McCann v McManus

• Jurisdiction: Ireland
• Judge: Ms. Justice Butler
• Judgment Date: 06 December 2022
• Neutral Citation: [2022] IEHC 682
• Year: 2022
• Court: High Court
• Docket Number: [Record No. 2021/5012 P]

Between

Shannen McCann and Tara McCann

Plaintiffs

and

Colin McManus, Kathleen McManus and Simon Wagner

Defendants

[2022] IEHC 682

[Record No. 2021/5012 P]

THE HIGH COURT

Cause of action – Abuse of process – O. 19, r. 28 of the Rules of the Superior Courts – Third defendant seeking an order striking out the claim against him – Whether a stateable cause of action was disclosed

Facts: The third defendant, Mr Wagner, applied to the High Court for an order under O. 19, r. 28 of the Rules of the Superior Courts, striking out the claim of the plaintiffs, Mses McCann, against him or, alternatively, orders pursuant to the inherent jurisdiction of the court directing the amendment of the plenary summons to remove any claim to relief against the third defendant. The plaintiffs contended that by virtue of a contribution of stg£1.2 million made by them or on their behalf towards the purchase of 256 acres of land at Buncrana Road, Derry (the Derry lands), the first defendant, Mr McManus, held 25% of the lands or of a joint venture in respect of the lands or of the profits from such joint venture in trust for them. The first defendant denied the existence of the alleged trust. The third defendant claimed to have had no knowledge of the relationship between the plaintiffs and the first defendant nor of the plaintiffs’ alleged involvement in the purchase of the property. On becoming aware of the plaintiffs’ claims, he terminated his commercial involvement with the first defendant in respect of the Derry lands and reached a settlement agreement with him under which a sum of stg£8.8 million was to be paid to the first defendant in respect of any remaining interest he might have. A portion of the lands were sold in August 2019 and paid for in tranches between March 2020 and September 2021. During that period, the third defendant became aware of the plaintiffs’ alleged interest when in February 2020 they began to make certain claims through solicitor’s correspondence. Consequently, on 10 April 2020, a settlement was negotiated with the first defendant as a result of which the first defendant’s continued proprietary involvement in the Derry lands was terminated in exchange for a substantial payment and an agreement regarding the on-going provision of professional services. The plaintiffs then became concerned that sums were going to be paid to the first defendant which would not be distributed by the first defendant in accordance with their entitlements under the alleged trust and, consequently, issued a number of sets of proceedings culminating in these proceedings, issued on 12 August 2021. They then made an ex parte application to the High Court (Humphreys J) on 10 September 2021 and obtained an order restraining the defendants from distributing or paying out a sum of stg£4.5 million, being part of the proceeds of sale of the portion of the sold Derry lands, pending the trial of the action. The third defendant complained that he was not put on notice of the proceedings nor of the application to restrain payment out in advance of the proceedings issuing or the application being made. He made no claim on the sum of stg£4.5 million due to be paid to the first defendant or to companies controlled by him. On becoming aware of the proceedings and of the order, the third defendant immediately offered to agree to the monies being placed in an escrow account under the control of the first defendant’s and/or the plaintiffs’ solicitors in which he would have no further involvement. He claimed that the proceedings did not make out a stateable claim against him as, not only was he not a trustee of the alleged trust, the plaintiffs and the first defendant agreed that the plaintiffs’ involvement in providing funds for the purchase of the Derry lands was deliberately concealed from him.

Butler J held that the plaintiffs’ proceedings did not disclose a stateable cause of action against the third defendant. She was satisfied that the proceedings brought by the plaintiffs against the third defendant were tantamount to an abuse of the court’s processes.

Butler J made the order requested under O. 19, r. 28 and the orders requested under the court’s inherent jurisdiction deleting from the plenary summons and the statement of claim all relief sought against the third defendant.

Application granted.

JUDGMENT of Ms. Justice Butler delivered on the 6 ^th day of December 2022

Introduction

1 . This is an application by the third defendant for an order under O. 19, r. 28 of the Rules of the Superior Courts, striking out the plaintiffs' claim against him or, alternatively, orders pursuant to the inherent jurisdiction of the court directing the amendment of the plenary summons to remove any claim to relief against the third defendant. At the time the motion was issued the statement of claim had not yet been served, hence it is not specifically referred to in the motion. The background to the proceedings is complex and is not made any easier to unravel by virtue of the fact that this is the third set of proceedings the plaintiffs have issued in this jurisdiction, although the only one to name the third defendant as a defendant. There are also extant proceedings in Northern Ireland concerning the same subject matter but the third defendant is not a party to those proceedings either.

2 . In brief, the plaintiffs contend that by virtue of a contribution of stg£1.2 million made by them or on their behalf towards the purchase of 256 acres of land at Buncrana Road, Derry ( “the Derry lands”), the first defendant held 25% of the lands or of a joint venture in respect of the lands or of the profits from such joint venture in trust for them. The first defendant (who is not a party to this motion, but who has sworn affidavits in the proceedings for other purposes) denies the existence of the alleged trust. The third defendant claims to have had no knowledge of the relationship between the plaintiffs and the first defendant nor of the plaintiffs' alleged involvement in the purchase of the property. On becoming aware of the plaintiffs' claims, he terminated his commercial involvement with the first defendant in respect of the Derry lands and reached a settlement agreement with him under which a sum of stg£8.8 million was to be paid to the first defendant in respect of any remaining interest he might have.

3 . These proceedings were issued in circumstances where a portion of the lands were sold in August 2019 and paid for in tranches between March 2020 and September 2021. During this period, the third defendant became aware of the plaintiffs' alleged interest when in February 2020 they began to make certain claims through solicitor's correspondence. Consequently, on 10 April 2020, a settlement was negotiated with the first defendant as a result of which the first defendant's continued proprietary involvement in the Derry lands was terminated in exchange for a substantial payment and an agreement regarding the on-going provision of professional services. The plaintiffs then became concerned that sums were going to be paid to the first defendant which would not be distributed by the first defendant in accordance with their entitlements under the alleged trust and, consequently, issued a number of sets of proceedings culminating in these proceedings, issued on 12 August 2021. They then made an ex parte application to the High Court (Humphreys J.) on 10 September 2021 and obtained an order restraining the defendants from distributing or paying out a sum of stg£4.5 million, being part of the proceeds of sale of the portion of the sold Derry lands. pending the trial of the action.

4 . As well as the defendants, Humphreys J. directed that notice of his order be served on four companies in which the title to the Derry lands is vested. These companies, Fadeford ltd, Detailridge Ltd, Rusticglade Ltd and Riddleside Ltd, shall for convenience be referred to cumulatively as the FDRR companies. The issued share capital in the FDRR companies is owned by a company called Harts Investment DAC (HIL). The third defendant was a director of HIL until 2019 but is not a shareholder in either HIL or the FDRR companies.

5 . The third defendant complains that he was not put on notice of the proceedings nor of the application to restrain payment out in advance of the proceedings issuing or the application being made. He makes no claim on the sum of stg£4.5 million due to be paid to the first defendant or to companies controlled by him. On becoming aware of the proceedings and of the order, the third defendant immediately offered to agree to the monies being placed in an escrow account under the control of the first defendant's and/or the plaintiffs' solicitors in which he, the third defendant, would have no further involvement. More fundamentally, he claims that the proceedings do not make out a stateable claim against him as, not only is he not a trustee of the alleged trust, the plaintiffs and the first defendant agree that the plaintiffs' involvement in providing funds for the purchase of the Derry lands was deliberately concealed from him. Insofar as the plaintiffs make any claim to an interest in the unsold Derry lands, the High Court has already refused jurisdiction in respect of this dispute as it relates to property situated outside of the State and within the jurisdiction of the Northern Ireland courts where the plaintiffs have issued further proceedings. Consequently, these proceedings relate only to the portion of the proceeds of sale of the sold Derry lands due to be paid to the first defendant over which the third defendant makes no claim.

6 . The plaintiffs, on the other hand, contend that once the third defendant became aware of their involvement and of the existence of the alleged trust, he owed some sort of duty to them, and that the settlement reached between the first defendant and the third defendant in...