Court of Appeal allows appeal striking out fraud claim for lack of standing and abuse of process.

THE COURT OF APPEAL

Neutral Citation Number: [2017] IECA 167

Record No. 2016/203

2016/204

Ryan P.

Irvine J.

Hogan J.

BETWEEN/

JANE SMITH

PLAINTIFF / APPELLANT

- AND -

SHANE MCCARTHY, ACC LOAN MANAGEMENT LIMTIED, MICHAEL COLLINS & COMPANY SOLICITORS AND JAMES SMITH

DEFENDANTS / RESPONDENTS

JUDGMENT of Mr. Justice Gerard Hogan delivered on the 17th day of May 2017

1. The appellant, Ms. Jane Smith, seeks to appeal the decision of the High Court (Gilligan J.) dated the 18th April 2016. In his ex

tempore ruling delivered on that date Gilligan J. struck out the proceedings against both the first and second defendants (who are,

respectively, a receiver and a credit institution) and the third defendant, a firm of solicitors, on the ground that these proceedings

were an abuse of process and were unsustainable. Gilligan J. also struck out the proceedings as against the third defendant, Michael

Collins & Co., solicitors, pursuant to Ord. 19, r. 28 on the ground that they were frivolous and vexatious.

2. The plaintiff is the daughter of Mr. James Smith, who is the fourth defendant. Her mother, Ms. June Smith, is also the appellant

involving similar parties in a related appeal, judgment in which is also being delivered today. For convenience, I propose to refer to Mr.

and Ms. Smith in this judgment as either “the Smith parents” or “the parents”.

The background to the present proceedings

3. It is first necessary to consider the background to these proceedings which really cannot be understood without reference to other

litigation involving the Smith parents.

4. In October 2007 the plaintiff and her father approached Agricultural Credit Corporation (“ACC”) seeking a loan facility in the sum of

€1.25m. to assist with the purchase of certain lands which were about to be sold by public auction and also to redeem certain

borrowings from AIB. At that auction the plaintiff’s father, Mr. James Smith, committed to purchasing the lands in the sum of €1.825m.

This was a considerably higher sum than had previously been proposed or envisaged.

5. Shortly after the public auction a revised loan application was submitted to ACC in the joint names of Mr. James Smith and Ms.

June Smith. By that loan application the Smith parents sought two loans: the first in the sum of €800,000 and the second in the sum

of €1.296m.

6. As it happens, by separate facility letters dated the 11th November 2007 ACC offered to advance these facilities to the Smith

parents. The Smith parents accepted the terms of the facility letters in writing and drew down the full amount of these loan sums.

The facility in the sum of €1.296m. was a bridging loan which was for a term of one year, while the facility in the sum of €800,000

was repayable on demand, or in the absence of such a demand, over a period of twenty five years.

7. A condition precedent to ACC’s obligation to advance monies under the facilities was that the Smith parents’ solicitor, Mr. Michael

Collins, furnish ACC a letter confirming that signed contracts for the sale of other lands for €1m.were in place. Mr. Collins did, in fact,

provide such confirmation to ACC by letter dated the 26th November 2007 although, as it happens, the plaintiff now asserts that her

parents did not, in fact, instruct Mr. Collins to his effect.

8. In September 2008 the Smith parents executed a deed of mortgage and charge in favour of ACC over a number of parcels of land

extending to over a hundred and eighty acres. The plaintiff claims, however, to enjoy a prior leasehold interest in those lands with the

exception of sixty two acres. The first named defendant, Mr. McCarthy, was ultimately appointed as a receiver over these lands

pursuant to the mortgage by ACC in March 2014. In later injunction proceedings the Smith parents conceded that the mortgage was

valid.

9. On the 17th July 2008 certain employees of ACC were informed by the Smith parents that the contracts of sale were not, in fact,

in place. At that stage ACC were not, informed a letter of instruction had been written by Mr. Collins without, it is claimed, having

been instructed to do so by the Smith parents.

10. In November 2008 the bridging loan expired and in November 2011 ACC issued summary proceedings seeking the repayment of all

sums due on the facilities. The Smith parents instructed a new solicitor to enter an appearance on their behalves and in an affidavit

sworn by Ms. June Smith, on behalf of both herself and her husband, the bank’s entitlement to judgment was disputed on a number of

discrete grounds.

11. The principal defence advanced by the Smith parents was in essence the same contention which the plaintiff seeks to rely on in

these proceedings, namely, that the letter from Mr. Collins confirming that contracts for the sale of lands for €1m. were in place in

November 2007 had, in fact, been written without instructions. In particular, it was not alleged that ACC either knew that the

contracts for sale were not in fact in place or that ACC knew that (assuming for the moment that it is the case), that Mr. Collins had

written the letter to ACC without instructions.

12. The summary judgment application was heard on the 29th February 2012. The application proceeded in the absence of the Smith

parents and the High Court (Kelly J.) and a judgment in the sum of €1.933m. as against the Smith parents on a joint and several

basis. The curial part of the order of Kelly J. specifically recited that the Court had had regard to the affidavit of Ms. June Smith in

respect of which the contracts for sale issue had been raised, but that the High Court had determined that no arguable defence had

been thereby demonstrated.

13. On the 27th March 2014 ACC appointed the first named defendant, Mr. McCarthy, to act as receiver of the lands which are at

issue in the present proceedings. The receiver contended that he could not secure possession of those lands and to that land he

commenced separate proceedings in June 2014 seeking injunctions restraining, inter alia, the Smith parents from interfering with the

receivership or in trespassing upon the properties.

14. The High Court (Gilligan J.) granted an interlocutory injunction to that effect on the 17th October 2014. The Smith parents then

instructed Mr. Collins to enter an appearance, and a defence was delivered in response to the statement of claim of the receiver. In

that defence it was pleaded that the mortgage and the borrowings were predicated upon an illegality by reason of certain alleged

activities by ACC parent company, Rabobank, in connection with the setting of benchmark interest rates. The matter was due to be

heard by the High Court (Gilligan J.) on the 1st December 2015.

15. At, however, a hearing before the High Court in June 2015 the plaintiff’s mother, Ms. June Smith, claimed that she could not give

up possession of the lands to the receiver by reason of a prior 2012 lease of these lands in favour of her daughter, the present

plaintiff. Clause 7.17 of the mortgage prohibits the creation of such a lease without the prior consent of ACC and it is clear from the

affidavit of ACC’s solicitor, Mr. Conal Keane, dated 7th April 2016 that the bank had never consented to the creation of such a lease.

Indeed, Mr. Collins apparently did not dispute the non-binding character of such a lease in the course of oral submissions made to the

High Court on behalf of the Smith parents.

16. Insofar as Ms. Jane Smith endeavours to rely on the earlier “lease” dated 1st January 2007 between herself and the executors of

her late uncle, it should be pointed out that this was a standard conacre letting for a period of eleven months. (The period of eleven

months is normally chosen to ensure that the writing requirements contained in s. 4 of the Landlord and Tenant Law Ireland

(Amendment) Act 1860 (“Deasy’s Act”) do not capture such a letting). Even in its own terms this agreement (which is described as a

“land letting agreement”) was expressed to be a licence rather than a lease.

17. Moving forward to the December 2015 hearing, on that occasion the Smith parents’ solicitor, Mr. Collins, informed Gilligan J. that

he did not have any formal instructions to assert any positive defence to the claim, while not formally consenting to the reliefs sought

in the receiver’s proceedings. It would appear that Mr. Collins conceded that the mortgage was valid and that the receiver had also

been validly appointed. Mr. McCarthy then gave oral evidence as to his appointment and to the steps that had been taken to

interfere with that appointment. Gilligan J. granted the receiver a permanent injunction restraining, inter alios, the Smith parents and

the plaintiff from trespassing upon these lands.

The judgment of the High Court

18. In his judgment Gilligan J. held that the present proceedings were abusive. The plaintiff was attempting to re-ventilate issues

(such as the November 2007 letter) on behalf of her parents vis-à-vis ACC even though these issues had already been raised and

rejected by Kelly J. by his order of February 2012 in the separate proceedings brought by the ACC against the parents. That order

was never appealed.

19. Gilligan J. took the same view of the plaintiff’s claim to have a prior lease in respect of some of the lands which were the subject

of ACC’s charge. At this point the plaintiff was seeking to rely upon an even earlier lease between herself and her grand-uncle dated

2006 which pre-dated the mortgage. Any such claim could – and should – have been raised at various stages, whether in 2012 or at

the time of the appointment of the receiver in 2014 or in the subsequent proceedings brought by the receiver claiming possession of

the lands. The judge concluded that the plaintiff’s attempt to do so now was abusive.

20. Gilligan J. further took the view that plaintiff had no locus standi to pursue what he regarded as in effect a professional negligence

action as against Mr. Collins given that he had never been retained qua solicitor by her. He regarded as the claims of fraud to be

abusive in the absence of any particulars and, specifically, expert evidence to support that claim.

The claims against ACC and the receiver

21. So far as the claims against ACC and the receiver, Mr. McCarthy, are concerned, they are plainly abusive. The claim rests upon

the defence arising from the contention – which I appreciate is denied by Mr. Collins – that the letter of November 2007 from Mr.

Collins to ACC confirming that the contracts for the sale of lands was in place was written without the authorisation of the Smith

parents. This issue, however, has been raised by the Smith parents on several occasions and it has been rejected, most particularly

by the High Court order of February 29th 2012 which was never appealed.

22. Quite apart from the fact that these are claims which, subject to one exception, could only have been advanced by the Smith

parents, it must be recalled that these are claims which effectively replicate or duplicate the various claims and defences which the

Smith parents have already advanced in separate proceedings.

23. So far as the plaintiff’s claim that she enjoys a prior lease in respect of part of the lands (amounting, approximately, to 120

acres), the most immediate answer is to say that this is a claim which could – and should – have been raised in the 2014 proceedings

when the receiver sought an injunction against her parents from trespassing upon these lands or at the various stages throughout

2015 when the 2012 lease was raised. If she had such a defence based upon an even earlier lease dating from 2006 that was the

time at which to raise it.

24. It is true that she was not formally a party to the 2014 proceedings, although she was fully aware of them. Her failure at that

point to raise the earlier 2006 lease and to alter the receiver of its existence and alleged continued validity in the fact of the

receiver’s claims as against the Smith parents must be regarded as tantamount as acquiescence on her part such as would debar her

from raising this point in the present collateral proceedings.

25. In any event, no such defence based on the alleged 2006 lease was raised by the Smith parents and a permanent injunction was

duly granted by the High Court on the 1st December 2015 restraining any interference with the receiver. The fact that the present

proceedings were commenced some two months afterwards on the 8th February 2016 – in which the prior lease defence is raised for

the first time – tells its own story. It is clear that there is, accordingly, either an issue estoppel operating to preclude the plaintiff

from raising this defence in these proceedings or she has otherwise acquiesced in the facing of the receiver’s claims by not positively

raising this issue of the 2006 lease until after the permanent injunction was granted by the High Court. Either way, her attempt to do

so via these proceedings is plainly abusive.

The nature of the plaintiff’s claims as against Mr. Collins

26. Although it is accepted that the plaintiff never retained Mr. Collins or his firm as her solicitor, she nonetheless alleges that she is

owed a duty of care by him. One might ask, therefore, how the plaintiff could then make such a case as against this defendant?

27. The plaintiff here points to the fact that Mr. Collins had acted as solicitors to the plaintiffs’ parents for well nigh twenty years. It

is also not disputed but that the plaintiff is the intended beneficiary of her father’s will and that Mr. Collins assisted Mr. Smith in the

preparation of that will. Proceeding from that basis the plaintiff then contends that Mr. Collins owed her a duty of care to safeguard

her interests in the course of her parents’ dealings with both ACC and the receiver.

28. The plaintiff further makes the claim that Mr. Collins had acted fraudulently to the detriment of her parents qua solicitor in his

dealings with ACC and, furthermore, that both Mr. Collins and ACC acted in a joint enterprise to commit such a fraud. It is also

contended that Mr. Collins committed several breaches of s. 60 of the Land Law and Conveyancing Law Reform Act 2009. These

claims can now be considered in turn.

Whether Mr. Collins owed the plaintiff a duty of care?

29. It is clear that a solicitor retained by a client undertakes certain professional obligations towards him. If the solicitor has

discharged those duties in an unsatisfactory manner the client may have a remedy in both contract and in tort: see Finlay v. Murtagh

[1979] I.R. 249. There may, however, be special cases where a solicitor owes a duty of care to third parties, of which the

disappointed legatee cases provide the most clear-cut example. As Henchy J. explained in his judgment in Finlay ([1979] I.R. 249,

257):

“….the general duty of care created by the relationship of solicitor and client entitles the client to sue in negligence if he

has suffered damage because of the solicitor’s failure to show due professional care and skill, notwithstanding that the

client could sue alternatively in contract for breach of the implied term in the contract of retainer that the solicitor will

deal with the matter in hand with due professional care and skill.

The solicitor’s liability in tort under the general duty of care extends not only to a client for reward, but to any person for

whom the solicitor undertakes to act professionally with reward, and also to those (such as beneficiaries under a will,

persons entitled under an intestacy, or those entitled to benefits in circumstances such as a claim in respect of a fatal

injury) with whom he has made no arrangement to act but who, as he knows or ought to know, will be relying on his

professional care and skill. For the same default there should be the same cause of action. If others are entitled to sue in

tort for the solicitor’s want of care, so also should the client; that is so unless the solicitor’s default arises not from a

breach of the general duty of care arising from the relationship but form a breach of a particular and special term of the

contract in respect of which the solicitor would not be liable if the contract had not contained such a term. Thus, if the

client’s instructions were that the solicitor was to issue proceedings with a specified time, or to close a sale by a

particular date, or generally, any resulting right of action which the client might have would be in contract only unless the

act or default complained of falls within the general duty of care owed by the solicitor.”

30. In Wall v. Hegarty [1980] I.L.R.M. 124 Barrington J. held that a solicitor taking instructions from a testator owed the potential

beneficiaries a duty of care to ensure that the formalities required by the Succession Act 1965 were duly complied with, “so that the

wishes of the legator are not frustrated and the expectancy of the legatee defeated.”

31. The decision in Wall is, however, an exceptional one and its rests squarely on the fact that there is a specific duty towards a

defined class of persons at given point of time in respect of a particular legal transaction, namely, the execution of a will. As

Barrington J. explained ([1980] I.L.R.M. 124, 129):

“…there is a close degree of proximity between the plaintiff and the defendant. If a solicitor is retained by a testator to

draft a will and one of the purposes of the will is to confer a benefit on a named legatee, the solicitor must know that if

he fails in his professional duty properly to draft the will, there is a considerable risk the legatee will suffer damage. [The

solicitor’s] contemplation of the plaintiff is actual, nominate and direct.”

32. Beyond that, however, the courts have rarely ventured any further. In particular, the solicitor’s duty of care has not been

broadened beyond the special categories envisaged by the Supreme Court in Finlay and by Barrington J. in Wall. A contemporary

illustration of this is provided by Adigun v. McEvoy [2013] IEHC 342. Here a company controlled by the plaintiff sought legal advice

from the defendant solicitor for the purposes of pursuing a copyright infringement claim by the company. Hedigan J. held that the

advice had been given to the company qua client and that the plaintiff – as distinct from the company - had no entitlement to sue

the solicitor in his own right:

“Mr. Adigun urges on the Court that he was paid by the company and was in the same category as the beneficiary in a

will suit in the case of Wall v. Hegarty [1980] I.L.R.M. 124 in that the solicitors owed him, as a beneficiary of the

company, a duty of care just as the solicitor in Wall owed a legatee a duty of care to draft a will properly. However, I am

not satisfied that these two situations are similar ones. No corporate entity intervened between the solicitor and the

legatee in Wall. One does exist herein. Here, if the client was in fact the company and not Mr. Adigun then no privity

exists between him and its solicitors. The fact Mr. Adigun stood to benefit from whatever monies came the company’s

way does not establish a duty of care between the solicitors for the company and him. He is in no stronger or weaker a

position than any other member of the company. The dispute existing was between the company and the Abbey

[Theatre] and it was the company that stood to gain or lose thereby.”

33. In the present case the plaintiff had no privity with Mr. Collins and, accordingly, he owed her no general duty of care. It is true

that in the event that her father were to pre-decease her and it transpired that his will was ineffective to carry out his wishes qua

legator, the plaintiff could doubtless sue under the principle of Wall v. Hegarty. Beyond that, however, Mr. Collins owed the plaintiff

no duty of care.

34. Independently of authority, the wide-ranging duty of care contended for would, in any event, be inconsistent with general

principles of tort law. The imposition of such a broad duty of care – to ensure that her parents did not suffer any financial losses in

their dealings with ACC – would effectively impose precisely the same duties on Mr. Collins vis-à-vis the plaintiff as if she had retained

him on a professional basis. Even if she had so retained him, he would have owed her no separate duty in that regard than that which

he already owed her parents qua clients.

35. In short, the duty contended for here is open-ended and indeterminate and it lacks the quality of immediacy and directness which

grounded the particular and specific duty of care in Wall v. Hegarty. As I have just pointed out in the companion appeal in respect of

Ms. June Smith’s (this plaintiff’s mother) claim in negligence against the Law Society arising from these events, the courts have

always set their face against admitting claims derived from the imposition of an indeterminate duty to an potentially indeterminate

class, regardless of considerations of proximity, foreseeability and remoteness.

36. It follows, therefore, that the plaintiff’s claim against Mr. Collins is based on the existence of a supposed broad-ranging duty of

care which is neither recognised by authority nor consistent with fundamental principles of tort law.

The claim based on fraud

37. The claim of fraud which the plaintiff makes as against Mr. Collins and, indeed, the ACC is entirely unparticularised and consists of

largely generalised allegations. For my part, I consider that these claims are, for several reasons, unsustainable.

38. First, the claim of fraud is a purely generalised one. Ord. 19, r. 5(2) provides that any plaintiff alleging fraud must ensure that

“particulars (with dates and items if necessary) shall be set out in the pleadings.” The plaintiff has not supplied any particulars of

fraud in the present case, even though, in the words of Delany and McGrath, Civil Procedure in the Superior Courts (Dublin, 2012) (at

267) “the long establish practice of the courts has been to require allegations of fraud to be pleaded with particularity”. The rationale

for this requirement was thus explained by Barrington J. in Healy v. Finnerty [1981] I.L.R.M. 198, 202:

“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 solicitors 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.”

39. While it is true that these comments were made in the context of undue influence, they apply a fortiori in the case of fraud, as

Barrington J. himself acknowledged. As matters stand, neither Mr. Collins nor ACC would have any fair knowledge or advance warning

of that which has been alleged them. The courts could not countenance the continuation of such proceedings absent such

particulars.

40. Second, in any event, the only possible basis for a claim of fraud relates to the November 2007 letter which Mr. Collins wrote to

the ACC confirming the contracts for the sale of land were in place. This letter was not accurate and in various proceedings the Smith

parents have contended that the letter was written without instructions from them. This very fact, however, invites two fundamental

objections. As Gilligan J. pointed out, the only parties who are entitled to raise this plea are, of course, the Smith parents themselves

because if there was indeed any fraud it was they (and not the plaintiff) who were the victims of this deceit. Furthermore, as I have

elsewhere pointed out, this issue has already been raised by the Smith parents in the earlier proceedings and rejected by the High

Court. If the parents were dissatisfied with this decision, their remedy was to appeal that decision. It cannot be impeached

collaterally by the plaintiff in these proceedings.

Section 60 of the Land and Conveyancing Law Reform Act 2009

41. Section 60 of the Land and Conveyancing Law Reform Act 2009 (“the 2009 Act”) provide in relevant part as follows:

"(1) Any person disposing of land to a purchaser, or the solicitor or other agent of such a person, who with intent to

defraud-

(a) conceals from the purchaser any instrument or incumbrance material to the title, or

(b) falsifies any information or matter on which the title may depend in order to induce the purchaser to accept the

title offered or produced,

is guilty of an offence under this Act.

(2) Any such person or the person's solicitor or agent is also liable to an action for damages by the purchaser, or persons

deriving title under the purchaser, for any loss sustained by reason of-

(a) the concealment of the instrument or incumbrance, or

(b) any claim made by a person whose title to the land was concealed by such falsification.”

42. It will be seen that s. 60 of the 2009 Act is designed to provide certain safeguards to the purchasers of property. First, the

falsification of title to a purchaser is, by virtue of s. 60(1), an offence. Second, s. 60(2) provides for a statutory cause of action at

the hands of the purchaser (any person claiming title through the purchaser) for any loss caused by such concealment or falsification.

43. The key point here, of course, is that the claim must be brought by the purchaser of the lands. But the plaintiff is not the

purchaser of these lands and she has never even claimed to be such. In these circumstances, it is clear that she has no standing to

rely upon or invoke s. 60 of the 2009 Act in these proceedings. It follows in turn that her claim against Mr. Collins is bound to fail.

Conclusions

44. For all of the above reasons it is plain that these proceedings have no reasonable prospect of success and I consider that Gilligan

J. was correct to strike them out pursuant to the Court’s inherent jurisdiction.