Money Markets v Fanning (& Others)

• Jurisdiction: Ireland
• Court: High Court
• Judgment Date: 11 February 2000
• Docket Number: 1999 No. 10527 P,[1999 No. 10527P]
• Date: 11 February 2000

THE HIGH COURT

1999 No. 10527 P

BETWEEN

MONEY MARKETS INTERNATIONAL STOCK BROKERS LIMITED (IN LIQUIDATION)

PLAINTIFF

AND

OISIN FANNING, JOHN CURRAN, PAUL BOUCHER, COLM O'REILLY, TIM MURPHY, ClAN KEALY AND PETER O'BYRNE

DEFENDANTS

Abstract:

Company law - Commercial law - Practice and procedure - Duties of directors - Fiduciary duty - Allegations of fraud - Whether defendants should be compelled to deliver replies to interrogatories - Whether public interest principle applied to compelling replies to interrogatories - Rules of the Superior Courts, 1986 (SI 15) Order 31, rule 2.

The application was brought by the liquidator on behalf of the company in liquidation. The liquidator claimed that some of the directors had fraudulently transferred monies from the company's account to the benefit of the directors involved. The liquidator also sought to compel the first and fourth named defendants reply to certain interrogatories. On behalf of the defendants the claims were denied and it was argued that the liquidator had not established any special exigency that would justify answering the interrogatories in question . O'Sullivan J held that the liquidator had established that the answering of the interrogatories was necessary for the purposes of disposing fairly of the matter. In this regard the first and fourth named defendants should answer the bulk of the interrogatories in question.

1 JUDGMENT of O'Sullivan J. delivered on the 11th day of February, 2000.

2 INTRODUCTION

3 The Plaintiff seeks to compel the first and fourth named Defendants to reply to interrogatories delivered by it as of right in the circumstance where it alleges fraud against all the Defendants and, secondly, to deliver further interrogatories against all the Defendants.

4 As interrogatories must relate to matters in question it is necessary, at the outset, to identify the issues arising on the pleadings.

5 THE PLEADINGS

6 The Plaintiff's case is brought by the Official Liquidator pursuant to leave granted by the Court. At all material times the Plaintiff ("MMI") carried on the business of stockbroker and the Defendants were executive directors thereof. The Plaintiff claims that the Defendants defrauded MMI out of large sums of money by transferring same out of the

7 client bank accounts of MMI, re-lodging these sums giving credit to parties not entitled thereto and wrongly debiting a further party (Cater Allen) and recording false transactions in the books of MMI. The wrongful beneficiaries of such transactions were the directors or persons connected with them. In a further allegation it is said that a sum of £200,000 Sterling was transferred telegraphically from an MMI client bank account to a Hambros private bank account for the benefit of an unauthorised party and that the same third party, "Cater Allen" was wrongly debited with the said amount. The third major allegation is that almost £500,000 Sterling was wrongly transferred from the MMI account with Bank of Ireland, Kilburn, London for the benefit of the third Defendant.

8 It is alleged, further, that the books of MMI were falsely manipulated to disguise and cover up the foregoing transactions.

9 A large number of interrogatories have been delivered by the Plaintiff relating, in the main, to the detailed, step by step, tracing of the "paper trail" which is apparent from a perusal of the books of the company now available to the Liquidator. For example the first Defendant is asked a number of detailed questions in relation to each of the relevant cheques including whether it was drawn on the relevant account, whether it was made payable to MMI, whether the cheque stub recorded the payee as Cater Allen, whether it was signed by the seventh Defendant, whether it was lodged back into a specified account on a specified date, and whether the Cater Allen client ledger account recorded the payment to that party.

10 The foregoing is a sample only; it is fair to say, however, that the vast bulk of interrogatories relate to particularised detail of the kind indicated in the foregoing sample.

11 The defences of all seven Defendants comprise comprehensive denials. In addition the second, third and seventh Defendants say they relied upon the first Defendant's representations that he had authority to transfer the monies and to arrange the various transactions. These Defendants say that if the others were guilty of fraud or breach of

12 fiduciary duty or trust or statutory duty, they are not liable for the actions of the others. The fifth and sixth Defendants do not go quite so far, but they do say that insofar as they drew cheques, they did so in the belief that same was for honest and bona fidepurposes and they were not aware of the manner in which these transactions were in fact treated or recorded in the books of MMI.

13 As will be seen, the pleadings establish deep and comprehensive issues between the Plaintiff and all the Defendants but also as between several of the Defendants inter se.

14 SUBMISSIONS

15 Mr. Gleeson B.L. on behalf of the Plaintiff submits that:

16 1. The Defendants as ex directors of the Plaintiff owe a particular duty to it and should be compelled to answer interrogatories relating to the primary books of the company which were prepared and maintained under their control and pursuant to their statutory duty.

17 2. They may not avoid this obligation on the plea that they were not personally involved in the specific transactions in question because, as directors, they have an obligation to get such information as they can from other servants of the company who may have personally conducted the relevant transactions. He relies in this connection on the observations of Walsh J. in

18 J. and L.S. Goodbody Limited -v- The Clyde Shipping Company Limited

19 (Supreme Court unreported, 9th May, 1967, p.5 following) to the effect that:

20 "Prima facie the secretary is the person to whom they (the interrogatories) should be delivered and in the absence of any Order to the contrary it is to be assumed that that was what was intended in the present case. It is important to bear in mind, however, that it is not the secretary who is being interrogated but the company. The secretary is not answering for himself but for the company and in doing so he must get such information as he can from the other servants of the company who have personally conducted the transaction in question and have personal knowledge of the facts sought. The secretary's function is to give the answer of the company. When the secretary answers on the basis of information obtained from other servants of the company he is answering according to information. On behalf of the company he is bound to answer according to information and belief acquired or formed from personal knowledge or from information obtained from others who are servants or agents of the company and have acquired the information in that capacity."

21 This view was echoed by Laffoy J. in McCole -v- The Blood Transfusion Service Board and Others( unreported: 11th June, 1996 at p.12) although she was not referred to Clyde Shipping,where she said:

22 "The duty of the first named Defendant is to make reasonable enquiries of present and past employees and agents. Having done so, it can qualify its answer in such a way as to obviate any adverse comment during cross examination at the trial".

23 The interrogatories could not be described as "fishing interrogatories", in the circumstances that the details have been precisely pleaded, the Plaintiff knows precisely where it is going and what facts it will rely on, and seeks admissions of facts so identified (as distinct from evidence, or certainly evidence of how the Defendants intend to conduct their defences).

24 3. Under the rules where a Plaintiff pleads fraud it is entitled without leave of the Court to deliver interrogatories and there is nothing in the authorities (which do not explicitly deal with such a case) to suggest that the Defendants may refuse to answer in the absence of establishing prejudice: in the present case there are no affidavits in response to the grounding affidavit of the Liquidator.

25 4. Having regard to the test set down by the Supreme Court in Bula Limited -v- Tara Mines Limited [1995] 1 ILRM 401 following; per Lynch J. at page 405] he submits that costs will be saved and injustice avoided if these interrogatories are answered in that the Plaintiff will not have to call the Defendants to prove these transactions thereby depriving itself of the opportunity to cross-examine them.

26 In addition to the foregoing, considerable discussion arose concerning the distinction between interrogatories which relate to the facts in dispute on the one hand, and on the other, interrogatories which relate to evidence of the facts in dispute where the authorities allow the former but not the latter: a difficult distinction explicitly acknowledged as such by

27 Costello J. (as he then was) in Mercantile Credit Company of Ireland -v- Heelan [1994] 2 IR 105 at p.112.

28 Mr. Sanfey B.L. submitted on behalf of the first Defendant:

29 1. Whilst the rules entitle a Plaintiff alleging fraud to deliver interrogatories without leave of the Court, there is nothing in the rules to suggest that a different test applies as to whether or not they are permissible. There is no presumption in favour of interrogatories in a fraud case. Order 31 Rule 6 entitles his client in this case, as in any other, to object to answering on the grounds therein set out.

30 2. His clients, as all the Defendants, have sworn in their answers, that they have had no personal involvement in or knowledge of the specific transactions concerned. The dictaof Walsh and Laffoy JJ. in Clyde Shipping

31 and

32 McCole respectively do not apply in the present case because in those cases the...