Howley v McClean and Another

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Mr. Justice Binchy,Mr. Justice O'Moore
• Judgment Date: 28 March 2025
• Neutral Citation: [2025] IECA 77
• Docket Number: Court of Appeal Record No.: 2024/78 Court of Appeal Record No.: 2024/77 High Court Record No.: 2021/76R

Between/

Joseph Howley

Plaintiff/Respondent

and

Paul Howard

Defendant/Appellant

Joseph Howley

Plaintiff/Respondent

and

Una McClean

Defendant/Appellant

[2025] IECA 77

Whelan J.

Binchy J.

O'Moore J.

Court of Appeal Record No.: 2024/78

High Court Record No.: 2021/66R

Court of Appeal Record No.: 2024/77

High Court Record No.: 2021/76R

THE COURT OF APPEAL

Summary judgment – Champerty – Fraud – Appellants appealing against summary judgment – Whether champerty was a defence to the proceedings

Facts: The respondent, Mr Howley (the Collector General), claimed unpaid taxes, interest and penalties from each of the appellants, Ms McClean and Mr Howard. In a judgment delivered on 16 January 2024, the High Court (Quinn J) found the amounts claimed by the respondent to be duly proven, having regard to the determinations made by the Tax Appeal Commission. He further concluded that the fee agreement entered into between the respondent and his solicitors on 29 January 2020 (the Contract) was not champertous. The judge also held that even if he was incorrect in his conclusion that the Contract was not champertous, champerty cannot be relied upon as a defence to the proceedings, and the appellants would have other remedies available to them in the event that they succeeded in defending the proceedings. By order made and perfected on 6 February 2024, the High Court judge ordered that the respondent recover as against the first appellant the sum of €2,531,229.36 together with the costs of those proceedings and that the respondent recover as against the second appellant the sum of €653,407.21 together with the costs incurred by the respondent in those proceedings. The appellants each appealed to the Court of Appeal from the judgment and orders made by the High Court. The principal grounds of appeal were that the High Court judge erred in failing to find that the contract was not champertous and contrary to law, and further erred in failing to find that champerty was not a defence to the proceedings.

Held by Binchy J that the appellants had not satisfied the burden on them to demonstrate that the fee arrangements between the respondent and his solicitors constituted champerty. Binchy J held that it followed from that conclusion that they could not be said to amount to champerty either, but that there was an additional reason why this was so, and that was, as the High Court judge also concluded, that costs could not be considered to be the proceeds of the litigation. Binchy J could find no error in the conclusion of the High Court judge that “the ‘proceeds’ or ‘fruits’ of the litigation are the recovered taxes, surcharges and interest and not the costs”. Binchy J dismissed all grounds of appeal related to that conclusion. Binchy J was satisfied that the decision of Lynch J in O’Keefe v Scales [1998] 1 I.R. 290 represented the current state of the law; champerty cannot be deployed as a defence to a stateable cause of action. Binchy J held that a successful defendant who can establish that the action was maintained by champerty has their remedy in tort against the tortfeasor. The accusation of fraud or misrepresentation or however it was to be characterised was, in Binchy J’s view, entirely without foundation and was to be deprecated. Binchy J held that it should never have been made in the first place, never mind re-agitated before the Court on appeal.

Binchy J held that, in light of his conclusions above, it was unnecessary to address any of the remaining grounds of appeal.

Appeals dismissed.

NO REDACTION NEEDED

JUDGMENT of Mr. Justice Binchy delivered on the 28 ^th day of March 2025

1 . In these proceedings, the respondent, who is the Collector General, claims unpaid taxes, interest and penalties from each of the appellants. The appellants are both life partners and business partners and the two sets of proceedings have progressed in tandem. In the case of the first named appellant, the amount claimed in the summary summons dated 8 ^th November 2021 was €1,210,704.32 together with interest thereon in the sum of €1,103,106.76, bringing the total claim to €2,313,811.08. The claim for interest was increased in the statement of claim delivered on 19 ^th December 2022, bringing the total claim, as of that date to €2,419,603.064.

2 . In the case of the second named appellant, the amount claimed in the summary summons was €302,535.41, together with interest in the sum €297,006.34, bringing the total claimed in the summary summons, which in this case issued on 22 ^nd November 2021 to €599,541. In a statement of claim delivered on 19 ^th December 2022 the claim for interest was increased, so that the total claimed as of that date was €625,513.76. In each case, statutory interest is claimed from the date of issue of the statement of claim onwards.

3 . Prior to the issue of proceedings, the appellants had appealed assessments raised by the respondent to the Tax Appeals Commission (“TAC”). In the case of the first named appellant, Mr. Howard, the taxes related to the years 2002 – 2014 (inclusive) and in the case of the second named appellant, Ms. McClean, the assessments related to the years 2002 – 2014. TAC issued its determinations in the appeals on 26 ^th August 2021. It found that there were no valid appeals made by the first named appellant for the years 2002, 2013 and 2014, and that in relation to all other years, the appeals failed. All of the appeals lodged by the second named appellant also failed. The result of TAC's determinations was to affirm the assessments raised by the respondent. As a result, the assessments made against the appellants are deemed to be final and conclusive, pursuant to s. 949(3) of the Taxes Consolidation Act, 1997 (as amended).

4 . On 14 ^th October 2021, before proceedings issued, the Revenue Commissioners issued a final notice to each of the appellants calling upon them to discharge the outstanding taxes. On 27 ^th October 2021, each of the appellants submitted a phased payment plan to the Revenue Commissioners in which each acknowledged in writing the amount of unpaid tax due and owing by them to the respondent. Those proposals were rejected by the respondent and proceedings issued in each case on 8 ^th November 2021.

5 . Summary judgment was granted to the respondent on 8 ^th April 2022, but, following an appeal to this Court, the proceedings were remitted to plenary hearing. In amended defences delivered on 11 ^th April 2023, each of the appellants, while admitting that taxes were due to the respondent, disagreed with the amounts claimed, but the principal defence advanced by them in the proceedings and the only issue falling for determination in these appeals is the appellants' claim that the respondent is not entitled to maintain the proceedings in each case on the basis that the fee agreement entered into between the respondent and his solicitors on 29 ^th January 2020 (the “Contract”) constitutes a champertous agreement.

6 . In a judgment delivered on 16 ^th January 2024, the High Court (Michael Quinn J.) found the amounts claimed by the respondent to be duly proven, having regard to the determinations made by the Tax Appeal Commission. He further concluded, following an extensive consideration of the provisions of the Contract and a comprehensive review of the law of maintenance and champerty in this jurisdiction, that the Contract is not champertous. The judge also held that even if he was incorrect in his conclusion that the Contract is not champertous, champerty cannot not be relied upon as a defence to the proceedings, and the appellants would have other remedies available to them in the event that they succeeded in defending the proceedings.

7 . In a further conclusion, arising out of a subsequent amendment to the Contract made between the respondent and his solicitors during the course of these proceedings, the High Court judge rejected the submission of the respondent that that amendment agreement rendered the proceedings moot.

8 . Having so found, by order made and perfected on 6 ^th February 2024, the High Court judge ordered that the respondent do recover as against the first named appellant the sum of €2,531,229.36 together with the costs of these proceedings and that the respondent recover as against the second-named appellant the sum of €653,407.21 together with the costs incurred by the respondent in those proceedings.

9 . The appellants have each appealed from the judgment and orders made by the High Court, and as in the High Court, each of these appeals have travelled together, and the appellants have relied upon the same grounds of appeal. The principal grounds of appeal are that the High Court judge erred in failing to find that the contract was not champertous and contrary to law, and further erred in failing to find that champerty is not a defence to the proceedings.

The Contract

10 . The solicitors acting on behalf of the respondent in these proceedings are Ivor Fitzpatrick & Co., 44–45 St. Stephen's Green, Dublin 2. On 29 ^th January 2020, the solicitors entered into an agreement with the respondent for the provision of legal and related services in the collection of certain revenue debt. These solicitors are one of six firms on a panel retained by the respondent for the collection of unpaid taxes. For present purposes, the relevant provisions of the Contract appear at clauses 5.1–5.3 of the Contract. Those provisions provide as follows:-

“5.1 The major portion of the renumeration under this contract will be in form of commission expressed as a percentage of amounts collected. Legal costs shall be recovered from the debtor to the greatest extent possible. Revenue acknowledges that in the nature of the work, there will be some cases where costs will be incurred but no recovery is possible.

5.2 [In the judgment under appeal, the High Court judge broke this clause down into its individual sentences for...