Northern Bank v Charlton

JurisdictionIreland
CourtSupreme Court
JudgeO'HIGGINS C.J.,Henchy J.,GRIFFIN J.,Parke J.
Judgment Date01 January 1979
Neutral Citation1978 WJSC-SC 3172
Docket Number[1975 No. 2819; 1976 No. 2991],(204/1977)
Date01 January 1979

1978 WJSC-SC 3172

THE SUPREME COURT

O'Higgins C.J.

Henchy J.

Griffin J.

Parke J.

Butler J.

(204/1977)
NORTHERN BANK FINANCE Ltd. v. CHARLTON
HIGH COURT 26.5.77
NORTHERN BANK FINANCE CORPORATION LIMITED
Plaintiffs

and

GERARD CHARLTON, HUGH CHARLTON and GERARD SHEEHY
Defendants
1

Judgment delivered the 21st day of July 1978by O'HIGGINS C.J.(Butler J. concurring)

The Facts
2

This is an appeal brought by the Plaintiffs, who are a merchant bank, against the Judgment and Order of the President of the High Court, Mr. Justice Finlay, dismissing their claim against the Defendants and allowing to the Defendants the relief which they sought in a counterclaim against the Plaintiffs. The Plaintiffs' claim was for the sum of £38,581.90 with interest thereon which was alleged to be monies due on a loan. The Defendants and the Respondents in this appeal are respectively a solicitor and two businessmen, the first and second-named being brothers. They resisted the Plaintiffs' claim on the grounds that the loan relied on by the Plaintiffs arose out of a larger transaction or series of transactions intowhich they were induced to enter by the fraudulent misrepresentations of the Plaintiffs' servants and agents. They further counterclaimed against the Plaintiffs for damages and other relief because of the alleged fraud. As the amount due on foot of the loan if valid was not in dispute the real question which was tried by the learned President was whether the Defendants' claim in fraud was well-founded or not. In this respect the trial proceeded as if the Defendants were in fact thePlaintiffs.

3

The transactions which gave rise to the Defendants' allegations related to a takeover of the public company of J. G. Mooney and Company Limited. This took place in 1972. The takeover was promoted by the three Defendants together with two others, Patrick Quinn and Vincent Deignan. It was assisted by the Plaintiffs, both by way of a loan and by the Plaintiffs agreeing to act as the promoters' agents in relation to the carrying out of the payments. The Defendants claimed that they were induced to enter into this transaction by a number of fraudulent misrepresentations made by the servants of the Plaintiffs.Theserepresentations, it was alleged, related to the amount and the continued existence, during the currency of the takeover bid, of a cash deposit made by Patrick Quinn as his contribution towards the total contribution in cash to be put forward by the promoters. They further alleged that they were later induced to purchase the shares of Patrick Quinn in the enterprise by the continuance of these fraudulent representations and by a further representation which was also fraudulent, that at that time Patrick Quinn was not indebted to the Plaintiffs.

4

The trial before the learned President occupied sixteen days during which he heard the evidence of each of the Defendants and that of Mr. Tierney, the Plaintiffs' manager, and also two assistant managers, Mr. Tuomey and Mr. Byrne. In addition, the President was referred to a large number of documents which related to the transactions and which were duly proved in evidence. Having considered all this evidence, both oral and documentary, the President came to the conclusion that the Defendants' allegations that the Defendants had been induced byfraudulentmisrepresentations to enter into the transactions in question were well-founded. Accordingly, he dismissed the Plaintiff's claim and granted the Defendants a series of orders and declarations designed to set aside all the acts and transactions they had done and entered into with the Plaintiffs and designed to restore to them in so far as was possible all property or rights transferred by them to the Plaintiffs. In addition, the learned President held that the Defendants were entitled to a sum for damages measured in terms of interest on the sum repayable to them by the Plaintiffs, this interest running from the date upon which each sum was deposited or paid.

5

In this appeal the Plaintiffs call into question each and every finding of disputed fact made by the learned President which led him to make the orders and declarations mentioned. In a long and detailed Notice of Appeal these findings are questioned as being either unjustifiably inferred from the evidence, or as being unsupported by and inconsistent with the evidence or as arising from misdirections in fact and in law. In this Notice ofAppeal it was also alleged that the learned President was wrong in law in permitting evidence to be adduced by the Defendants as to misrepresentations which had not been previously alleged or pleaded and in basing his holding that the Plaintiffs had been guilty of fraudulent misrepresentations on such evidence. The appeal also calls into question, as a separate issue, the various orders and declarations made by the learned President on the basis that even if the allegations of fraud were well-founded these various orders and declarations were not justified and ought not to have been made.

The Findings of Fraud
6

The general background and circumstances under which the five promoters came together are fully set out in the Judgment of the learned President. This Judgment also contains details of the various steps that were taken either by or on behalf of the promoters to pursue with the assistance of the bank the aimed-at takeover of Mooney and Company. I do not propose in this Judgment to repeat all these details. It is, I think, sufficient if I refer to the representations which the learned President found tohave been made and to have been fraudulent. These representations are four in number. The first of these was, on the President's finding, made by the Plaintiffs' manager, Mr. Tierney, in September 1972. The President found that Mr. Tierney, in September 1972, represented to Gerald Charlton, the first-named Defendant, as the spokesman or representative of the three Defendants that, in accordance with the arrangement made between the promoters and the Plaintiffs, Patrick Quinn had duly deposited with the Plaintiffs £200,000. The fact was that Patrick Quinn had deposited only the sum of £150,000, and, on the evidence which the President accepted, the knowledge of this shortfall in Patrick Quinn's contribution would have caused the Defendants not to proceed in a joint enterprise with him. The President found this representation to have been made and to have been fraudulent. The second representation which the President found to have been fraudulent was one of non-disclosure or silence. This related to Mr. Tierney, the Plaintiffs' manager, and Mr. Tuomey, the assistant manager, and concerned a meeting attended by thePlaintiffs' officials and the promoters on the 26th November 1972. At this meeting it was agreed to go after Mooney's shares on the stock exchange market and in particular to try to purchase a block of 10 per cent of these shares in London. This decision involved the promoters' contributions being committed unconditionally to the purchase of such shares and the making of a further deposit by Hugh Charlton of£100,000. At that stage Patrick Quinn's deposit had been reduced by withdrawals to a mere £25,000. The learned President held that in these circumstances the failure of Mr. Tierney and Mr. Tuomey to disclose to the Defendants the true position with regard to Patrick Quinn's cash account constituted a representation, which was false, that the condition of this account was in accordance with the arrangement made between the promoters inter se and the Bank. The next representation related to a meeting held in the office of Mr. Michael Dickson, solicitor. (Mr. Dickson is a member of the firm of solicitors acting for the Plaintiffs). An enquiry was made by the first-named Defendant, who hadcome, both as a promoter and solicitor, to finalise matters with the legal representatives of the Plaintiffs, as to whether all the agreed contributions were in. The President held that having made that enquiry he was informed in a three-way telephone conversation by Mr. Tuomey, the assistant manager of the Plaintiffs, that all the money was in. This representation, the President held was false and fraudulent in that at that stage Patrick Quinn's contribution was represented not by£100,000 cash provided by himself, as the Defendants believed, but by £47,000 worth of Mooney's shares and a £53,000 loan from the Plaintiffs. Finally, the President held that, in relation to the purchase out by the Defendants of Patrick Quinn's shares in the holding company which had affected the takeover of Mooney's, a further fraudulent misrepresentation took place. This purchase out was suggested by the Plaintiffs's manager, Mr. Tierney. Prior to agreeing to this the Defendants enquired, as the President found, whether Patrick Quinn was then indebted to the Plaintiffs to any extent. The President held thatthePlaintiffs' manager thereupon gave an assurance to the Defendants that Mr. Quinn was in no way so indebted. This assurance the President held was false and fraudulent.

7

These then are the representations which the learned President found to have been made by the Plaintiffs' agents and to have been made fraudulently and in such a manner as to induce the Defendants to enter into the original transaction concerned with the promotion of the takeover and later to purchase out the shares of Patrick Quinn in the venture. Other representations which were relied on by the Defendants, the learned President held not to have been proved or established to the degree necessary to sustain an allegation of fraud. In coming to his findings of fraud the learned President chose between the affirmative evidence adduced by the Defendants in support of the allegations they made and the directly contradictory evidence adduced by the Plaintiffs in denial that the representations were made. His findings were clearly based on the view...

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