Kearney v J&E Davy
| Jurisdiction | Ireland |
| Judge | Mr. Justice Twomey |
| Judgment Date | 18 January 2023 |
| Neutral Citation | [2023] IEHC 18 |
| Court | High Court |
| Docket Number | Record No. 2021/3509P |
[2023] IEHC 18
Record No. 2021/3509P
THE HIGH COURT
COMMERCIAL
Fraudulent misrepresentation – Strike out – Bound to fail – Defendants seeking to strike out the plaintiffs’ claim – Whether the plaintiffs’ claim was bound to fail
Facts: There was a dispute over the sale of subordinated floating rate notes (the Bonds) in Anglo Irish Bank by the defendants, J&E Davy t/a Davy and Mr McLaughlin, Mr Garry, Mr McKiernan, Mr Nangle, Mr Smith, Mr O’Connor, Mr Quinlan, Mr McGinley, Ms Howard, Mr O’Mahony, Mr Childs, Mr Lyster, Mr King, Mr Murphy, Mr Reilly and Mr Lyons t/a The O’Connell Partnership, on behalf of the plaintiffs, Mr Kearney and Kilmona Holdings Ltd (Mr Kearney). In the substantive proceedings (the 2021 Proceedings), Mr Kearney sought to set aside his settlement agreement (which settled the 2015 Proceedings) with the defendants on the grounds that he was induced to enter that agreement by a fraudulent misrepresentation. The first pre-trial application dealt with by the High Court rejected Davy’s application to require Mr Kearney to provide Davy with further information regarding the claims against it. The Court refused that application on the grounds that Mr Kearney had established a prima facie case of fraud against Davy and so it was appropriate to defer the giving of any further particulars of his claim, until after discovery, because of the clandestine nature of fraud (if it were to be proven). The second pre-trial application heard by the Court was heard on the 20th and 21st December, 2022. It was an application by some of the defendants to strike out Mr Kearney’s claim on the basis that it was bound to fail. The defendants raised doubts as to whether Mr Kearney was in fact induced by a fraudulent misrepresentation to settle the 2015 Proceedings.
Held by Twomey J that the Court would refuse the application because, inter alia, the 2021 Proceedings alleged fraud, and thus there existed the possibility of clandestine activity on the part of the defendants, combined with the fact that there was prima facie evidence of a lack of candour on the part of Davy, regarding the transaction in dispute; accordingly, there was a possibility that clandestine activity/lack of candour on the part of the defendants may be concealing evidence which could come to light at trial. For that reason, the Court could not say that it was ‘clear beyond doubt’ that Mr Kearney would not succeed, such that his proceedings should be struck out without a trial.
Twomey J rejected the defendants’ application to strike out Mr Kearney’s proceedings.
Application refused.
JUDGMENT OF Mr. Justice Twomey delivered on the 18 th day of January, 2023
. This is the second pre-trial application which has been dealt with by this Court in relation to a dispute over the sale of subordinated floating rate notes (the “Bonds”) in Anglo Irish Bank by the defendants on behalf of the plaintiffs (referred to as “Mr. Kearney”, for ease of reference). In the substantive proceedings (the “2021 Proceedings”), Mr. Kearney seeks to set aside his settlement agreement (which settled the 2015 Proceedings) with the defendants on the grounds that he was induced to enter that agreement by a fraudulent misrepresentation.
. The first pre-trial application dealt with by this Court rejected Davy's application to require Mr. Kearney to provide Davy with further information regarding the claims against it. This Court refused that application on the grounds that Mr. Kearney had established a prima facie case of fraud against Davy and so it was appropriate to defer the giving of any further particulars of his claim, until after discovery, because of the clandestine nature of fraud (if it were to be proven).
. This, the second pre-trial application heard by this Court, was heard on the 20 th and 21 st December, 2022. It is an application by some of the defendants to strike out Mr. Kearney's claim on the basis that it is bound to fail.
. As noted below, the defendants have raised doubts as to whether Mr. Kearney was in fact induced by a fraudulent misrepresentation to settle the 2015 Proceedings. However, this Court refuses this application because, inter alia, the 2021 Proceedings allege fraud, and thus there exists the possibility of clandestine activity on the part of the defendants, combined with the fact that there is prima facie evidence of a lack of candour on the part of Davy, regarding the transaction in dispute. Accordingly, there is a possibility that clandestine activity/lack of candour on the part of the defendants may be concealing evidence which could come to light at trial. For this reason, this Court cannot say that it is ‘ clear beyond doubt’ that Mr. Kearney will not succeed, such that his proceedings should be struck out now, without a trial.
. The background to Mr. Kearney's claim against all 17 defendants is set out in the judgment on the first pre-trial application heard by this Court in Kearney & Anor v. J&E Davy T/A Davy & Ors [2022] IEHC 95 at paras. 1 to 11 (the “First Judgment”). Accordingly, it is not necessary to restate that background here. Definitions which are used in that judgment are also used in this judgment.
. This pre-trial application is made on behalf of all of the defendants, bar the first named defendant (“Davy”) and the seventh named defendant (“Mr. O'Connor”). The 15 other defendants were employees of Davy and/or occupied various roles in Davy and/or were members of a consortium/partnership called the O'Connell Partnership, which purchased the Bonds (For ease of reference in this jdugment, these 15 defendants are referred to as the “Defendants”). The Defendants have brought this pre-trial application in which they seek to have Mr. Kearney's case dismissed without a hearing. They seek the order pursuant to the inherent jurisdiction of the court, on the grounds that the proceedings are unsustainable and/or bound to fail (or in the alternative, on the basis of Order 19, rule 28 of the Rules of the Superior Courts on the grounds that the pleadings disclose no reasonable cause of action or that they are frivolous and/or vexatious or an abuse of process). In particular, the motion states that these orders are being sought having regard to the fact that the:
“claims made by the Plaintiffs in these proceedings directly contradict the pleaded case of the Plaintiffs”
as set out in the 2015 Proceedings and Mr. Kearney's affidavit of 27 th April, 2021.
. In the 2021 Proceedings, Mr. Kearney claims that he signed the various documents dated 11 th and 12 th February, 2016, which comprised the settlement of the 2015 Proceedings (the “Settlement Agreement”) because of a fraudulent misrepresentation which was made by two of the Defendants (Mr. Garry and Mr. Nangle) over the course of meetings held on the 21 st and 22 nd December, 2015 at the Merrion Hotel. This alleged fraudulent misrepresentation was to the effect that the purchaser of the Bonds, the O'Connell Partnership, had no connection with Davy, when in fact the members of the O'Connell Partnership were employees of Davy.
. In seeking to dismiss the 2021 Proceedings, the Defendants rely on the terms of Mr. Kearney's affidavit of 27 th April, 2021 (seeking interlocutory orders in the 2021 Proceedings) and in particular paragraph 3 thereof:
“These proceedings concern Settlement Agreements which were entered into on the 12 th February 2016 between the Plaintiffs on the First Named Defendant (“Davy”) and on foot of which previous commercial High Court proceedings having High Court (Commercial) Record No. 2015/6180P between the Plaintiffs and Davy were compromised. As explained in greater detail below, the Plaintiffs claim that the compromise of the previous proceedings on the terms set out in the three separate Settlement Agreements dated the 11 th and 12 February 2016 respectively (“the Settlement Agreements”) were procured by the fraudulent concealment by Davy who at all material times acted as the Plaintiffs' financial adviser and agent in the sale of the Plaintiffs' Bonds which on Davy's advice the Plaintiffs sold to the Second named Defendant (“the O'Connell partnership”) on foot of a written Agreement dated the 14 th November 2014.” (Emphasis added)
. The Defendants claim that there are a number of inconsistencies in Mr. Kearney's allegation that he was induced into signing the Settlement Agreement by a fraudulent misrepresentation, such that his claim is bound to fail. In particular, they claim that a person cannot be deceived if he knows the truth and they say that Mr. Kearney did in fact know that employees of Davys were members of the O'Connell Partnership. Accordingly, they claim that he could not therefore have been induced to sign the Settlement Agreement, even if, taking his claim at its height, he was the recipient of a false misrepresentation that they were not members. Thus, the Defendants claim that Mr. Kearney could not have been induced to enter the Settlement Agreement on the basis of a fraudulent representation. Therefore, they claim that these proceedings seeking the setting aside of the Settlement Agreement are bound to fail.
. It is common case that, in considering the dismissal of Mr. Kearney's claim based on affidavits and without an oral hearing, this Court must accept fully all averments pleaded and all assertions deposed to on behalf of Mr. Kearney. Thus, for example, this Court must assume, for the purposes of this application only, that it was fraudulently...
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