Moorview Developement Limited & ors v First Active Plc & ors, [2018] IESC 33 (2018)

Docket Number:213/11
 
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THE SUPREME COURT

[Appeal No. 213/2011]

[High Court Record No. 2003/9018 P]

McKechnie J.

MacMenamin J.

Dunne J.

Between /

MOORVIEW DEVELOPMENTS LIMITED, SALTHILL PROPERTIES LIMITED, VALEBROOK DEVELOPMENTS LIMITED, SPRINGSIDE PROPERTIES LIMITED, DRAKE S.C. LIMITED, MALLDRO S.C. LIMITED, THE POPPINTREE MALL LIMITED and BLONDON PROPERTIES LIMITEDPlaintiffs/Notice Parties -and-

FIRST ACTIVE PLC, RAY JACKSON and, by order, BERNARD DUFFYDefendants/Respondents

AND RELATED PROCEEDINGS

JUDGMENT of Mr. Justice William M. McKechnie delivered on the 27th day of July, 2018

Introduction

  1. This is an appeal by Mr Brian Cunningham (“the appellant”), who is not a party to the proceedings, against an order of the High Court (Clarke J., as he then was) made and perfected in April, 2011, making Mr Cunningham liable for the costs incurred by First Active in defending the action brought by the plaintiff companies, on the grounds that Mr Cunningham funded the litigation. The background to this appeal is lengthy and complicated, involving numerous linked proceedings. In short Mr. Cunningham was made personally liable for costs which arose both in this case (referred to elsewhere as “Case A”) and also a series of other connected cases (Cases C, E and H). The judgment of the High Court explaining the reasons for the making of said non-party costs order was delivered on the 16th March, 2011 ([2011] I.E.H.C. 117; [2011] 3 I.R. 615). The appellant denies that he was the funder, denies that the Court had jurisdiction to make such order, and submits that, even if it did have such jurisdiction, it was exercised wrongly in this case.

  2. The judgment under appeal was a significant one. It is described as “a landmark development in the law on costs” in the Annual Review of Irish Law (2011, 25(1), p. 521) and as a “groundbreaking judgment” in Delaney and McGrath, Civil Procedure in the Superior Courts (3rd Ed., Round Hall, Dublin, 2012 at para. 23-124). The judgment was one of the first in this jurisdiction in which an order for costs was made against a non-party, and certainly the first in which a director/shareholder of an insolvent company was made liable for costs incurred in defending proceedings brought by the said company. It has subsequently been followed and applied by the High Court in a number of cases, including Used Car Importers of Ireland Limited v. Minister for Finance & Ors. [2014] I.E.H.C. 256 (Gilligan J.), Nugent Personal Insolvency (Costs) [2016] I.E.H.C. 309 (Baker J.) and W.L. Construction Limited v. Chawke and Bohan [2017] I.E.H.C. 319 (Noonan J.), albeit in the first and final cases mentioned it seems to have been accepted by the parties that the Court had jurisdiction to join a non-party for the purposes of making a costs order against them. Mr Cunningham, however, disputes that this is so, and maintains on this appeal that Clarke J. erred in concluding that he had jurisdiction to make the order sought.

  3. Thus two major issues arise for the consideration of this Court. The first is whether there exists a jurisdiction to make costs orders against a non-party. If so, the Court must then consider the second question, which concerns the factors which are relevant to the exercise of that jurisdiction both generally and on the facts of this case in particular. This judgment also addresses a number of subsidiary issues raised by the appellant.

    Related Appeal

  4. It should be noted at the outset that this appeal was heard together with the related appeal in First Active v. Brian Cunningham, High Court Record No. 2005/272 S. Three issues were raised in that appeal. The first concerned the transfer of the business of First Active plc to Ulster Bank Ireland Limited, and the effect of that transfer on the proceedings. Mr Cunningham has also raised an issue concerning that transfer in this case (see paras. 134-135, infra), although that point can be disposed of for the reasons contained in the judgment of this Court in that related appeal, delivered on the 22nd February, 2018 ([2018] I.E.S.C. 11). The other two issues addressed in that judgment are not relevant to this appeal: one arose out of the awarding of Courts Act interest by the trial judge and the other concerned the principle of res judicata in the context of a non-suit/direction. However, this judgment should be read together with the judgment in the related appeal, which provides further context to the issues herein discussed.

    Background

  5. The factual backdrop and procedural history of this case are long and complex. Full details of same can be obtained by reference to the various other judgments which have been delivered by the High Court and by this Court in these proceedings, many of which are referred to over the course of this judgment. Most of the matters raised for consideration in the main and linked proceedings do not fall to be considered here. Nonetheless, some background information is necessary in order to explain how it is that the High Court came to make a non-party costs order against Mr Cunningham. In setting out this background, I will endeavour to distil it down to its essential elements in order to contextualise the legal issues which arise.

  6. These proceedings were brought by Brian Cunningham and companies of which he is a director and/or shareholder (“the Cunningham Group” or just “the companies”) against a number of parties, including (i) First Active plc (“the respondent”) (now known as Ulster Bank Ireland Limited; see paras. 134-135, infra); (ii) Ray Jackson, a receiver appointed by the respondent to various Cunningham Group companies; and (iii) Bernard Duffy, who purchased certain property formerly owned by the Cunningham Group from the respondent as mortgagee in possession. It is common case that the Cunningham Group companies are grossly insolvent.

  7. The Cunningham Group and the respondent had a banking relationship in the course of which the respondent advanced money to the companies, principally for the acquisition and development of certain properties. Over time this relationship deteriorated, resulting in the appointment by the respondent of Mr Jackson as receiver to certain of the companies in April, 2003.

  8. The plaintiff companies alleged that the respondent and others had committed a fraud against them. Various proceedings were instituted between 2003 and 2007 in which the companies sought damages from different defendants; ultimately, all such proceedings were unsuccessful. It is beyond this judgment to address the multiplicity of claims made. It will suffice to say that the main issue related to the sale of the Finglas Shopping Centre in Dublin and the financing of a property development at Bailey Point, County Galway. The case made by the plaintiff companies was that after representing that it would fund the project at Bailey Point, First Active refused to do so, thereby preventing the completion of the development, preventing the site from opening and thus causing the companies huge losses. In essence, it was alleged that the respondent had perpetrated a fraud against the companies, in that there was never any intention to continue to support the companies at the time when representations were made that such support would be forthcoming. It was alleged that these actions of the respondent destroyed the financial well-being of the companies.

  9. Following a lengthy procedural history, the main proceedings were ultimately at trial before Clarke J. in the High Court for 66 days. At the end of the plaintiffs’ evidence, the defendants applied for a non-suit/direction in respect of all claims. On the 15th December, 2008, Clarke J. indicated that he would accede to the application, with his reasons therefor being contained in a comprehensive written judgment delivered on the 6th March, 2009 ([2009] I.E.H.C. 214). Various ancillary claims were rejected in subsequent judgments delivered by Clarke J. on the 17th July, 2009, the 31st July, 2009, the 5th February, 2010 and the 9th July, 2010. The respondent further obtained judgment against certain of the plaintiff companies on a counter-claim, and also obtained judgment against Mr Cunningham personally on foot of a capped guarantee (in respect of which see the judgment of this Court in First Active v. Brian Cunningham [2018] I.E.S.C. 11).

    Application for an order directing that Mr Cunningham be made personally liable for the costs orders made against the corporate plaintiffs

  10. The trial of the main action began on the 28th April, 2008. Previously, on the 11th February, 2008, the respondent had written to the plaintiff companies and suggested that it would seek to make any identified third party funding the litigation liable for the costs of same, should it be successful at trial. The respondent followed through on this when, some months after the delivery final judgment in July, 2010, it issued a notice of motion dated the 18th October, 2010, seeking orders making Mr Cunningham liable for the costs of the proceedings. The Court heard oral argument on the 1st March, 2011, and reserved judgment.

    The judgment under appeal

  11. The judgment of the Court was delivered by Clarke J. on the 16th March, 2011. It is reported at [2011] 3 I.R. 615. Where appropriate, the critical portions of the judgment of the High Court are set out in the “Decision” section of this judgment, below. What follows here is but a short overview of the judgment in order to explain the essence of the learned judge’s reasoning.

  12. For contextual purposes, it is worth noting that there were two applications before the Court. The first concerned the motion brought by First Active seeking to have Mr Cunningham made personally liable to pay costs awarded in favour of First Active in certain of the linked proceedings concerning the Cunningham Group; the second issue, which is of no continuing relevance on this appeal, related to First Active’s application to have Mr Cunningham cross-examined in aid of execution (together with...

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