Scully v Coucal Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Donnelly
• Judgment Date: 30 April 2024
• Neutral Citation: [2024] IECA 104
• Court: Court of Appeal (Ireland)
• Docket Number: Record No.: 2022/275

In the Matter of Regulation 1215/2012 and Order 42A of the Rules of the Superior Courts and S.I. No. 9/2016

Between/

Michael Scully

Appellant

and

Coucal Ltd.

Respondent

[2024] IECA 104

Donnelly J.

Ní Raifeartaigh J.

Binchy J.

Record No.: 2022/275

THE COURT OF APPEAL

UNAPPROVED

JUDGMENT ofMs. Justice Donnellydelivered on this 30 ^th day of April, 2024.

Introduction

1 . This judgment considers the public policy exemption which permits a court to refuse to recognise a judgment handed down in another EU Member State. The recognition and enforcement of judgments, provided for in Regulation (EU) 1215/2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial matters (recast) (“Brussels I (Recast)” or “the Regulation”), is founded in the EU principle of mutual trust in the administration of justice. Article 36 of Brussels I (Recast) provides for a presumption of recognition between courts of EU Member States, and public policy is one of the limited circumstances upon which refusal of recognition and/or enforcement is permitted under the Regulation (see Article 45).

2 . One of the key issues in the case is precisely when Irish law considers the assignment of a cause of action to be invalid because it savours of champerty and when it does not. More particularly, the judgment examines the relative importance during that analysis of (i) the fact that the assignee is entitled pursuant to the express terms of the assignment to carry out a further assignment to an unconnected third party; and (ii) the degree of connection between the assignor and assignee at the time of the assignment. The discussion includes an analysis of the judgments in SPV Osus Ltd v HSBC Institutional Trust Services (Ireland) Ltd[2019] 1 IR 1 (“ SPV Osus”) and the recent judgments in McCool v. Honeywell Control Systems Ltd[2024] IESC 5 (“ McCool v Honeywell Control Systems”).

Background

3 . Mr. Scully, (“the appellant” or “Mr. Scully” as appropriate), claims that recognition of a judgment (“the Polish judgment”) and order awarded against him in Poland, and the subsequent order permitting enforcement of that judgment, must be refused under Article 45(1)(a) of Brussels I (Recast). That Article provides that “the recognition of a judgment shall be refused: (a) if such recognition is manifestly contrary to public policy (ordre public) in the Member State addressed”.

4 . The appellant submits that the judgment issued against him violates public policy of this jurisdiction in two ways; first, that the judgment was issued by a court in Poland improperly constituted contrary to the principle of judicial independence and second, that the transfers of rights to take the action against the appellant to the respondent company was the transfer of a bare cause of action and was impermissible in Irish law because of the prohibition on maintenance or champerty. Relying on the decision of the Supreme Court in SPV Osus, the appellant argued that the proceedings from which the judgment in question arose savoured of champerty.

5 . The appellant's request for orders seeking refusal of the recognition of the orders of the Court of Appeal in Warsaw was rejected by the High Court in an ex tempore judgment of 11 November 2022.

6 . The respondent in these proceedings, Coucal Ltd, (“Coucal” or “the respondent” as appropriate) is a limited company registered in this jurisdiction whose shareholders consist of 63 Irish-based individuals who were among 78 investors who invested in 2006 in a construction project carried out by Castle Carbery Properties Ltd, a company owned by Mr. Scully and one Mr. Coll. The construction project consisted of the purchase of land and the construction of a shopping centre in Opole, Poland. On behalf of Coucal, Ms. Doreen Ryan, an investor in the relevant scheme and a director and shareholder of Coucal, has sworn an affidavit in which she describes the arrangement as follows:

“The Irish Investors invested considerable sums, which took the form of share capital in a Polish special purpose vehicle Coucal SP Zoo (hereinafter “the SPV”), which was to undertake the construction project. The 78 investors acquired 99.84% of the share capital in the SPV, while the remaining 0.16% was held between Michael Scully and Padraic Coll equally. In order to build the shopping centre, the SPV borrowed approximately €48m. The shopping centre was expected to be completed in Q1 2009.”

7 . In 2010, it is alleged, the investors expected a return on their investment. It is said they were under the impression that the shopping centre was completed and opened in March 2009 and had been running successfully and at a profit since then. The investors allege that they were defrauded by Mr. Scully when he induced them to divest themselves of their investments in the shopping centre, on terms which were very unfavourable to them and very favourable to Mr. Scully. As part of the new arrangement, the investors granted powers of attorney to Mr. Scully in March 2011. Following this, it is alleged on behalf of Coucal that: “In breach of the powers of attorney and his fiduciary duties to the investors, Michael Scully proceeded to enter into transactions which were heavily unfavourable to the investors. The investors were not informed of, and did not have any knowledge of, most of the transactions that Michael Scully was executing on their behalf”. The transactions entered into by Mr. Scully had “devastating consequences for the investors”. The investors say they have never received any proceeds of the investments, including from the sale of the shopping centre in March 2015.

8 . In May 2015, the shareholders of Coucal made individual assignment agreements with the company in order to assign rights of future debt due to the shareholders from Mr Scully. A supplemental assignment was made in order “to widen the nature of the assigned rights to Coucal, so as to ensure that it was fully capable of pursuing the claims against [Mr. Scully, Helen Scully] and Mr Coll across Europe”. Ms. Ryan on behalf of Coucal states that she represents those investors “who assigned their claims (described as future debts) to Coucal to enable it to take action on their behalf against Michael Scully in Poland in 2015”. For completeness, she refers to a further supplemental assignment through which 57 investors assigned to Coucal, inter alia, their interest, causes of action, claims and actionable rights in relation to their investments in this investment project as well as for the wrongdoing committed against them by Michael Scully and other wrongdoers in the context of this investment project. Another claim against Mr. Scully was taken by Coucal in Cyprus but this appeal concerns only the Polish judgment.

9 . The operative section of the assignment agreement between each investor and Coucal provides that the assignment is for a future debt due from Mr. Scully provided the Court rules that the Shares Purchase Agreement is null and void. That assignment agreement also provides for the assignment of all rights relating to the future debt and described it as a conditional claim provided that the court rules that the Shares Purchase Agreement is null and void. There is a right for onward transmission of the transferred claim which is expressed in the following way: “The Assignor states that …the right to sell the Debt to the third party has not been excluded”.

10 . In August 2015, Coucal exercised its assigned powers by instigating civil proceedings in the Regional Court of Warsaw against Mr. Scully “seeking a declaration of nullity of the agreements that he entered on their behalf using powers of attorneys granted to [Mr. Scully], and the return of the purchase price, on the grounds, inter alia, that Mr Scully, his servants or agents were not authorized to sign such agreements pursuant to the powers of attorney”. Coucal was initially unsuccessful but filed an appeal in October 2018.

11 . In June 2021, the Warsaw Court of Appeal found that Mr. Scully had wrongfully and without authority purported to enter into agreements on behalf of Coucal's shareholders and awarded judgment against Mr. Scully to “the sum of PLN 28,391,106, as well as statutory interest and the costs of the entire proceedings”. This sum equates to approximately €6.331 million.

12 . On 7 July 2021, the Court of Appeal in Poland permitted Coucal to commence enforcement proceedings in Ireland in respect of the judgment. By letter dated 28 July 2021, Coucal served Mr. Scully with a copy of the Polish judgment and a certificate from the Court of Appeal in Warsaw pursuant to Article 53 of Brussels I (Recast). The letter laid out Coucal's intention to commence enforcement proceedings in Ireland against his assets in this jurisdiction, including his farm in Co. Cork, pursuant to Chapter III of the Brussels I (Recast).

13 . In response, Mr. Scully filed an originating notice of motion on 30 July 2021 initiating proceedings in the Irish High Court (Record No. 2021/8FJ) seeking refusal of recognition and enforcement of the Polish judgment pursuant to Article 45 of Brussels I Recast. On 6 December 2021, Coucal issued proceedings (Record No. 2021/340MCA) seeking discovery and cross-examination in aid of execution against Mr. Scully.

14 . Subsequently, on 11 May 2022, the Polish Court of Appeal delivered written reasons for its judgment of 10 June 2021. On 11 July 2022, Mr. Scully sought leave to appeal to the Supreme Court of Poland, which was granted in March 2023. The respondent submitted that the appeal in Poland has no bearing on this appeal where no stay has been granted on the Polish judgment delivered in favour of Coucal. This Court has been informed that in February 2024 the Polish Supreme Court has made an Article 267 reference to the CJEU relating to issues concerning judicial independence and impartiality; one of...