Supreme Court dismisses appeal where plaintiff failed to allege fraud with sufficient particularity to establish a prima facie case.

THE SUPREME COURT

[Appeal No. 061/2007]

Clarke J.

Dunne J.

Charleton J.

BETWEEN

VINCENT KEANEY

PLAINTIFF/APPELLANT

AND

JAMES SULLIVAN

FIRST DEFENDANT

JOAN SULLIVAN

SECOND DEFENDANT

ST. JOHN CULLIGAN

THIRD DEFENDANT

MICHAEL NOLAN

FOURTH DEFENDANT

TITANIC QUEENSTOWN TRADING COMPANY LIMITED (IN LIQUIDATION)

FIFTH DEFENDANT

MAGPIE INTERNATIONAL HOLDING COMPANY LIMITED (IN LIQUIDATION)

SIXTH DEFENDANT

TITANIC QUEENSTOWN MEMORABILIA LIMITED (IN LIQUIDATION)

SEVENTH DEFENDANT

ALLIED IRISH BANKS PLC

EIGHTH DEFENDANT

Q.E.F. GLOBAL LIMITED

NINTH DEFENDANT

ROGER DUNCAN, GEOFFREY LEWIS, DAVID MARSH, TOM MOORE, DECLAN O’LUANAIGH, NEIL PAYNE, DAVID ISAACSON

(CARRYING ON PRACTICE UNDER THE STYLE AND TITLE OF ORMSBY RHODES AND BKR ORMSBY RHODES)

TENTH TO SIXTEENTH DEFENDANTS

TREGAN PROPERTIES

SEVENTEENTH DEFENDANT

JULIA NOLAN

EIGHTEENTH DEFENDANT

Judgment of Ms. Justice Dunne delivered on the 23rd day of July 2015

This is an appeal from the plaintiff appellant (the Appellant) in respect of the judgment of the High Court (Finlay Geoghegan J.)

delivered on the 16th January, 2007 and the order perfected on the 26th day of January, 2007 striking out parts of the statement of

claim delivered by the Appellant in these proceedings. The order of the 26th January, 2007 was made pursuant to four separate

notices of motion issued on behalf of the defendants/respondents (the Respondents) as follows:

1. The third, fourth, ninth, seventeenth and eighteenth respondents.

2. The eighth defendant (AIB).

3. The first respondent (Mr. Sullivan).

4. The tenth to sixteenth respondents (Ormsby Rhodes).

The background to this matter is described by the learned trial judge in her judgment and I gratefully adopt and set out her

description of the background as follows:

“The plaintiff won a significant sum of money in the Lotto in the 1990’s. In 1996, he acquired a premises known as Scotts

Building in Cobh, Co. Cork and decided to establish and run a theme bar to be known as the Titanic Bar. In 2000, he

retained the services of the first defendant a chartered accountant as financial advisor and to seek an investment

partner. The fourth defendant Michael Nolan was identified as such a person, in relation to a joint venture for the

premises acquired and the pub to be run therein. In 2000, the plaintiff and the fourth defendant entered into a Heads of

Agreement’’ and subsequent transactions pursuant thereto. These included a deed of assignment of the 20th October,

2000, by the plaintiff to himself and the fourth named defendant as tenants in common in equal shares of the premises

known as Scotts Building; the incorporation of Titanic Queenstown Trading Company Limited (“TQT Company’’) on the

11th August, 2000 and the granting to it of a lease of the said premises. It was agreed that the proposed pub, the

Titanic Bar was to be operated and run by TQT Company which was owned as to 49% by the plaintiff and 51% by the

fourth defendant. The publican’s licence originally obtained in July, 2000, in the name of the plaintiff was transferred to

TQT Company in September, 2001.

TQT Company traded as Titanic Bar until December 2002. In July, 2003, the plaintiff and the fourth defendant entered

into “heads of agreement legally binding” on 2nd July, 2003 and pursuant thereto entered into a further series of

agreements, deeds and share transfers. These included a contract for sale of the plaintiff’s interest in the Titanic Bar

premises dated the 24th July, 2003; a deed of assignment between the plaintiff and the fourth and eighteenth defendants

of the plaintiff’s interests in the premises; a transfer of the plaintiff’s 49% shareholding in TQT Company to the fourth

defendant and a deed of release and other documents referred to in paragraph 62 of the statement of claim. The

intended effect of these transactions appears to have been to separate the business and property interests of the

plaintiff and fourth defendant.

The plaintiff in these proceedings by plenary summons issued in 2006, has brought multiple claims and made many

allegations against the 18 defendants arising out of the transactions entered into in 2000, the running of the pub between

2000 and 2003 and the transactions in 2003. He seeks inter alia to set aside all the transactions, deeds and property

transfers entered into and effected both in 2000 and 2003.

Following commencement of the proceedings the fourth defendant, Michael Nolan, the seventeenth named defendant,

Tregan Properties Limited and the eighteenth defendant Julia Nolan, his wife made application for admission to the

Commercial List. On the 3rd April, 2006, Kelly J. entered the proceedings into the Commercial List and treated the motion

as the initial directions hearing. He further ordered that the plaintiff deliver a statement of claim on or before the 13th

April, 2006.

On the 24th April, 2006, at a further hearing of the directions motion on complaint from a number of the defendants in

relation to the form of the statement of claim delivered Kelly J. ordered that: ‘the plaintiff be at liberty to deliver an

amended statement of claim herein by close of business on Monday 8th May, 2006, the said statement of claim to be

properly drafted, in the proper form and properly particularised.’

An amended statement of claim was delivered on the 8th May, 2006.

The defendants were further given liberty on the 24th April, 2006, to bring notices of motion for orders dismissing or

striking out the proceedings within a period of two weeks from receipt of the amended statement of claim.”

As can be seen from the recital of facts set out, the original statement of claim delivered herein was directed to be amended at a

directions motion in the Commercial List presided over by Kelly J. by reason of the lack of particularity as to the allegations made

against the various Respondents. The statement of claim as amended was the subject of the notices of motion which came on for

hearing before Finlay Geoghegan J. However, on the day before the hearing of the motions to strike out, the Appellant delivered

another statement of claim without leave of the Court. It was accepted that it was appropriate to determine the motions in respect

of that statement of claim. Thus, the statement of claim at the heart of that decision and this appeal was the third attempt by the

Appellant to plead his case in accordance with the Rules of the Superior Courts (RSC) having been expressly ordered to furnish

particulars of the allegations in the statement of claim as required by the RSC.

Judgment of the High Court

The notices of motion issued on behalf of the respective Respondents sought to strike out all or part of the Appellant’s statement of

claim pursuant to the provisions of Order 19, rule 27, 28 and/or the inherent jurisdiction of the Court. The learned trial judge in the

course of her judgment described in detail the various applications made and the grounds relied on. Thus in the case of the

application of the third, fourth, ninth, seventeenth and eighteenth Respondents the judgment focused, inter alia, on the allegations of

fraud, deceit, misrepresentation and/or undue influence made against those parties by the Appellant. The Appellant relied on those

allegations with a view to seeking to set aside agreements and deeds entered into in 2000 and 2003 with the fourth named

respondent.

At the heart of these Respondents’ complaints about the statement of Claim was Order 19, rule 5(2) of the RSC which provides:

“In all cases alleging misrepresentation, fraud, breach of trust, wilful default or undue influence and in all other cases in

which particulars may be necessary, particulars (with dates and items if necessary) shall be set out in the pleadings.”

In the course of her judgment, the learned trial judge quoted with approval passages from Delany and McGrath, Civil Procedure in the

Superior Courts (2nd Ed.) paragraph 5.38 as follows:

“(b) Allegations of Fraud

5.38 The long established practice of the courts has been to require allegations of fraud to be pleaded with

particularity. Rule 5(2) now provides that, in all cases alleging misrepresentation, fraud, breach of trust, wilful or

undue influence and in all other cases in which particulars may be necessary, particulars (with dates and items if

necessary) must be set out in the pleadings. The rationale of this requirement was explained by Barrington J. in

Hanly v. Finnerty in relation to a plea of undue influence as follows:

Undue influence is a plea similar to fraud and it appears to me that it would be quite unfair to require a

party against whom a plea of undue influence is made to go into court without any inkling of the

allegations of fact on which the plea of undue influence rests. Because of the seriousness of the plea

counsel will not lightly put his name to a pleading containing a plea of undue influence so that his

solicitor will usually have in his possession some allegations of fact which justify the raising of the plea

or at least excuse the plea from being irresponsible.

5.39 Thus, a party is not only required to expressly plead fraud or misrepresentation etc., but he must also give full

particulars of its nature and how it is alleged to have occurred. However, it should be noted that, given the

difficulty of proving fraudulent intention, malice or any other condition of the mind (which is often a matter of

inference to be drawn from the proven facts), it suffices to allege this as a fact without setting out the

circumstances from which the same is to be inferred.”

She also referred with approval to a passage from Bullen and Leake (12th Ed.) 1975 at pages 452 to 453 where the position in relation

to the equivalent English rule is set out:

“The Statement of Claim must contain precise and full allegations of facts and circumstances leading to the reasonable

inference that the fraud was the cause of the loss complained of (see Lawrance v. Lord Norreys (1890) 15 App. Cas. 210

at 221). It is not allowable to leave fraud to be inferred from the facts pleaded and accordingly, fraudulent conduct must

be distinctly alleged and as distinctly proved (Davy v. Garrett (1878) 7 Ch.D. 473 at 489). ‘General allegations, however

strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any court

ought to take notice’

...

Particulars. Full particulars of any misrepresentation relied on must be given in the pleading (R.S.C., Ord. 18, r. 12 (1)

(a)). The Statement of Claim must show the nature and extent of each alleged misrepresentation (Newport Dry Dock &

Engineering Co. v. Paynter (1886) 34 Ch.D. 88) and it must contain particulars showing by whom and to whom it was

made, and whether orally or in writing, and if in writing, identifying the relevant document (Seligmann v. Young [1884]

W.N. 93). Where the plaintiff alleged that the entries made by the defendant in certain books were false, he was ordered

in the first place to give particulars of entries which he alleged to be false, and subsequently to give further particulars

showing in what respects each of these entries was false (Newport Dry Dock & Engineering Co. v. Paynter, ante); ‘all the

accounts rendered to the plaintiff are untrue’ did not comply with an order for further particulars of fraud (Harbord v.

Monk (1878) 38 L.T. 411).

Moreover, the necessary particulars of the fraudulent intention relied on must also be contained in the pleading (R.S.C.,

Ord. 18, r. 12 (1) (b)), and accordingly, the pleadings must set out the facts, matters and circumstances relied on to

show that the party charged had or was activated by a fraudulent intention.”

The learned trial judge accepted that these principles were a correct statement of the pleading requirements in this jurisdiction. I

agree with her view as to the appropriate principles applicable to the requirement to particularise allegations of fraud, deceit,

misrepresentation, etc. Thus in the case of fraud, it is not sufficient that a statement of claim or other pleading makes a bare

assertion of fraud against another party. The facts, matters and circumstances said to give rise to the alleged fraud must be

expressly pleaded.

Having set out the relevant principles, the learned trial judge proceeded to analyse the claims alleging fraud, deceit, misrepresentation

and undue influence alleged against the fourth named respondent in the statement of claim and in particular paragraphs 25, 26 and

28, paragraph 51 and paragraphs 62 to 71 of the statement of claim. By way of example it would be useful to set out paragraphs 25,

26 and 28 of the statement of claim which are in the following terms:

“25 In the foregoing the First Named Defendant in negotiating the Agreement between the Plaintiff and the Fourth

Named Defendant hereinafter pleaded acted deceitfully, in conflict of interest and in breach of duty including

fiduciary duty, and was at all times acting as the undisclosed agent of the Fourth Named Defendant.

26. In the year 2000 as a result of aggressive and improper conduct and deceit on the part of the First and Fourth

Named Defendants and as a result of duress and undue influence including the threat by the First Named Defendant

that if the Plaintiff did not enter into an Agreement with the Fourth Named Defendant then, the Manager of the AIB

in Midleton would persuade AIB to foreclose on securities including the Plaintiff’s Family Home. The Plaintiff was thus

induced to enter into purported Heads of Agreement bearing dated the 27th March, 2000 with the Fourth Named

Defendant, which Heads of Agreement in any event the Fourth Named Defendant entirely breached.

28. The said purported Agreement of 2000 was void as it was obtained by deceit and/or impropriety/duress/undue

influence, or alternatively on the grounds that it was an unconscionable and improvident bargain in that it was

disproportionately disadvantageous to the Plaintiff and utterly failed to protect his existing and legitimate interests

and was not complied with in any event by the Fourth Named Defendant, nor was it intended to be.”

Having carefully analysed the paragraphs of the statement of claim in respect of the claims made against the fourth named

respondent the learned trial judge concluded:

“I have considered carefully each of the above sets of pleas and concluded that none satisfy the requirements of O. 19,

r. 5(2).”

The learned trial judge then considered the allegations of fraud and deceit against the third named respondent set out in paragraphs

41, 44, 45 and 48 of the statement of claim and concluded that those paragraphs did not comply with the requirements of Order 19,

rule 5(2) of the RSC.

The learned trial judge then proceeded to consider the application of the third, fourth, ninth, seventeenth and eighteenth

respondents to strike out the claims of those Respondents pursuant to Order 19, rules 27 or 28 or pursuant to the inherent jurisdiction

of the Court. She identified the relevant principles applicable as follows:

“Counsel for these defendants submit that all the remaining claims against these defendants should now be struck out

either pursuant to O. 19, rr. 27 or 28 or pursuant to the inherent jurisdiction of the court on one or more of the following

grounds:

(i) They disclose no reasonable cause of action against these defendants; and/or

(ii) They are frivolous or vexatious; and/or

(iii) They must fail or are unsustainable as that term has been used by the Supreme Court in Sun Fat Chan v.

Osseous Limited [1992] 1 I.R. 425 and O’Neill v. Ryan [1993] ILRM 557.

The first two grounds need no elaboration. The nature of the third ground is clearly set out by Blayney J. in O’Neill v. Ryan

where in relation to a similar ground advanced in that case he states at p. 561:

‘The second ground invokes an aspect of the inherent jurisdiction of the court which was defined as follows recently

by Costello J. in D.K. v. A.K., High Court, 1990 No. 5306P, 2 October 1992:

‘The principles on which the court will exercise its inherent jurisdiction to strike out a plaintiff’s action

can be shortly stated. Basically the jurisdiction exists to ensure that an abuse of the court’s process

does not take place. If it is established by satisfactory evidence that the proceedings are frivolous or

vexatious or if it is clear that the plaintiff’s claim must fail then the court may stay the action. But it will

only exercise this jurisdiction sparingly and in clear cases (Barry v. Buckley [1981] IR 306: Sun Fat Chan

v. Osseous Ltd [1992] 1 IR 425.’

Having expressed the view that the plaintiff’s claims there were neither frivolous nor vexatious Costello J went on to

say:

What I am required to consider therefore is whether any of the claims against all or any of the

defendants is so clearly unsustainable that I should strike it out.

I am satisfied that this is a correct statement of the law.’

The requirement that the High Court only exercise this jurisdiction sparingly derives from the caution expressed by

McCarthy J. in Sun Fat Chan v. Osseous Ltd. [1992] 1 I.R. 425 where at pages 428 to 429 he stated:

‘By way of qualification of the jurisdiction to dismiss an action at the statement of claim stage, I incline to the view

that if the statement of claim admits of an amendment which might, so to speak, save it and the action founded on

it, then the action should not be dismissed.

Generally, the High Court should be slow to entertain an application of this kind and grant the relief sought.

Experience has shown that the trial of an action will identify a variety of circumstances perhaps not entirely

contemplated at earlier stages in the proceedings; often times it may appear that the facts are clear and

established but the trial itself will disclose a different picture. With that qualification, however, I recognise the

enforcement of a jurisdiction of this kind as a healthy development in our jurisprudence and one not to be disowned

for its novelty though there may be a certain sense of disquiet at its rigour.’”

The learned trial judge has, in my view, correctly identified the principles to be applied in such an application. She then considered

the relevant claims set out in paragraphs 73 and 74 of the statement of claim which she summarised as follows:

“Those claims relate to two distinct matters:

1. The deed of assignment now dated 30th September, 2004, (but alleged to have been executed on 24th July,

2003) between the plaintiff and the fourth and eighteenth defendants in relation to the premises known as Scotts

Building; and

2. The transfer of the plaintiff’s 49% shareholding in TQT Company to the fourth defendant.”

The learned trial judge concluded that paragraphs 73(i) to (vi) together with the first sentence of paragraph 74 as amended in the

form permitted by the learned trial judge should be allowed to be pursued against the fourth and eighteenth named respondents but

she struck out any claim against the third named respondent appearing in paragraph 73 on the basis that contrary to the allegations

contained therein, the deed referred to in paragraph 73 was one to which the third named respondent was not a party and was not

executed by him as attorney for the fourth named respondent. She then struck out claims in relation to share transfers referred to in

paragraphs 73(vii) and 74 of the statement of claim. She also struck out all those parts of the statement of claim which sought to

challenge subsequent dealings in shares formerly held by the Appellant and for rectification of the share register.

The learned trial judge proceeded to consider a number of related claims against the fourth named respondent in relation to Titanic

Queenstown Trading Company Limited (TQT Company). In this context, the Appellant sought to take derivative actions on behalf of

TQT Company. He claimed that the company was never permitted to trade and was “an intentional sham” for the “exclusive profit” of

the fourth named respondent (see paragraph 51(ix) of the statement of claim). The argument that the company was a sham was

considered by reference to the decision in Snook v. London and West Riding Investments Limited [1967] 1 All E.R. 518 at 528 and

Yukong Line Limited v. Rendsburg Investments [1998] 2 B.C.L.C 485. Finlay Geoghegan J. concluded that the Appellant’s claim as

pleaded was not capable of supporting the claim that the company was a sham in the sense in which that term is explained in the

authorities referred to and therefore she struck out assertions that the company was a sham on the basis that any such claim must

fail.

Insofar as the Appellant sought to recover damages for the alleged misappropriation of funds of the company or wrongdoing to the

company she concluded that there was no basis to “lift the corporate veil”. She noted that what the Appellant was seeking to do was

to pursue claims against the fourth named respondent and others for alleged misapplication of funds of the company or wrongdoing to

the company. She observed that it was well established that the plaintiff as a shareholder had no entitlement to any assets of the

company such as would entitle him to pursue such a claim. She then went on to consider the arguments made on behalf of the

Appellant in respect of the non-application of the rule in Foss v Harbottle. She relied on the Supreme Court decision in O’Neill v. Ryan

[1993] I.L.R.M. 557 where the rule was explained and considered. She noted that the Appellant was no longer a shareholder in the

company and concluded that there were no facts disclosed which would bring the Appellant within what has been described as the

“fifth exception” to the rule in Foss v. Harbottle, namely “in the interests of justice”. Therefore, any claim which was in substance a

claim for damages on behalf of TQT Company, and thus reliant on the non-application of the rule in Foss v. Harbottle, was struck out

insofar as such claim was made against the fourth named respondent and a similar conclusion was reached insofar as any claim was

made against the third named respondent on that basis.

The Appellant also made a claim based on oppression of the Appellant as a minority shareholder within the meaning of s. 205 of the

Companies Act 1963 and that claim was also struck out on the basis that the Appellant was no longer a shareholder of the company.

The next section of the statement of claim to be considered was paragraphs 91 to 94. Insofar as those paragraphs contained

allegations against the fourth named respondent the claims were permitted to be pursued but not in respect of the seventeenth

named respondent. Accordingly those claims were struck out in respect of the seventeenth named respondent.

The final claims struck out related to the third named respondent and were in essence claims for damages as a result of an alleged

breach of duty to the Appellant as a shareholder by the third named respondent in his capacity as a director of TQT Company. Those

claims were set out in paragraphs 41 to 43 and parts of paragraph 44 to 45 of the statement of claim. Having identified the principles

as to the duty owed by directors to shareholders set out in Crindle Investments v. Wymes [1998] 4 I.R. 567 at 591 the learned trial

judge concluded that there were no facts pleaded in the statement of claim to sustain such a claim. Accordingly those claims were

stuck out.

Finally, the claim against the ninth respondent was struck out as the claim against the ninth named respondent was essentially a

claim for relief based on the claims against other respondents. As the relevant claims against the other Respondents had been struck

out, the underlying basis for seeking those reliefs no longer existed and therefore those claims for relief were also struck out.

The application of the first named respondent

The claims against the first named respondent consisted of a claim for damages for negligence and breach of contract; claims in

respect of breach of fiduciary duty which were summarised by the trial judge as “appear to relate to his position as a director and the

plaintiff’s position as a shareholder of the company”; claims for breach of duty alleged to be owed to the company with consequent

loss and damage to the company and claims that the first named respondent acted deceitfully. Save for the claim for damages for

negligence and breach of contract, the claims against the first named respondent were struck out by the learned trial judge for the

same reasons as those given in respect of the application on behalf of the previous group of respondents, namely a lack of material

facts necessary to ground claims for breach of fiduciary duty, the inability of the Appellant to sue on behalf of the company (see Foss

v. Harbottle) and the failure to particularise allegations as required by Order 19(5)(2) of the RSC.

The application of AIB

The claim against the eighth named respondent was also struck out by reference to the rule in Foss v. Harbottle. A further claim

against the eighth named respondent in relation to a deed of release was struck out on the grounds that no separate cause of action

was pleaded against the eighth named respondent in relation to the deed of release. The final claim against the eighth named

respondent concerned discovery and it was concluded by the learned trial judge that it was not necessary to keep the eighth named

respondent as a party to the proceedings for the purpose of seeking discovery. She pointed out that if discovery from the bank was

necessary, the procedure under the rules for non-party discovery could be utilised. Accordingly, all of the claims against the eighth

named respondent were struck out.

The application of Ormsby Rhodes

The final application was made on behalf of the tenth to sixteenth named respondents who are the partners in Ormsby Rhodes, a firm

of accountants. That firm acted as auditors for TQT Company. The claims against Ormsby Rhodes are for damages for loss and

damage suffered by (a) TQT Company and (b) the Appellant by reason of the alleged negligence and breach of duty of Ormsby

Rhodes in carrying out their duties as auditors to TQT Company. The claims were struck out on the basis that the first of those claims

could only be brought by the company. So far as the Appellant’s claim under the second heading was concerned the learned trial

judge, relying on the principles set out in Prudential Assurance Co. Ltd v Newman Industries Ltd (No. 2) [1982] Ch 204 as applied by

the Supreme Court in O’Neill v. Ryan referred to above, concluded that there was nothing in the pleadings to show any basis to

support the contention that such alleged loss was other than a diminution in the value of his shareholding. Thus insofar as there was

a personal claim made by the Appellant against Ormsby Rhodes such claim was struck out on the basis that no cause of action vested

in him as a shareholder for any diminution in the value of his interest in the company by reason of the alleged negligence and/or

breach of duty of Ormsby Rhodes as auditors to the company.

The other claim made against Ormsby Rhodes was a claim said to arise by vicarious liability for the alleged wrongdoing of the first

named respondent. It is contended by the Appellant that the first named respondent and Ormsby Rhodes had a relationship and/or

association with one another. The learned trial judge pointed out that the statement of claim did not, contrary to the requirements of

Order 19, rule 3 of the RSC state the material facts upon which the Appellant relied to establish that Ormsby Rhodes was vicariously

liable for any alleged wrongdoing of the first named respondent. She referred in detail to evidence on affidavit in respect of this issue.

She concluded that:

“. . . the bald assertions that the first defendant acted as agent for or was in partnership with Ormsby Rhodes are ones

which having regard to the affidavit evidence (which it was common case I am entitled to take into account in

considering the matter pursuant to the inherent jurisdiction of the court) are ones which the plaintiff could not sustain at

the hearing of the action.”

She found that there were no material facts pleaded to establish an association between the first named respondent and Ormsby

Rhodes. She concluded that even if the Court were to permit the Appellant to amend the statement of claim to set out material facts,

that it appeared from the affidavits sworn by the Appellant and those sworn on behalf of Ormsby Rhodes simply demonstrated that

the first named respondent and Ormsby Rhodes practised in Cork from the same premises in 2000. As she pointed out, the mere fact

that two persons sharing a common profession practised from the same premises could not be a basis for a reasonable cause of

action for one person to be made vicariously liable for alleged wrongs by the other. She therefore struck out all the claims against

Ormsby Rhodes.

Thus, as can be seen, a significant number of the claims brought by the Appellant against the Respondents were struck out by the

learned trial judge relying on the provisions of Order 19, rule 5(2), Order 19, rules 27 and 28 and pursuant to the inherent jurisdiction

of the Court. Not all of the claims of the Appellant were struck out by the learned trial judge. The remaining claims were the subject

of a hearing before the High Court (Feeney J.) and resulted in a judgment delivered on the 19th December, 2008. The Appellant failed

in all his remaining claims. As that judgment is the subject of an appeal I do not propose to make any further comment on that

decision.

Submissions

This appeal concerns a statement of claim which contains some ninety nine paragraphs, many divided into lengthy sub-paragraphs.

The written submissions furnished on behalf of the Appellant ran to ninety two pages. The Supreme Court Practice Direction (SC 13)

provides that written submissions should in general not exceed twenty five pages. A further set of submissions described as a

synopsis of the written legal submissions was also provided. The delivery of overlong written submissions is not helpful. As the

Practice Direction makes clear, the purpose of written submissions is to summarise succinctly the arguments of the parties. They

should set out clearly and succinctly the issue or issues of law to be argued on an appeal. The Appellant’s submissions fall far short of

this requirement.

The length of the written submissions furnished on behalf of the Appellant is in itself a matter of concern but a matter of greater

concern to the Court and indeed, to the Respondents is the content of those written submissions. Written submissions are not for the

purpose of making further unsubstantiated allegations against the opposing parties to an appeal. Equally, it is inappropriate to use the

submissions to set out a narrative of the Appellant’s complaints against the various defendants in an attempt to provide more

information by way of factual background to the matters alleged in the statement of claim. In this case, further allegations are made

against some of the parties in the written submissions which were not even made in the statement of claim. For example, in the

synopsis of the written submissions and in the longer written submissions at page 85 it is stated as follows:

“As stated Michael Nolan the fourth defendant would not have succeeded in defrauding the plaintiff without the collusion

of the AIB Bank and the firm of chartered accountants the tenth to sixteenth defendants trading as Ormsby Rhodes

otherwise BKR Ormsby Rhodes.”

As counsel on behalf of Ormsby Rhodes pointed out, there is nothing at all in the statement of claim to support the suggestion that

Ormsby Rhodes colluded in any way to assist the fourth named respondent to defraud the Appellant.

Further in the synopsis of the written legal submissions the following appears:

“Furthermore, Vincent Keaney was not aware of a series of fraudulent acts that led to the execution of all the

agreements in this matter and which were committed by the respondents either jointly and/or severally which include:

misrepresentation, professional negligence, fraud, deception, breach of fiduciary duty, forgery of documents,

unconscionable bargain and breach of contract. All these acts flow at the backdrop of a sophisticated conspiracy to

defraud, and indeed defrauded the plaintiff commencing from the initial meeting of Vincent Keaney and the [sic] James

Sullivan.”

The use of written submissions by the Appellant to make such unsubstantiated allegations against other parties to the proceedings is

in my view nothing short of an abuse of process and is something to be strongly deprecated. The application before the High Court

was to dismiss or strike out those parts of the statement of claim which it was contended did not comply with Order 19, rules 27 and

28 and/or pursuant to the inherent jurisdiction of the courts. The submissions should have been focused on the grounds relied on for

the appeal before this court, namely, whether or not the learned trial judge identified the appropriate principles of law in the

applications before her and applied those principles correctly to the facts and circumstances of the case before her. The submissions

of the appellant went far beyond the bounds of what is permissible.

For completeness, I should add that I had helpful written submissions from the several Respondents.

Discussion on the issues

It was confirmed in the course of the hearing before the Court that there was no issue between the parties as to the relevant

principles of law applicable to the applications made on foot of the respective notices of motion issued by the respective

Respondents. Rather the argument before the Court was that the learned trial judge erred in law and in fact in her application of the

relevant principles to the facts of the case. At its most succinct, the argument was made on behalf of the Appellant that the learned

trial judge fell into error in not reading the statement of claim as a whole but rather decided matters “in a selective and disjointed

way”. It was also suggested that the Appellant should be permitted to amend the statement of claim following discovery.

Two central issues in the course of the appeal were first, the role of Order 19, rule 5(2) of the RSC and second, the application of the

rule in Foss v. Harbottle. I propose to look at those two issues briefly. In the course of her judgment as set out above, the learned

trial judge referred to the judgment of Barrington J. in Hanly v. Finnerty [1981] I.L.R.M. 198, it seems to me to be of such relevance

that it is worth reiterating that passage again. Barrington J. at page 202 stated:

“Undue influence is a plea similar to fraud and it appears to me that it would be quite unfair to require a party against

whom a plea of undue influence is made to go into court without any inkling of the allegations of fact on which the plea of

undue influence rests. Because of the seriousness of the plea counsel will not lightly put his name to a pleading containing

a plea of undue influence so that his solicitor will usually have in his possession some allegations of fact which justify the

raising of the plea or at least excuse the plea from being irresponsible.”

There are two observations I would make briefly in relation to that passage. First of all, when pleading fraud etc., it is necessary to

set out the allegations of fact in a statement of claim or pleading on which the plea concerned rests. That is required by the rules

and as is made clear in that passage from the judgment of Barrington J., it is a fundamental requirement. The reason is, as Barrington

J. said, that it would be quite unfair to require a party against whom such an allegation is made to go into court without any idea

whatsoever as to the nature of the allegations of fact on which that plea rests. The second point highlighted by Barrington J. in that

passage is the seriousness of such a plea. One does not lightly make an allegation of fraud against another party. It has to be borne

in mind that absolute privilege attaches to pleadings in court proceedings (see s. 17(2)(g) of the Defamation Act 2009). The fact that

absolute privilege attaches to pleadings in legal proceedings is not a licence to make unsubstantiated allegations of a serious nature

such as fraud against another party. Care must be taken before making such an allegation. There must be available facts to support

such a plea and those facts must be particularised in the pleading concerned. The seriousness of such a plea is underlined by the

express requirement contained in Order 19, rule 5 of the RSC to properly particularise such allegations. Bullen and Leake in the

passage set out earlier sets out how this should be done.

It is not suggested on behalf of the Appellant that it is not necessary to particularise the pleas complained of in these proceedings

but as I have explained the position of the Appellant is that on a full reading of the statement of claim there are sufficient particulars

of the allegations underlying the pleas of fraud, deceit, etc.

The rule in Foss v. Harbottle (1843) 2 Hare 461

The learned trial judge in the course of the judgment referred at length to the rule in Foss v. Harbottle and to the explanation of that

decision by the Supreme Court in the case of O’Neill v. Ryan [1993] ILRM 557.

The central issue in Foss v. Harbottle is whether a shareholder is entitled to prosecute an action on behalf of a company for a wrong

alleged to have been done to the company. Such an action is a form of a derivative action. The Appellant in this case relies on the

so-called fifth exception to the rule in Foss v. Harbottle, to argue that it is “in the interests of justice that the plaintiff would be

allowed to pursue an action on behalf of TQT Company for alleged damage to that company”. In considering the question of the so-

called fifth exception to the rule in Foss v. Harbottle, Blayney J. at page 568 of his judgment said:

“Counsel cited a later passage in the judgment of Sir G. Jessel M.R. to support his submission that exceptions to the rule

in Foss v. Harbottle would be allowed when necessary in the interests of justice. The passage in question, which occurs

at page 481, begins with the following sentence:

‘It remains to consider what are those exceptional cases in which, for the due attainment of justice, such a suit

should be allowed.

This sentence, however, is preceded by the following sentence which makes it clear that the types of case he was

dealing with were cases concerned with providing a remedy for an injury to a corporation and not for an injury to the

shareholding of a particular corporator. The preceding sentence is as follows:

‘If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained

except that of a suit by individual corporators in their private characters, and asking in such character the

protection of those rights to which in their corporate character they were entitled, I cannot but think that the

principles so forcibly laid down by Lord Cottenham in Wallworth v. Holt and other cases would apply and the claims

of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which

corporations are required to sue.’

It is clear from this and particularly from the last phrase “respecting the mode in which corporations are required to sue”

that the exceptional cases which Sir G. Jessel M.R. had in mind were cases of injury to a corporation for which it would be

entitled to sue so that the remedy being given was a remedy for such injury and not for an injury to the alleged rights of

an individual corporator which is what is in issue here.”

Blayney J. went on in the course of that judgment to refer to a passage from a judgment of the Court of Appeal in Prudential

Assurance v. Newman Industries Limited (No. 2) [1982] Ch. 204. That was both a derivative action and a personal action against

Newman Industries and two of its directors alleging in regard to the latter claim that as a result of the fraud of the two directors the

quoted price of Newman Industries must have been affected and accordingly they had suffered some damage to their shareholding.

Blayney J. at page 569 quoted from the judgment in that case as follows:

“The Court of Appeal dealt with this in its judgment at page 222:

‘In our judgment the personal claim is misconceived. It is of course correct, as the judge found and Mr. Bartlett did

not dispute, that he and Mr. Laughton, in advising the shareholders to support the resolution approving the

agreement, owed the shareholders a duty to give such advice in good faith and not fraudulently. It is also correct

that if directors convene a meeting on the basis of a fraudulent circular, a shareholder will have a right of action to

recover any loss which he has been personally caused in consequence of the fraudulent circular; this might include

the expense of attending the meeting. But what he cannot do is to recover damages merely because the company

in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value

of his shares, or equal to the likely diminution in dividend, because such a ‘loss’ is merely a reflection of the loss

suffered by the company. The shareholder does not suffer any personal loss. ‘Loss’ is through the company, in the

diminution in the value of the net assets of the company, in which he has (say) a 3% shareholding. The plaintiff's

shares are merely a right of participation in the company on the terms of the articles of association. The shares

themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the

shares as his own absolutely unencumbered property. The deceit practised upon the plaintiff does not affect the

shares; it merely enables the defendant to rob the company’.

And at page 224 the Court said:

‘A personal action would subvert the rule in Foss v. Harbottle and that rule is not merely a tiresome procedural

obstacle placed in the path of a shareholder by a legalistic judiciary. The rule is the consequence of the fact that a

corporation is a separate legal entity. Other consequences are limited liability and limited rights. The company is

liable for its contracts and torts; the shareholder has no such liability. The company acquires causes of action for

breaches of contract and for torts which damage the company. No cause of action vests in the shareholder. When

the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the

company and that he can only exercise his influence over the fortunes of the company by the exercise of his voting

rights in general meeting. The law confers on him the right to ensure that the company observes the limitations of

its memorandum of association and the right to ensure that other shareholders observe the rule, imposed upon them

by the articles of association.’

In my opinion that is a correct statement of the law in regard to the status of a shareholder in a limited liability company.

What is also a relevant consideration in addition to the matters referred to in the two passages cited are the

consequences which would flow from giving shareholders in a company a personal action against a party causing damage

to the company. It would enable a multiplicity of actions to be brought and deprive the company itself of the ability to

control them. So it would be both harmful to companies and very much against the public interest in opening the door to

irresponsible litigation. For these reasons also I am satisfied that a personal claim by a shareholder should not be

permitted.

I am satisfied, accordingly, that even if the plaintiff were still a shareholder in Ryanair he would have no cause of action

against the last four defendants. A fortiori he has none since he is no longer even a shareholder.”

The judgment of Blayney J. in O’Neill v. Ryan is a reminder of the importance of the rule in Foss v. Harbottle. While there are

exceptions to that rule, it is clear from the judgment of Blayney J. that no such exception can avail a party who wishes to sue in

respect of the reduction in value of a shareholding as a result of damage to the company is a matter for the company to deal with. I

cannot see any basis upon which the so called fifth exception to the rule in Foss v Harbottle can avail the Appellant.

Decision

I am conscious of the remarks made in the case of National Educational Welfare Board v. Ryan [2008] 2 I.R. 816 at page 825 by

Clarke J. where he stated:

“It is in the very nature of fraud (or other unconscionable wrongdoing) that the party who is on the receiving end will not

have the means of knowing the precise extent of what has been done to them until they have obtained discovery. To

require them to narrow their case prior to defence (and, thus, discovery) would be to create a classic Catch-22. The

case will be narrowed. Discovery will be directed only towards the case as narrowed. Undiscovered aspects of the fraud

or the consequences of the fraud will, as a natural result, never be revealed. This would, in my view, be apt to lead to an

unjust solution.”

He went on to observe at pages 824 to 825 as follows:

“A balance between these two competing considerations needs to be struck. The balance must be struck on a case by

case basis but having regard to the following principles. Firstly, no latitude should be given to a plaintiff who makes a bare

allegation of fraud without going into some detail as to how it is alleged that the fraud took place and what the

consequences of the alleged fraud are said to be. Where, however, a party, in its pleadings, specifies, in sufficient, albeit

general, terms the nature of the fraud contended together with specifying the alleged consequences thereof, and

establishes a prima facie case to that effect, then such a party should not be required, prior to defence and, thus, prior

to being able to rely on discovery and interrogatories, to narrow his claim in an unreasonable way by reference to his then

state of knowledge. Once he passes the threshold of having alleged fraud in a sufficient manner to give the defendant a

reasonable picture as to the fraud contended for, and establishes a prima facie case to that effect, the defendant should

be required to put in his defence, submit to whatever discovery and interrogatories may be appropriate on the facts of

the case, and then pursue more detailed particulars prior to trial.”

I would readily endorse those observations. However one has to bear in mind, as Clarke J. said, that a plaintiff alleging fraud has to

pass the threshold “in a sufficient manner to give the defendant a reasonable picture as to the fraud contended for”. The Appellant

has in my view fallen short of passing the threshold. In addition, many of the claims made in these proceedings are claims that could

only be properly brought by TQT Company. These are not claims that can be pursued by the Appellant.

By way of conclusion, I want to make it clear that I have carefully read the statement of claim herein. I have considered the

judgment of Finlay Geoghegan J. in respect of the motions brought by the respective Respondents. I have considered the written and

oral submissions of the parties on this appeal. I am satisfied that each of the grounds relied on by the respective Respondents in

support of their applications to strike out parts of the statement of claim was carefully considered by the learned trial judge. The

relevant principles of law were set out in the course of her judgment. There is no suggestion that she erred in any way in identifying

those principles. I can see no basis for suggesting that Finlay Geoghegan J. erred in any way in her application of the relevant

principles to the facts and circumstances of this case. On the contrary, it is clear from her judgment in this matter that she carefully

and properly considered all the issues before her.

Finally, I do not think that this is a case in which the Court should give any consideration to the possibility of an amendment of the

statement of claim. The statement of claim at issue in these proceedings was the third statement of claim to be delivered. It is worth

recalling that Kelly J. had directed that the second statement of claim should be delivered in circumstances where the complaint made

at that time was the failure to particularise the claims being made against the various respondents. The comments of McCarthy J. in

Sun Fat Chan v. Osseous Limited [1992] 1 I.R. 425 at page 428 must always be borne in mind where he stated:

“By way of qualification of the jurisdiction to dismiss an action at the statement of claim stage, I incline to the view that

if the statement of claim admits of an amendment which might, so to speak, save it and the action founded on it, then

the action should not be dismissed.

Nevertheless in circumstances such as this where the Appellant has had three opportunities to deliver a statement of claim setting

out appropriately the claims against the respective respondents it is difficult to see what purpose would be served by giving a further

attempt to plead the case appropriately.

In all the circumstances of the case I would dismiss the appeal.