonstrated by the evidence of other
witnesses, including Mr. Campion, who testified that, even by the time of meetings on the
23rd and the 24th November, 2009 - at which point Mr. O’Halloran was indicating a 1st
July, 2010, deadline completion date - the project was already so far behind that all the
monies received from Harlequin would have been needed in order to deliver anything
meaningful by that date.
80. Seen in hindsight, the judge was entitled to also regard this as very significant evidence.
It meant that if the monies paid over were actually extracted from the ICE companies and
devoted to other purposes, it would reduce to nothing the chances of any successful
completion of the project by the 1st July, 2010.
81. There was yet further evidence as to the rate of progress at a point midway through the
relevant period, between summer 2009 and June 2010. Mr. Campion testified that in
Page 16 ⇓
January 2010, the then project manager, Mr. Kevin Webster, produced what is called a
“Gantt Chart” (para. 63). This is a form of bar chart which is used as a production control
tool. It is used in project management to provide an illustration of a schedule that helps
to plan, coordinate and track specific tasks in a project. This showed that a more realistic
completion date for the project was not July 2010, but rather April 2011. Mr. Gilbert
Aquino, an architect, also testified on behalf of Harlequin that he was firmly of the view
that Phase 1 could not have been completed by the 1st July, 2010 (para. 64).
82. Mr. O’Halloran invited the High Court to consider a surveyor’s report which was dated
January 2010. The firm of surveyors, RLB, concluded that the programme, although
“ambitious, was achievable”, and with continued diligence of the main contractor and
design team should achieve a successful outcome. The judge found this was, at best, a
“guarded response”. A report in February 2010 concluded with the belief that overall, a
Phase 1 soft opening date could be achieved at Buccament Bay (para. 68). But both
reports raised concerns about the level of coordination required in order to ensure that
the resort would be ready in time and identified a number of threats to the achievement
of this.
83. McGovern J. considered that a reading of these and later reports indicated that the
authors were extremely careful in their phraseology. He observed that, in a final report
dated the 21st May, 2010, RLB concluded that having considered the progress on the site
by reference to the projected opening date of the 1st July, 2010, completion could not be
achieved given what was described as the lack of functional infrastructure and the then
current level of works incomplete (para. 70). The report noted that “the levels of
resources did not appear to be the same as observed in February”. It drew attention to
the absence of key materials, labour skills and essential works which led the consultants
to conclude that it would not be possible to project a revised date for the opening with
any confidence. On this the judge observed that “[w]hatever hopes might have existed
until then about meeting the opening date, they were now well and truly dispelled” (para.
70).
84. All this is to be seen in the light of Mr. O’Halloran having accepted in cross-examination
that, insofar as he did make assurances on the 25th and 26th May, 2010, that the project
would be complete by the 1st July, 2010, it would have been wrong of him to do so (para.
71). McGovern J. held that this report was of insufficient weight to offer any comfort to
Mr. O’Halloran, or to provide justification for what he held to be the many representations
made (para. 73). These were all findings he was entitled to make.
Mr. O’Halloran’s State of Mind when the Representations were Made
85. McGovern J. held that the evidence was that Mr. O’Halloran made repeated assurances
that the deadline would be met, and that it would be necessary to increase payments to
his company to achieve this end. Mr. O’Halloran contended that his companies were
starved of funds. The judge held there was no evidence of this assertion.
86. Evidence of a full and candid exchange of information between the two parties to an
agreement might potentially rebut a finding of fraudulent conduct. The judge referred to
Page 17 ⇓
evidence which, he concluded, showed that Mr. O’Halloran was far from candid with
Harlequin.
87. McGovern J. held that from the beginning of the year 2010, not only did Mr. O’Halloran
assure Mr. Ames and Harlequin that all was well, but that, despite requests for
information, he failed to keep the companies fully informed as to the progress of the
building works. He held that Mr. O’Halloran sought to ensure that all information going to
Mr. Ames and Harlequin would be directed through him (para. 61). His decision to control
this information was to ensure that Harlequin did not ascertain the true position with
regards to the works at Buccament Bay (para. 79(ix)). This, too, was a critical finding of
fact.
88. From time to time, a piece of evidence will emerge in a case which is itself more eloquent
than hours of verbal testimony or mountains of documentary evidence. McGovern J.
identified two pieces of evidence which must of course be assessed against the
background of the many oral representations which he held were actually made that the
project would be completed by 1st July, 2010.
89. First, McGovern J. referred at para. 61 to an email dated the 15th January, 2010. In it,
Mr. O’Halloran was communicating to two employees of the ICE Group: Mark Coggle and
Kevin Webster. The email was copied to other employees. It stated:
“Hi Guys,
Please don’t give Dave Ames any information, please direct the information through
me!...”
90. In the appeal, Mr. O’Halloran sought to explain this communication on the basis that Mr.
Ames was a volatile, unpredictable, “Walter Mitty” type character, who was difficult to
handle. With respect, this was utterly unconvincing. What is said in the email must be
placed within the context other evidence and the findings based on that evidence. It
showed concealment, as the judge concluded.
91. It may also be viewed in the context of the evidence regarding the absence of progress of
the project as established in the evidence of Mr. Amin, Mr. Campion and Mr. O’Connor.
This is in addition to Mr. Jacob’s evidence that, by June 2010, the ICE Group was
effectively insolvent and had not brought Phase 1 to anything like completion at a time
when the Buccament Bay project constituted 94% of its total turnover (para. 31).
92. Further, McGovern J. heard evidence which established that in the month of February
2010, Mr. O’Halloran met with a firm of consultants, Knowles, in order to discuss whether
his companies could disengage from the project (para. 67). He was advised that this
would not be possible. Mr. O’Halloran claimed in evidence that he sought this advice
because of Harlequin’s failure to make payments on schedule. But again there was no
evidence that either the ICE Group, or he himself, had complained of failure to make
payments. This meeting took place in the same month as the agreement made with
Page 18 ⇓
Harlequin for an increase in the payments to be made in pursuance of achieving the 1st
July deadline.
93. Evidence of concealment before the High Court did not end with that one email. The
second key piece of evidence was that, as McGovern J. found, on the 5th May, 2010, less
than two months prior to the deadline date of the 1st July, Mr. Kevin Webster again
emailed Mr. O’Halloran asking how to respond to Mr. Ames’ request for an update on the
progress of the project. It is striking that Mr. Webster felt the need to consult with Mr.
O’Halloran regarding information which Mr. Ames was surely entitled to have. Mr.
O’Halloran’s email reply to Mr. Webster was that the latter’s response to Mr. Ames should
be “… nice and simple along the lines that we are working towards the required deadlines,
don’t spook him” (para. 65). (Emphasis added). On this, and referring to Mr.
O’Halloran, McGovern J. held that “[c]learly, 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” (para. 65). This was a reasonable conclusion.
94. McGovern J. held, at para. 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.”
McGovern J. went on to say:
“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.”
These, too, were findings of fact which the learned trial judge was entitled to reach.
Reliance
95. Turning then to reliance placed by Harlequin on Mr. O’Halloran’s representations,
McGovern J. held:
“74. I have already concluded that the first named defendant made representations
concerning the opening date of Phase 1 by 1st July, 2010, and that these
representations were made by the first named defendant in circumstances where
he knew that the opening date of 1st July, 2010, could not be achieved for Phase
1. ”
He went on to find as facts:
“Those representations were made knowingly, or at the very least, recklessly, as to
their truth. There can be no doubt, on the evidence, that Harlequin placed reliance
Page 19 ⇓
on those representations. The first named defendant was well aware of the fact that
Harlequin was under enormous commercial pressure to deliver the Buccament Bay
resort by 1st July, 2010. As a result of the representations made by the first named
defendant, a number of steps were taken by Harlequin:-
(a) Harlequin purchased a large quantity of furnishings at a cost of
approximately US$12.7m which were delivered from China. These were for
the fitting out and furnishing of the rooms and facilities in the resort;
(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.”
96. These were all findings the judge was entitled to make on the evidence tendered to him.
Referring again to the ingredients of the tort of deceit as set out at para. 18 above,
Harlequin “altered its position” on foot of the misrepresentations. These steps are also to
be seen in light of the increased payments made from the summer of 2009 onwards: a
further alteration of position.
97. The judge dealt with the role of two members of the firm of WK. The part played by the
first, Mr. Martin MacDonald, has been outlined. Mr. MacDonald was the main contact
between WK and the ICE Group. McGovern J. described him as “more than a member of
an accountancy firm retained by Harlequin” (para. 75). He had become a “close friend
and confidante” of David and Carol Ames. The judgment describes that, as time went by,
Mr. Ames relied more and more on his assistance, and that, eventually, Mr. MacDonald
became, for all intents and purposes, the Chief Financial Officer of Harlequin.
98. The judgment goes on to describe the role of Mr. Jeremy Newman, who testified. He, too,
was an accountant with WK. McGovern J. stated:
“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
Page 20 ⇓
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” (para. 75).
Mr. Newman assisted the appellant as a McKenzie friend in this appeal.
99. The judge observed that Mr. Ames felt very “let down” by Mr. MacDonald, and with some
justification (para. 77). By that time, Mr. Newman was also working for the ICE Group.
100. Thus far, this judgment has addressed the circumstances in which monies were paid up to
June 2010.
The Extraction of Monies
101. There was evidence before McGovern J. that, during this same period, substantial sums
were extracted. The judge set out the evidence of Ms. Shona Quammie, who was
employed by the ICE Group on the 22nd June, 2009 (para. 50). She was in charge of all
transfers and disbursements of monies within the ICE Group. She remained employed in
that capacity until she resigned from that post on the 16th June, 2010, at which time she
joined Harlequin in the same position. McGovern J. found her to be a “credible witness”
(para. 50).
102. Ms. Quammie testified that there were no cash flow projections in ICE, and that Mr.
O’Halloran chose what was paid and not to be paid (para. 51). She testified that by April
2010, she was more and more dealing with pressure and queries from creditors as the
deadline for the opening of Phase 1 became closer (para. 52). Her testimony was that,
especially from in or about March 2010 until the time the ICE Group was dismissed, she
was not permitted to pay invoices or bills without Mr. O’Halloran’s approval (para. 52).
103. Ms. Quammie’s evidence of the circumstances of Mr. O’Halloran’s withdrawal of monies
was, the judge felt, clear. She testified that, at the same time as she was fending off
creditors, she was being directed to make regular and substantial payments from ICE
Group’s bank accounts to Mr. O’Halloran’s personal bank accounts in Ireland (para. 52).
This evidence was supported by contemporaneous emails which she had decided to retain
as she was concerned to protect her position (para. 53). McGovern J. found this evidence
to be “compelling” (para. 54). The trial judge pointed out that the claim brought in this
jurisdiction only related to monies found to have been transferred to this jurisdiction. The
evidence went so far as to demonstrate that 26% of all the monies paid by Harlequin
during this time was spent on items identified by Mr. Jacobs in a “Misappropriation
Schedule” which was provided to the Court (para. 44).
The Nature of the Sums Removed
104. At para. 43, McGovern J. held that the following ever-increasing “Irish payments” were
made at Mr. O’Halloran’s behest to his own bank accounts:
“January 2009: Transfer to Bank of Ireland Account (the 584 Account) US$110,000
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
Page 21 ⇓
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.”
Taking all these payments into account, McGovern J. calculated that the total “Irish
payments” amounted to US$2,257,800 (para. 43). He attached significance to the extent
to which, on and after June 2009, the pattern and size of the payments increased. These
could not, by any stretch of the imagination, be seen as “salary payments”.
The Judge’s Findings on the Payments
105. McGovern J. observed:
“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
Page 22 ⇓
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.”
106. McGovern J. then went on to hold:
“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.”
107. McGovern J. found:
“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
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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.” (Emphasis added)
The emphasised words almost speak for themselves. The evidence was “vague and
unclear”. The true purpose of the transfers was concealed.
108. McGovern J. concluded:
“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.” (Emphasis added)
These were findings the judge was entitled to make on the evidence.
Damages
109. The findings on loss and damages were based on the payments made at a particular time,
within a particular context. It is true that, theoretically, the judge might have fixed
himself with the task of balancing out work done by ICE as compared with the payments
extracted by Mr. O’Halloran. To my mind, he was quite correct in refraining from engaging
in what would have been a complex and unnecessary exercise which would have involved
calculating the damages which were not being sought, as contrasted to those which were.
110. The evidence was that the sums of money which had been paid over by Harlequin were
sufficient for the performance of the contract - if performance had been undertaken in
good faith. These were common law damages. The respondents limited the quantum of
their claim to the timespan and the particular payments made into the Irish accounts. If
the claim might have been put on the basis of being proprietary in nature, or a
constructive trust, together with knowing receipt, or a Quistclose Trust accompanied by
tracing, the award could not have been any less.
111. The order made by McGovern J. on the 31st July, 2013, was that the respondents were to
recover the sum of US$1,575,500 from Mr. O’Halloran personally. Drawn from the
payments, the figures were broken down as follows:
•
Payments between the 29th June, 2009, and the 31st May, 2010, 22 in number;
that is, US$1,488,000
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•
Payments made by the ICE Group to Weddings by Franc in respect of a wedding
planned by Mr. O’Halloran at Adare Manor with his then fiancée. These amounted to
the 6th November, 2009, US$72,000, the 17th December, 2009, €20,000, the 8th
March, 2010, €50,000, and the 12th March, 2010, Eastern Caribbean equivalent of
€50,000.
The “non-dollar” figures were converted into their dollar equivalents for the purposes of
the judgment.
112. It has not been said that any of these calculations were incorrect. The payments to
Weddings by Franc are in themselves significant. It is not possible to conceive how these
were lawful payments from ICE. This was a transaction which was personal to Mr.
O’Halloran. The transfers say much as to his control of the companies. The Weddings by
Franc payments set out above, which came to a total of US$72,000, were added the euro
sums from the 17th December, 2009, the 8th March, 2010, and the 12th March, 2010,
amounting in total to €120,000.
113. The learned trial judge also took into account two payments made directly to Mr.
O’Halloran Snr.’s bank account of US$179,000. These were made on the 13th November,
2009, and the 20th November, 2009. He held that Mr. O’Halloran, Jnr. was liable for
repayment of these. This amounted to a total sum in US dollars of US$1,918,000 and
€120,000, giving rise to the ultimate award.
114. In assessing damages, the judge confined himself to what he referred to as the “Irish
payments”; that is, the payments into Mr. O’Halloran’s Irish bank accounts. He held that
from the summer of 2009, Mr. O’Halloran knew that the ICE Group could not deliver
Phase 1 of the project by the 1st July, 2010, and that, therefore, the Irish payments from
that time onwards were sums misappropriated from Harlequin. McGovern J. held that
these sums could be taken into account in assessing the damages to be awarded for
fraudulent misrepresentation giving rise to the tort of deceit. In so doing he ignored all of
what he termed the Caribbean and other payments referred to in the course of the trial,
save as to their corroborative value and showing a pattern of behaviour of Mr. O’Halloran
with regard to the diverting of funds from the Buccament Bay project.
The Law
115. Apart from making submissions regarding the standard of proof, Mr. O’Halloran did not
make any other observations on the legal authorities cited.
116. As to the law, McGovern J. correctly observed that the case before him bore certain
similarities to the well-established tests for deceit referred to at para. 18 earlier. He also
observed that there are similarities to the old case of Edgington v. Fitzmaurice (cited at
para. 22 above). In Edgington, 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 received it. Monies were advanced by the plaintiff for a specific purpose, and
the company subsequently became insolvent. The English Chancery Court held that the
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representations as to the purpose for which the monies would be applied were capable as
operating as a material misstatement of fact, capable of giving rise to an action in tort.
117. In Standard Chartered Bank v. Pakistan National Shipping Corporation [2002] 3 W.L.R.
1547, Lord Hoffman observed that no one could escape liability for fraud by saying that
he or she wished to make it clear that he or she was committing a fraud on behalf of
someone else and that he or she was not to be held personally liable.
118. McGovern J. correctly applied dicta to be found in Shinkwin v. Quin-Con Ltd. [2001] 1 I.R.
514, where this Court (Fennelly J.) indicated that a separate personal duty could be
imposed on a company director arising from his or her close proximity to a tortious act.
McGovern J. held that the facts of this case, and the extent of Mr. O’Halloran’s control,
demonstrated that this principle was applicable.
119. The judge also correctly directed himself that the standard of proof was that enunciated
by this Court in Banco Ambrosiano S.P.A. v. Ansbacher Company Ltd. [1987] I.L.R.M.
669. There, Henchy J. observed that he was unable to discern in principle or in practice
any rational or cogent reason why fraud in civil cases should require a higher degree of
proof than that required for the proof of other issues in a civil claim. McGovern J. correctly
directed himself on the relevant legal principles (para. 89).
120. Given his conclusion on this primary issue on fraudulent misrepresentation giving rise to
deceit, the judge did not consider it necessary to consider any alternative claim made on
behalf of the respondents that Mr. O’Halloran could be held liable simply by reference to
the duty owed to creditors by directors in circumstances where the latter are aware that
Inns [1991] 1 I.L.R.M. 387; West Mercia Safetywear v. Dodd [1988] BCLC 250;
Winkworth v. Edward Baron Development Company [1987] 1 All E.R. 114. See, also,
Deirdre Ahern, Directors’ Duties: Law and Practice (Round Hall 2009), at p. 185; and
Yukong Lines of Korea v. Rendsburg Investments Corporation and Ors. (No. 2) [1998] 4
All E.R. 82, at p. 89. But see also, Gavin Lightman, Gabriel S Moss and Ian F Fletcher,
Lightman and Moss on the Law of Administrators and Receivers of Companies (5th edn.,
Sweet and Maxwell 2011), at p. 12). For the reasons set out in this judgment, I also do
not consider it is necessary to embark on such a consideration.
121. For completeness, I would add that the judge set out his reasons for holding that what
occurred in this case did not give rise to what is known as a Quistclose trust, or a
constructive trust (para. 118). In view of the conclusion I have reached, it is unnecessary
to deal with these questions either. The findings render the appellant personally liable for
the amount of the award.
122. I mention here one disturbing aspect of the case. What is written now is no reflection on
the Irish lawyers who acted entirely correctly in these proceedings. But there is clear
evidence that, at some point, a person or persons, so far unidentified, interfered with
copy emails said to have been sent by Mr. O’Halloran to a Ms. Trish Young, then an ICE
employee. The purported emails contained additions which have been found by expert
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independent analysis to be interpolation and not written by Mr. O’Halloran, but which
purported to be written by him. These were used in proceedings elsewhere, but were
exhibited in an application for interim relief made on behalf of the respondents to the
High Court. Fortunately, no Irish court made an order on foot of, or in reliance on, these
emails. It is clear that they were provided by others and that the Irish lawyers acted
entirely in good faith. These emails have no bearing on the outcome of the main issues in
this appeal.
Conclusion
123. Seen with all the clarity of hindsight, this case can be reduced to its bare essentials. It is,
of course, true, that there are occasions when those involved in construction projects
make assurances to clients as to deadlines which turn out to be over-optimistic.
124. But there are features about the evidence in this case which caused the trial judge to take
a less sanguine view and which raised what happened to a different order of seriousness,
beyond mere negligent misrepresentation or breach of contract. He was entitled to reach
these conclusions.
125. This was, in essence, a “fact case”, where the judge was fully entitled to accept the
evidence upon which he proceeded to make sustainable findings, and where he correctly
directed himself on the relevant law. Even had Mr. O’Halloran been legally represented, it
is impossible to conceive how the result would have been any different. I would dismiss
the appeal, and hear counsel on the form of the order, and any ancillary orders, which
may arise from the efflux of time since the judgment.
Result: Appeal allowed