High Court dismisses counterclaim and personal guarantee claim due to failure to discharge onus of proof.

Neutral Citation Number: [2010] IEHC 275

THE HIGH COURT

2003 9018 P

BETWEEN

MOORVIEW DEVELOPMENTS LIMITED, SALTHILL PROPERTIES LIMITED, VALEBROOK DEVELOPMENTS LIMITED, SPRINGSIDE

PROPERTIES LIMITED, DRAKE S.C. LIMITED, MALLDRO S.C. LIMITED, THE POPPINTREE MALL LIMITED AND BLONDON

PROPERTIES LIMITED

PLAINTIFFS

AND

FIRST ACTIVE PLC AND RAY JACKSON

AND BY ORDER

BERNARD DUFFY

DEFENDANTS

AND RELATED CASES

JUDGMENT of Mr. Justice Clarke delivered on the 9th July, 2010

1. Introduction

1.1 This is, at the last count, the thirteenth judgment given in relation to cases arising out of the collapse of the plaintiffs and related

companies (“the Cunningham Group”). The background to these proceedings generally has been set out in many of those previous

judgments and it is unnecessary to repeat it here. What might reasonably be described as the “main proceedings” (i.e. those referred

to in the title of this judgment) and the “main judgment” in same (Moorview Developments Limited & Ors v. First Active Plc & Ors

[2009] IEHC 214) dealt with many of the issues which arose in these connected proceedings. However, for the reasons set out in the

main judgment, a number of issues were left over for subsequent determination. Some of the issues left over have already been the

subject of decision, see Moorview Developments Ltd v. First Active Plc & Ors [2009] IEHC 367. This judgment is principally concerned

with two remaining issues, being a counterclaim in the main proceedings and claim on a guarantee against Mr. Brian Cunningham

personally.

1.2 The main proceedings involved a claim brought by companies in the Cunningham Group against the defendants First Active Plc

(“First Active”), Ray Jackson (“Mr. Jackson”) and Bernard Duffy (“Mr. Duffy”). In response to those proceedings First Active

maintained a counterclaim against the first named plaintiff (“Moorview”), the second named plaintiff (“Salthill”) the third named

plaintiff (“Valebrook”) and the fourth named plaintiff (“Springside”). The counterclaim related to monies alleged to be due by those

companies arising out of loans advanced by First Active to the companies concerned and cross guarantees entered into by those

companies in respect of the indebtedness to First Active of Moorview and Salthill.

1.3 In addition, this judgment is concerned with separate proceedings [2005 No. 272 S] in which First Active sues on foot of a

guarantee entered into by Mr. Brian Cunningham (“Mr. Cunningham”). There is a complication in respect of these latter proceedings

which it will be necessary to deal with in due course.

1.4 Subsequent to delivery of the main judgment, these two connected matters, that is to say First Active’s counterclaim in the

Moorview proceedings and the claim by First Active against Mr. Cunningham personally on the guarantee, were case managed with a

view to those issues being tried together. In that context issues arose between the parties as to the entitlement, in the light of the

main judgment, of the Cunningham Group and Mr. Cunningham to raise certain matters of defence. What, in fact, occurred was that

witness statements were filed, on behalf of the Cunningham Group and Mr. Cunningham, from which it could only be inferred that it

was intended to raise matters which First Active asserted had already been determined in the main judgment. An issue as to the

entitlement of the Cunningham Group and Mr. Cunningham to raise those matters was determined in a judgment in Moorview

Developments Ltd & Ors v. First Active Plc & Ors [2010] IEHC 34. For the reasons set out in that judgment I came to the view that it

was not open to Mr. Cunningham or the Cunningham Group to raise the relevant matters on the grounds of res judicata.

1.5 The proceedings were then listed for hearing and this judgment is directed to the issues which were raised at that hearing.

1.6 In that context, I turn to the issues.

2. The Issues

2.1 It is possible, and in my view convenient, to separate the issues raised as a defence to the counterclaim into two sets of issues.

2.2 The first submission made on behalf of the Cunningham Group (or more accurately those four companies within the Cunningham

Group which are specifically the defendants to the counterclaim) concern the adequacy of the evidence presented on behalf of First

Active as to the indebtedness of those companies. I will in due course turn to that question.

2.3 Second, some specific issues concerning particular amounts of money included in the counterclaim were raised. I propose dealing

separately with each of those issues.

2.4 Finally, it is necessary to touch on the question of First Active’s claim against Mr. Cunningham on the guarantee. Only one issue

was raised under that heading. The issue concerned the fact that the relevant guarantee made reference to liabilities of a company

called Moorview Properties Limited. However, the name of the first named plaintiff is Moorview Developments Limited. On that basis it

is said that the guarantee is not effective, at least insofar as debts of Moorview are concerned. Before leaving that issue I should

also note that in a separate set of proceedings in which the Cunningham Group and Mr. Cunningham have brought a claim against the

Royal Bank of Scotland & Ors (“the RBS proceedings”), I also had to consider an application on behalf of the Cunningham Group and

Mr. Cunningham for an amendment to the pleadings in that case. I will deal with the issues which arose on that application in a

separate ruling. However, for present purposes, it is necessary to note that the amendment sought, if made, would claim additional

relief which would, if granted, have the effect of setting aside the guarantee which is the subject matter of the proceedings with

which I am currently concerned. When I noted that there was only one issue in the guarantee proceedings, it is important to

emphasise that it is perhaps more accurate to say that there is currently only one issue in those proceedings but that it may,

depending on the result of the amendment application to which I have referred, be necessary to give further consideration as to what

is to happen to those proceedings. For the purposes of this judgment I am concerned solely with the only issue which was, on the

basis of the current pleadings, before the Court in relation to the continuing validity of the guarantee and Mr. Cunningham’s liability on

it. I propose dealing with that issue first.

3. The Guarantee Issue

3.1 As already noted only one point concerning the guarantee was made. It is true that the liabilities in respect of which Mr.

Cunningham entered into in the guarantee concerned are specified as including liabilities of a company described as “Moorview

Properties Limited”.

3.2 The defendant to the counterclaim is, of course, Moorview Developments Limited. The company which has potential liabilities to

First Active is, therefore, Moorview Developments Limited.

3.3 One preliminary point was made by counsel on behalf of First Active. Mr. Cunningham’s guarantee has, in events which have

happened, been capped at the sum of the euro equivalent of IR£1.5 million. The extent to which any of the companies whose

liabilities are guaranteed may owe sums in excess of that amount is, therefore, irrelevant. Provided one or more of the relevant

companies owes a cumulative sum equal to or in excess of the guarantee cap, then Mr. Cunningham is clearly liable to pay that

capped sum on the guarantee. It will be necessary in due course to deal with the liabilities of each of the companies who are

defendants to the counterclaim. However, it does need to be emphasised that, even if there was a difficulty concerning the

description of Moorview as Moorview Properties, that would not avail Mr. Cunningham unless the cumulative liability of the other

companies in respect of which no point can be raised fell below the cap. The amounts claimed in respect of each of the other

companies exceeded the cap by a very substantial margin indeed so that in the event that First Active is even modestly successful in

its counterclaim, the point made on the guarantee becomes wholly irrelevant.

3.4 Indeed, as will become apparent from the various points raised as a defence to the counterclaim, it is very difficult indeed to

envisage any circumstances in which the amounts claimed could have been reduced to a sum that would make this point of any

relevance. The Cunningham Group did put forward an argument concerning the adequacy of First Active’s evidence which, if

accepted, might theoretically lead to no award being made on the counterclaim. In those circumstances, of course, there would be no

evidential basis for the liability of any of the relevant companies and the guarantee claim would also necessarily fail on that ground

alone. On the other hand if there is a liability on the part of any or all of the companies who are defendants to the counterclaim, then

there does not seem to be any basis for suggesting that that liability could be less that the cap. What relevance the point has, in

practice, somewhat eludes me. However, the point being raised I propose dealing with it.

3.5 This aspect of the case concerns what has, in some of the case law, (see for example East v. Pantiles (Plant Hire) Ltd (1981) 263

E.G. 61) been described as “correction of mistakes by construction”. As is clear from East and from the speech of Lord Hoffman in

Investors Compensation Scheme Ltd v. Bromwich Building Society [1998] 1 W.L.R. 896, two conditions must be satisfied in order for

such a correction to occur. First, there must be a clear mistake. Second, it must be clear what the correction ought to be.

3.6 It is also clear from the speech of Lord Hoffman in Investors Compensation that a correction of the type with which I am

concerned is not a separate branch of the law, but rather an application of the general principle that contractual documents should

be construed according to their text but in their context. That context may make it clear that the words used in the text are a

mistake. Thus, a reasonable and informed person may conclude that the words used are an obvious mistake and may also be able to

conclude what words ought to have been used. In those circumstances, as a matter of construction, the court will, as it were,

construe the contract as if it had been corrected for the obvious mistake. The reason for so construing the contract in that way is

that the proper principles for the construction of contracts lead to that construction in any event. I am satisfied that those cases,

most recently restated by the House of Lords in Chartbrook v. Persimmon Homes Ltd [2009] 1 A.C. 1101, represent the law in this

jurisdiction.

3.7 The evidence in relation to this case was given on behalf of First Active by Mr. John Collison. Mr. Collison drew attention to the

fact that all of the letters and contractual documents passing between the parties at or around the time of the guarantee being

entered into, made reference to loans being advanced or to be advanced by First Active to Moorview Developments Limited. Mr.

Collison gave evidence that, to the best of his knowledge, no one in First Active had ever heard of a company called Moorview

Properties Limited. The guarantee was entered into as part of a package of financial arrangements between the Cunningham Group

and Mr. Cunningham on the one side and First Active on the other side. The relevant loans were all entered into between First Active

and Moorview Developments Limited. Likewise, evidence was produced from the company’s register which showed that there never

was a company called Moorview Properties Limited.

3.8 In those circumstances there is only one conclusion. The reference to Moorview Properties Limited in the guarantee was a clear

mistake. Not only was it a clear mistake but also what the correct reference should have been is equally clear. The guarantee should

have made reference to Moorview Developments Limited. Moorview Properties did not exist. It never existed. Moorview Developments

was, at exactly the same time as the guarantee was entered into, involved in entering into loan arrangements with First Active. It is

inconceivable that there could have been any other intention of the parties but that the company whose liabilities were to be

guaranteed was Moorview Developments Limited and not Moorview Properties Limited.

3.9 It is illustrative of the way in which the Cunningham Group has met these proceedings, that this point was persisted in,

notwithstanding the fact that no evidence was tendered on behalf of the Cunningham Group or Mr. Cunningham and the only evidence

likely to be before the Court would be wholly supportive of the fact that the legal test, which I have identified above, was

comfortably met. It is, quite frankly, difficult to understand how the point could have been made in those circumstances. When regard

is further had to the fact that, for the reasons which I have already sought to analyse, the point, even if it were good, would not be

of any practical benefit to Mr. Cunningham, then it is doubly difficult to understand why the point was persisted with at all.

3.10 This is a matter to which I will have to return. However, for present purposes it is sufficient to say that I am more than satisfied

that the proper construction of the guarantee is that it includes a guarantee by Mr. Cunningham over any liabilities of Moorview

Developments Limited, the first named plaintiff. Subject to establishing the liabilities of both Moorview and the other defendants to

the counterclaim, and subject to the question concerning the RBS proceedings to which I have already referred, it follows that Mr.

Cunningham is liable to the cap amount on the guarantee.

3.11 In those circumstances, it is necessary to turn to the issues which arise in respect of the counterclaim and to deal first with the

complaint made on behalf of the Cunningham Group that the evidence presented on behalf of First Active was insufficient to establish

its claim. The evidence tendered on behalf of First Active in relation to the counterclaim was also that of Mr. John Collison. I,

therefore, turn to this evidence.

4. Mr. Collison’s Evidence

4.1 Mr. John Collison of First Active gave evidence in relation to the outstanding balances owed to First Active by the relevant

plaintiff companies. Mr. Collison first became involved with the Cunningham Group in and around May, 2000 when he was assigned to

monitor and assess the facilities that related to the Cunningham Group, which predominantly related to property at Finglas Shopping

Centre and a development site at Bailey Point, Salthill, Co. Galway (“Bailey Point”). An up to date table of the outstanding balances

was handed into Court during the hearing. Mr. Collison used the 9th April, 2003, as the starting date for the calculations as it was the

date of the appointment of the receiver, Mr. Jackson. The main judgment sets out the circumstances in which Mr. Jackson was

appointed.

4.2 The outstanding balances are set out as follows:-

Salthill Moorview Valebrook Springside Total

Bal €26,198,051 €5,212,963 €nil €nil €31,411,014

(9th April, 2003)

Payments €11,846,231 €25,604,230 €557,797 €29,898 €38,038,156

Receiver’s €2,006,287 €2,832,133 €538,022 €129,556 €5,505,998

Fees

Receipts €(17,632,927) €(15,813,303) €(86,043) €(567,058) €(34,099,331)

Interest €11,231,912 €8,739,823 €0 €(89,710) €19,882,025

Bal €33,649,554 €26,575,846 €1,009,776 €(487,314) €60,737,862

(30th April,

2010)

4.3 Mr. Collison gave evidence as to the calculations. The nil opening loan balance recorded in respect of Valebrook and Springside

reflect the fact that no loans were outstanding and owing by these companies to First Active when they were placed in receivership

on foot of the cross-guarantees entered into by them in respect of the indebtedness to First Active of Moorview and Salthill. Each of

the reconciliations submitted by First Active set out a summary of the payments made in respect of the companies in receivership up

to and including 30th April, 2010. The receiver’s fees did not include any of the legal fees incurred by Mr. Jackson in respect of these

companies; such legal fees have in the main been incurred in respect of these proceedings and are a matter for costs in these

proceedings. Also, First Active is not seeking at this stage to recover legal fees incurred by Mr. Jackson in respect of matters

unconnected to these proceedings. Mr. Collison stated that the interest is calculated and charged on a monthly basis at the

prevailing rate for each company on the loan balance then outstanding.

4.4 Mr. Collison further stated that, based on the extent of the Cunningham Group’s liabilities, any sales would not generate sufficient

proceeds to repay all of the debt to First Active. Mr. Collison did not envisage any possibility of overpayment or over-realisation of

the debt.

4.5 Mr. Collison was clear in his evidence that he had carried out the calculations himself subject to the fact that he was assisted by

one colleague in his task, which colleague worked together with him in circumstances where he was personally familiar with the work

done by that colleague. Mr. Collison also produced a series of lever arch files which contained vouching documentation in respect of

virtually each item which formed part of his calculation. Mr. Collison gave clear evidence that each item in the calculation was derived

from the books and records of First Active and was accurately reflected in the schedules which he produced to the Court. It was

suggested on behalf of the Cunningham Group and Mr. Cunningham that I should not accept Mr. Collison’s evidence to the effect that

he had personally compiled the schedules produced to the Court having verified each item from the company’s books and records. I

totally reject that submission. The only colourable (if it even be that) factual basis for the suggestion that Mr. Collison had lied on

oath was that one error was discovered in the calculations. As pointed out earlier Mr. Collison indicated that First Active had not

included in its claim (and he had not included in the relevant schedules) legal fees charged by First Active’s solicitors, Arthur Cox,

notwithstanding the fact that such fees could, in certain circumstances, be properly regarded as forming part of the liabilities to First

Active of companies within the Cunningham Group. The terms of the various mortgage debentures provided that such costs incurred,

both by First Active in its capacity as a mortgagee in possession and by Mr. Jackson subsequent to his appointment as receiver, were

to be regarded as part of the secured debt. However, First Active, as pointed out, stated that any claim that might be made in that

regard was being waived. In the three lever arch files amounting to some hundreds of separate dividers relating to individual

transactions, it proved possible to find one error, which involved there being a claim in respect of legal fees which was undoubtedly

properly maintainable, but which was included in the schedules notwithstanding the fact that it had been indicated that such claims in

respect of legal fees were being waived. On that basis, it was suggested that I should infer that Mr. Collison had misled the court by

indicating that he had personally compiled and checked the relevant schedules. I find that suggestion to be untenable. I am more

than satisfied that Mr. Collison was a credible and truthful witness. It does not seem to me to be open (as suggested on behalf of the

Cunningham Group) to infer that Mr. Collison, simply because one error was made in a most laborious task, had not in fact done the

task himself. I totally reject the suggestion that Mr. Collison’s evidence should not be accepted.

4.6 On that basis, I accept Mr. Collison’s clear evidence that First Active’s books and records contain entries, each one of which is

set out in the relevant schedule, which involve either the initial liability of each respective company as of the date of the

receivership, further sums advanced to the relevant companies in the course of the receivership, sums expended by First Active as

mortgagee in possession which, in accordance with the terms of the mortgage debenture, become liabilities of the company

concerned, and interest properly calculated in accordance with the terms of the relevant facility letters.

4.7 Subject to the individual points to which I will shortly turn, no challenge was made to any particular entry or any of the

calculations carried out. No evidence was presented on behalf of the Cunningham Group or Mr. Cunningham in relation to same.

4.8 A point was made on behalf of the Cunningham Group and Mr. Cunningham that some of the documents produced by Mr. Collison

were not documents which could be proved under the provisions of the Bankers Books Evidence Acts 1879 and 1959. However, that

submission seems to me to misunderstand the object of that legislation. As pointed out in Volume 1 of the 1st Edition of Hallsbury’s

Laws of England at para. 1301, the main object of the Bankers Books Evidence Acts is to relieve bankers from the necessity for

attending at court and producing their books under a subpoena duces tecum. The purpose of the Acts is not, therefore, to facilitate

banks in proving matters. The purpose is to enable evidence to be given of the contents of other parties’ bank accounts without the

necessity for the attendance of a representative of the bank concerned and the production of the relevant books. However, in this

case a representative of the bank did attend and gave evidence that the records which he produced to the court were taken from

First Active’s electronic books and faithfully recorded what was present in them. In those circumstances there is no need for the

relevant records to conform with the Bankers Books Evidence Acts. That legislation is irrelevant to a case where the contents of the

banks books are proved in the ordinary way by a witness who can give direct evidence of having analysed the books.

4.9 In my view, therefore, the general submission made on behalf of the Cunningham Group and Mr. Cunningham as to the inadequacy

of the evidence produced on behalf of First Active is wholly misconceived. Subject to a number of individual points, made in respect

of specific and limited sums, that alone would be sufficient to establish that the sums claimed are due in each case. I should, in

passing, briefly note that the reason why the sums due from the respective companies differ in some respect is that a complete set

of cross-guarantees was not in place so that not all of the liabilities attached to each of the companies.

4.10 However, before going on to those specific points, it is necessary to deal with one additional matter urged on behalf of First

Active. Each of the relevant mortgage debentures contained a clause (clause 27) which provided as follows:-

“A certificate of any authorised officer or employee of the Bank as to the amount of Secured Liabilities due and owing are

incurred by the Company to the Bank shall be binding on the Company and as respects the Company (save in the case of

manifest error) for all purposes.”

The term “Secured Liabilities” is defined as meaning:-

“All monies, obligations and liabilities, including without limitation in respect of principle interest, discount, commission,

fees and expenses,…”

4.11 It is clear, therefore, that any sums due by companies within the Cunningham Group as fees and expenses, either incurred by

the receiver or by First Active as mortgagee in possession, formed part of the secured liabilities. It follows in turn that a certificate of

an officer of First Active as to the amount of that secured liability is, in the absence of manifest error, evidence of the amount due. It

seems to me that counsel for First Active was correct when he submitted that the written and oral evidence of Mr. Collison amounts

to a certification for the purposes of Clause 27. The fact that Mr. Collison’s evidence was not in the form of a formal document in

writing (or at least not solely in that form) containing the word “certify” does not seem to me to be material. In my view, the New

Zealand case of Meyer v. Gilmer [1899] 18 NZLR 129 is good authority for the proposition that, in the ordinary way, and in the

absence of the relevant document requiring a certificate to be in writing, a certificate can be given in any appropriate manner. There

is no requirement in this case that the certificate be in writing. Mr. Collison gave relevant oral evidence. He also produced detailed

written documents specifying the amounts and their calculations. Subject to the points to which I am about to turn, there was no

evidence of an error, let alone a manifest error in Mr. Collison’s calculation. For those reasons as well, I am satisfied that there was an

adequacy of evidence to support First Active’s counterclaim.

4.12 On that basis I now turn to the specific issues raised on behalf of the Cunningham Group and Mr. Cunningham.

5. The Specific Points

5.1 The first point made suggested that, as First Active retains the benefit of certain security over the assets of some of the

relevant companies, credit must be given for the value of the relevant properties in calculating the amount of the debt of the

respective companies. Perhaps the best example of this point relates to Salthill. For the reasons set out in a number of other

judgments in these proceedings, what has been described as the commercial units in the Salthill development have not yet been sold.

First Active is in possession of those units as a mortgagee in possession. It is clear that the units would have been sold were it not

for the barrier placed in the way of completing any such sale by the existence of these proceedings. However, that factor does not

seem to me to be relevant.

5.2 Quite frankly, I find the point made by the Cunningham Group and Mr. Cunningham difficult to understand. If a party owes its bank

€1,000,000, the fact that the bank may have security over a property worth €400,000 does not alter the fact that the relevant party

still owes the bank €1,000,000. Of course, if the bank chooses to and succeeds in realising the relevant security, then the bank has

to give credit to its customer for whatever net sum is realised in reduction of the debt. In the example I have given, if the bank is

able to sell the relevant property for €400,000, then it must credit its customer with that sum and thus reduce the debt to €600,000.

However, until monies are actually realised by the sale of the secured property, then the debt remains €1,000,000. I can find no

reason whatsoever, either in principle or in precedent, for the suggestion that a court calculating the amount owing by a customer to

its bank must give credit for a hypothetical value of any security that might be realised.

5.3 Courts are frequently faced with joint and several claims. For example, a company may have procured that its principals give a

guarantee to support loans from its bankers to that company. The fact that the bank may be able to obtain partial or, indeed, full

payment on the guarantee does not prevent the company from owing the money in the first place. True it is that if the bank has

actually received monies from the guarantor, then the company’s debt must be reduced accordingly (and, if necessary, extinguished).

However, until the bank has actually received money from the guarantor concerned, the company continues to owe the full sum and

any judgment entered by the court should be for that full sum. The fact that the bank cannot obtain double recovery on foot of

obtaining a judgment for the full sum against both the company and guarantor, does not prevent the bank being entitled to a

judgment in the full sum against both. There is nothing unusual, therefore, in a plaintiff (such as a bank) obtaining judgment against

two or more parties where it cannot recover the full sum against them all, but must credit any sums recovered from one against the

liabilities of the others.

5.4 Frankly, such a situation seems to me to represent such an obvious position that I find it difficult to understand how the contrary

could have been argued. I, therefore, reject this argument entirely.

5.5 The next point made on behalf of the Cunningham Group and Mr. Cunningham concerns a suggestion (which had already been

canvassed in the main proceedings) that the residential portion of the Salthill development had been sold at an undervalue. It is

unnecessary to repeat what I said in the main judgment concerning that issue. For the reasons set out therein it was clear that that

case had not been pleaded and that it had been improperly maintained on behalf of the Cunningham Group at that time. It follows,

therefore, that I made no formal determination in respect of the issue, although I did express some comments generally on it. It

follows in turn that it is not an issue which is caught by the res judicata ruling to which I have already referred.

5.6 In substance, the point made stems from the division of the price for the overall Salthill site, which was being sold to Mr. Duffy,

as and between the residential and commercial portions thereof. At the level of business substance Mr. Duffy was buying the lot for a

single price. However, because of difficulties in completing the sale of the commercial portion (caused by the existence of Cunningham

Group litigation), it became necessary to divide the sale into the respective commercial and residential portions. It followed that the

overall purchase price needed likewise to be apportioned. The allegation is that, for stamp duty reasons, the portion to be allocated

to the residential portion was artificially reduced and the portion to be allocated to the commercial portion was correspondingly

overstated. It being the case that only the residential portion has now completed, it follows that it is suggested that the current

liabilities of Salthill (and the other companies who have given guarantees in respect of those liabilities), is currently overstated by the

relevant amount. It is true, as was pointed out by counsel for First Active, that, even if the accusation were true, no loss ought

ultimately be suffered by Salthill or those who have guaranteed its liabilities, in the eventuality that the contract in respect of the

commercial portion ultimately completes. The reason for this is, of course, that even if it were the case that there were an

understatement of the residential portion, any loss attributable to that would be compensated for when the commercial portion closed

at a correspondingly increased price. However, it remains technically true that if it were to be established as a fact that the

residential portion was sold at an undervalue, the current liabilities of the relevant companies would be overstated by the amount of

any disparity.

5.7 It should first be noted that no evidence was called by the Cunningham Group to suggest that the apportionment of the price

ultimately operated on was inappropriate. It needs to be recalled that the question of the contract between the receiver (and

ultimately taken over by First Active as mortgagee in possession) for the sale of Salthill was a significant issue in the main

proceedings. In the main judgment I dismissed the Cunningham Group’s claim that the property as a whole had been sold at an

undervalue. At that hearing evidence was led from Mr. Phelan, the auctioneer, concerning values. No evidence was put forward,

either from Mr. Phelan or from anyone else, to suggest that a proper expert view of the apportionment between the residential and

commercial portions of the Salthill development would suggest that the price of the residential element was ultimately fixed at an

inappropriate level.

5.8 In the absence of leading evidence, the Cunningham Group sought to place reliance on various documents (being, in the main,

memoranda from within First Active) which were admitted in evidence on the Bula/Fyffes basis (Bula v. Tara and Fyffes v. DCC [2005

IEHC 477). There is little doubt but that those documents show that certain officials within First Active were, at certain times,

concerned that the apportionment might not be correct. However, it is important to recollect that the arrangements between First

Active, Mr. Jackson, and Mr. Duffy went through a significant number of developments between the time when a commercial deal was

first done and when the sale of the residential portion actually closed. Much of the reason for that delay and much of the reason for

the need to renegotiate the terms of that sale stemmed from actions taken by Mr. Cunningham or those who were acting on his

behalf. There can be little doubt that First Active was required to reduce the overall price to Mr. Duffy to reflect the difficulties which

had been created by Mr. Cunningham and his agents.

5.9 An absolutely precise view on the proper allocation of the total purchase price between the two elements of the property would

not, in any event, be possible. Such an apportionment is not an exact science. In ordinary circumstances it might, however, be

possible to reach a relatively clear view as to a proper apportionment. However, in circumstances where there were very many

difficulties about the property as a whole (most of them, as I have said, orchestrated by Mr. Cunningham), the precise impact of

those difficulties on the two parts of the property would be most difficult to estimate in any event.

5.10 The global price changed on a number of occasions over a significant period of time. The allocation or apportionment between

the commercial and residential units changed itself, both by reference to that global price and also, independently.

5.11 Against that factual background it is also important to note the evidence of Mr. Collison. Although heavily pressed on the matter

in cross examination, Mr. Collison did not accept that the price ultimately fixed on as appropriate to the residential development was

anything other than a reasonable view of a proper apportionment of the monies then available from Mr. Duffy. Mr. Collison accepted

that, at various stages, certain of his colleagues had concerns (which they expressed and in writing) that the allocation proposed at

the relevant time might not be correct. However, the fact that parties expressed such concerns and raised same with their

colleagues, does not, in my view, give rise to an adverse inference against First Active. Rather, it demonstrates that First Active

were concerned to ensure that the apportionment of the purchase price was one which could be stood over.

5.12 I am not satisfied on the evidence that the Cunningham Group has established that the ultimate apportionment of the price

between the residential and commercial portions was anything other than appropriate. In those circumstances, I am not satisfied that

Salthill, or any of the companies guaranteeing Salthill’s liabilities, are entitled to a reduction in the amount due on that basis.

5.13 Finally, it is said that certain proceeds of sale (admittedly very minor in the overall scheme of these proceedings) were not

properly credited to the accounts of companies in the Cunningham Group when the lands in question were sold, either by the receiver

or by the First Active as mortgagee in possession. The problem in dealing effectively with this issue is that there was nothing in the

papers filed prior to the hearing which suggested that this point was going to be raised. Not unreasonably Mr. Collison was not,

therefore, in cross examination able to put his finger on the documentation which he assumed would demonstrate that proper credit

had been given. It was subsequently (after the close of evidence) suggested by counsel for First Active, speaking from his

instructions, that the relevant amounts were set off in respect of monies due to Mr. Jackson. In all the circumstances it seems to me

that the best course of action to adopt is to allow First Active to place before the Court affidavit evidence dealing with this question

so as to satisfy me, if the evidence be appropriate, that what counsel said, speaking from his instructions, is correct. Given the huge

volume of documentation in this case it would be wholly contrary to the proper practice in the Commercial Court to allow a party to

be caught by ambush in the way in which Mr. Collison was, and to penalise that party because the relevant witness was not able,

without prior notice, to identify from the vast amount of documentation discovered in this case, which documents might provide the

relevant explanation. However, in case there might be a difficulty, it does seem to me that I should require the matter to be properly

proved. If, and when such an affidavit is filed, and the Cunningham Group wish to cross examine on it, and provided that there is

some realistic basis put forward for such cross examination, I will permit cross examination to take place. Subject only to that, it does

not seem to me that there is any merit in any of the points raised in defence.

6. Some Final Points

6.1 One specific issue raised on behalf of the Cunningham Group concerning the evidence generally, insofar as it related to

expenditure by either Mr. Jackson as receiver or First Active as mortgagee in possession, was to the effect that there was no

evidence of the such money having actually been spent in a manner caught by the relevant debentures. So far as Mr. Jackson in his

capacity as receiver is concerned, counsel for First Active was, in my view, completely correct when he drew attention to the fact

that monies expended during the period when Mr. Jackson was receiver were monies advanced to the companies of which Mr. Jackson

was receiver rather than monies advanced to or spent by Mr. Jackson himself. Mr. Jackson was, as receiver, in control of the

companies concerned. Mr. Jackson was entitled to borrow monies on behalf of those companies. Provided the monies were advanced

to the companies at Mr. Jackson’s request, then those monies where advanced to the company concerned and, in the absence of

repayment, remained due by such company to First Active. The point had, therefore, absolutely no merit so far as monies advanced

to the companies while Mr. Jackson was acting as receiver is concerned.

6.2 A somewhat greater substance might be said to attach to the point in relation to monies spent by First Active (through Mr.

Jackson as its agent) when First Active was mortgagee in possession. It is clear that any monies so expended form part of the monies

due under the terms of the mortgage debenture by the relevant companies to First Active. Mr. Collison’s evidence was that the

records of First Active show the relevant monies as having been paid on specified invoices or requests by Mr. Jackson. It seems to me

that that evidence, of itself, is sufficient to establish a prima facie case to the effect that the monies were spent by Mr. Jackson on

behalf of First Active, as First Active’s agent, on matters connected with the properties in relation to which First Active was

mortgagee in possession. There was, in my view, therefore, no evidential deficit under this heading either. In any event even if there

were, then it seems to me that the certification point, to which I have already referred, would have provided an absolute answer.

6.3 To the extent that it was complained that Mr. Collison could not give evidence about aspects of the First Active’s dealings with

the Cunningham Group where he was not directly and personally involved, it seems to me that the point made was misconceived.

What Mr. Collison gave evidence of was an analysis carried out by him of documents kept by the bank in the ordinary way as part of

the bank’s records. Business records of that type are prima facie evidence of a course of dealing between parties, although, of

course, any party is free to challenge the accuracy of any such records. However, the idea that a bank wishing to prove its case in

debt against a customer has to produce a separate bank official who was personally involved in each individual transaction which

gives rise to the customer’s current debt is, in my view, fanciful. A witness from a bank is entitled to give evidence of the bank’s

records showing the amount due by a customer of that bank. That evidence and those records provide prima facie evidence of the

liability. If a specific element or elements of those records are challenged, then the bank might well have a problem if it could not

produce a witness who could give personal evidence of the contested matter. The reason for that problem is not that the bank did

not have evidence of the matter concerned. Rather it is the weight to be attached to that evidence. If credible evidence is given

that the bank’s records are wrong, then the weight to be attached to a witness who could do no more than speak to the bank’s

records might well be insufficient to displace the credible evidence suggesting the inaccuracy of the same records. In those

circumstances the court might well conclude, on the balance of probabilities, that the records were inaccurate. In order to counter

the credible evidence of the inaccuracy, the bank might well have to produce a witness who could do more than speak to the bank’s

records but could give evidence of direct involvement. Even in those circumstances, however, the court would have to consider the

weight to be attached to the bank’s records and form a judgment on all the evidence as to whether it could properly be concluded

that those records were wrong.

6.4 However, in this case there was no challenge (other than the few points which I have dealt with in the course of this judgment)

to First Active’s records. In those circumstances, it seems to me that Mr. Collison’s evidence was more than sufficient to discharge

the onus of proof on First Active. It should also be noted, in that context, that the counterclaim with which I am now concerned is

part of the same proceedings that were determined in the main judgment. Part of the Cunningham Group’s case in the main

proceedings was to assert that it now owed the very large sums of money being claimed by First Active in circumstances where it

was said that First Active and/or Mr. Jackson and/or Mr. Duffy was guilty of wrongdoing leading to an increase in those liabilities. The

Court was invited to assess damages based, in many cases, on the assertion that those monies were due, should not be due, and

that the difference amounted to the appropriate measure of damages. Having asserted that the monies were due as part of its claim,

it is difficult to understand how the Cunningham Group and Mr. Cunningham can now credibly assert that the monies are not due

(save for some technical issues which I have already dealt with) when it comes to the counterclaim which is, after all, part of the

same proceedings.

7. Conclusions

7.1 In summary, therefore, and subject to what may transpire in relation to the filing of an affidavit concerning the very minor matters

referred to at para. 5.13 above, I am satisfied that First Active has made out its case for the full sums claimed in respect of each of

the relevant plaintiffs. I am also satisfied that First Active has made out its claim in full on the guarantee against Mr. Cunningham. I

will deal further with what is to happen in respect of that claim when I have dealt with the application to amend in the RBS

proceedings.

7.2 Finally, I should end where I started by noting that this is the thirteenth judgment in these proceedings. While recognising that

the issues raised in these proceedings are necessarily complex, it does have to be said that there must be some limit to the time and

resources of the courts which can reasonably be allocated to one set of even complex proceedings. It is true to say that some of the

points raised from time to time by the Cunningham Group have proved well-founded. In particular, I have held with the Cunningham

Group in respect of a number of amendments which they sought to bring to proceedings (although it is now clear that the issues

sought to be raised by amendment have failed). But it should also be noted that some of those amendments (for example the original

hotly contested amendment in respect of the fraud claim as originally formulated) were ultimately not proceeded with or at least not

proceeded with in anything remotely resembling the form in which it was originally sought to plead them. While the Cunningham Group,

therefore, succeeded in its application to amend, it ultimately abandoned the case which was included in the pleadings by reason of

that amendment. It also seems to me that many of the points now being relied upon by the Cunningham Group are wholly devoid of

any merit. At least some of the points which I have had to deal with in this judgment seem to me to be bordering on the unstateable.

7.3 Parties have, of course, an entitlement to argue any points which they wish before the courts and if so argued, the courts have

to deal with them. But parties do have an obligation to refrain from wasting court time by raising arguments which either cannot

affect the ultimate result or have no real basis. I am afraid I have to say that in some respects the Cunningham Group has trespassed

over the line in that regard.

7.4 In that context I should end by commenting on one matter raised by counsel for the Cunningham Group in the course of

submissions in this case. At the beginning of his submissions counsel put it, as he said, “on the record” that rulings which I had made

had precluded his clients from raising issues that they would have wished to raise on the counterclaim. Counsel also mentioned that

he had been precluded from cross-examining Mr. Collison on certain matters. Counsel noted that the Cunningham Group was being

sued for very large sums of money but because of the course the case took it was said that the Cunningham Group was not allowed

to raise certain matters and had been deprived of “any opportunity to cross-examine the bank’s witnesses as to defences they wish

to raise to the bank’s claim”. That account is factually correct to a point. However, counsel went on to suggest that it was his

client’s position that that outcome was unjust.

7.5 I should finish by commenting that the course which these proceedings took was largely of the Cunningham Group’s making. The

Cunningham Group agreed that the counterclaim and the guarantee claim against Mr. Cunningham personally, would not be tried at

the main hearing. That course was not in any way imposed on either the Cunningham Group or Mr. Cunningham. The Cunningham

Group was given ample opportunity to seek to discharge the onus of proof on it in relation to the very many serious allegations which

it raised against both, First Active, Mr. Jackson and Mr. Duffy. It was facilitated in that regard by each of the defendants (in Mr.

Duffy’s case more by inaction), agreeing to all of their documents being admissible as prima facie proof of their contents on the

Bula/Fyffes basis. Despite that facility and despite the facility of calling any evidence which it wished, the Cunningham Group failed to

discharge the onus of proof necessary to get beyond the non suit or direction stage. It is for those who assert to establish. A party

does not get the right to cross-examine it’s opponent as an exploratory measure in the hope that something might come up to make

its case. Rather, a party needs to establish a sufficient evidential basis to provide a prima facie case such that its opponent has then

to go into evidence and be subjected to cross-examination. It is true that the Cunningham Group did not get to cross-examine First

Active’s witnesses save that it had the right to cross-examine Mr. Collison on the relatively narrow matters arising in connection with

the calculation of liabilities. But the reason for that is clear. The Cunningham Group agreed to a structure to the proceedings which

separated the counterclaim out from the claim. It failed, in making its claim, to discharge the onus of proof on it. It is for that reason

that it did not get to cross-examine First Active’s witnesses. While, as counsel for the Cunningham Group said, it is a really matter

that may have to be addressed on appeal, I frankly fail to see how any injustice has been caused. On the contrary, to have allowed

the case to proceed otherwise and have allowed the Cunningham Group another opportunity to re-run issues and points which had

been endlessly explored, would have been a serious injustice and an abuse of process.