Sheehan v Talos Capital Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Twomey
• Judgment Date: 20 June 2018
• Neutral Citation: [2018] IEHC 361
• Docket Number: [2016 No. 7062 P]
• Court: High Court
• Date: 20 June 2018

BETWEEN:

JOSEPH SHEEHAN

PLAINTIFF

-AND-

TALOS CAPITAL LIMITED

DEFENDANT

[2018] IEHC 361

[2016 No. 7062 P]

THE HIGH COURT

COMMERCIAL

Settlement agreement – Fraudulent representation – Civil Liability Act 1961 s. 17 – Plaintiff seeking to claim an alleged misrepresentation – Whether there was a misrepresentation by the defendant which induced the plaintiff to enter a settlement agreement

Facts: The plaintiff, Dr Sheehan, alleged that he signed a settlement agreement with the defendant, Talos Capital Ltd, based on a fraudulent representation by Talos, through its solicitors. Dr Sheehan submitted before the High Court that there was a misrepresentation by Talos which induced him to enter the settlement agreement with Talos in the first place. Dr Sheehan also submitted that his payment made under that settlement agreement in relation to the deposit should be reduced by the payment made by Irish Bank Resolution Corporation Ltd under its settlement with JCS Investments Holdings XIV Ltd in relation to the deposit.

Held by Twomey J that there was no misrepresentation by Talos to Dr Sheehan and that this was not a case of concurrent wrongdoers, so s. 17 of the Civil Liability Act 1961 had no application. Accordingly, Twomey J rejected both of Dr Sheehan's claims.

Twomey J held that the application would be refused.

Application refused.

JUDGMENT of Mr. Justice Twomey delivered on the 20th day of June, 2018.

SUMMARY

1 This case involves a claim by the plaintiff, Dr. Joseph Sheehan ('Dr. Sheehan') in which he alleges that he signed a settlement agreement with the defendant, Talos Capital Limited ('Talos') based on a fraudulent representation by Talos, through its solicitors.

2 The settlement agreement between Dr. Sheehan and Talos related to the enforcement of a guarantee by Talos against Dr. Sheehan in respect of a loan by Talos to a company called JCS Investments Holdings XIV Limited ('JCS'). JCS was a special purpose company set up by Dr. Sheehan for the purpose of the purchase of loans by JCS from Irish Bank Resolution Corporation Limited ('IBRC'). The loan which Dr. Sheehan had guaranteed was a loan by Talos to JCS in the sum of €2.4 million and was the deposit for the purchase of those loans and it was duly paid by JCS to IBRC.

3 It was claimed on Dr. Sheehan's behalf (since Dr. Sheehan chose not to give evidence on his own behalf) that, at the time of the settlement agreement between Dr. Sheehan and Talos, Talos's solicitors had misrepresented to Dr. Sheehan's solicitor that JCS had not settled the claim that it had against IBRC for the return of the deposit.

4 Under the terms of the settlement agreement, Dr. Sheehan regained control of JCS from Talos, as up to that point Talos had controlled the shares in that company as security for Talos's loan of the deposit to JCS. After regaining control of JCS, it is claimed that Dr. Sheehan discovered that the claim that JCS had against IBRC for the return of the deposit of €2.4 million had in fact been settled. It is claimed on Dr. Sheehan's behalf that because of that misrepresentation (that JCS's claim against IBRC had not been settled), he entered into the settlement agreement in order to regain control of JCS and pursue that claim against IBRC, only to subsequently discover that the claim against IBRC for the deposit no longer existed as it had been settled several weeks previously by the payment of part of the deposit, a sum of €1.7 million, by IBRC to JCS. Upon receipt of this settlement sum of €1.7 million, JCS paid it to Talos since Talos had originally lent the full deposit of €2.4 million to JCS.

5 Under the terms of the settlement agreement with Talos, Dr. Sheehan discharged his obligations under his guarantee of JCS's obligations to Talos by paying, inter alia, some €2.4 million to Talos, plus interests and costs, in respect of the deposit that had been borrowed by JCS.

6 In addition to the foregoing claim by Dr. Sheehan of an alleged misrepresentation Talos, Dr. Sheehan also claims in these proceedings against Talos that under s. 17 of the Civil Liability Act, 1961, Dr. Sheehan should have benefited from the fact that Talos had received payment of €1.7 million arising from the settlement with IBRC. On this basis it is claimed that the sum of €2.4 million plus costs and interest, received by Talos from Dr. Sheehan pursuant to Dr. Sheehan's guarantee of JCS's obligations, should have been reduced by the sum of €1.7 million. As is noted in detail below, Talos was involved in the negotiations of this €1.7 million settlement between IBRC and JCS. Against this background, the claim under s. 17 depends therefore on whether the settlement of the claim with IBRC, in relation to the deposit, whereby IBRC returned €1.7 million to JCS on the one hand, and the settlement of the claim under the guarantee between Talos and Dr. Sheehan in relation to the deposit on the other hand, whereby Dr. Sheehan paid Talos €2.4 million plus costs and interests, is a case of concurrent wrongdoers such that s. 17 of the 1961 Act applies

7 This case therefore deals with first whether there was a misrepresentation by Talos which induced Dr. Sheehan to enter the settlement agreement with Talos in the first place and secondly whether in any case the payment made by Dr. Sheehan under that settlement agreement in relation to the deposit should be reduced by the payment made by IBRC under its settlement with JCS in relation to the deposit.

8 For the reasons set out in detail below, this Court concludes first that there was not a misrepresentation by Talos to Dr. Sheehan and secondly that this is not a case of concurrent wrongdoers, so s. 17 of the 1961 Act has no application. Accordingly, this Court rejects both of Dr. Sheehan's claims. As noted hereunder, the claim of misrepresentation is made under English law and so is considered in light of the Expert Reports obtained from two experts in English law.

Applicability of Isaac Wunder orders to all litigants

9 This Court was also provided with uncontroverted evidence of Dr. Sheehan's previous litigation in relation to the subject matter of this dispute, which has been described by the English High Court as "outrageous". In this regard, Isaac Wunder orders against parties who pursue vexatious litigation (which require them to seek Court consent before instituting future proceedings) have been applied on several occasions to lay litigants. Lay litigants who do not have financial resources to instruct lawyers and who engage in hopeless or vexatious litigation not only deplete court resources but also leave the winning party significantly out of pocket, since a costs order against such a lay litigant is often of no value.

10 Litigants with sufficient resources to engage in protracted litigation, simply because they can afford to pay the winning party's legal costs, whether in the Commercial Court or otherwise, are not immune from having Isaac Wunder orders made against them on application by an opposing party or by a court's own motion in appropriate circumstances. This is because unnecessary, vexatious and endless litigation depletes scarce public resources and deprives other litigants of timely access to the courts and for this reason, the Courts need to be alive not just to impecunious lay litigants (for whom a costs order is not a deterrent) but also to serial litigants with significant financial resources (who pursue private disputes or private agendas and for whom a costs order is also not a deterrent).

11 The factual background to this case is complex so it is first necessary to set out those facts in detail.

FACTUAL BACKGROUND

12 Talos is a finance company and is a subsidiary of a UK charity, called the Children's Investment Fund Foundation and is managed by TCI Fund Management Limited. Talos and TCI Fund Management Limited are part of the Talos group of companies ('Talos Group').

13 Talos agreed to lend up to €45 million to Dr. Sheehan, Mr. John Flynn ('Mr. Flynn') and Dr. George Duffy ('Dr. Duffy'), or to companies controlled by them, to purchase Dr. Sheehan's and Dr. Duffy's loans (the 'Duffy Loans') held by IBRC and to redeem Mr. Flynn's loan, through his corporate vehicle, with National Asset Loan Management Limited ('NALM').

14 The three loans to Dr. Sheehan, Mr. Flynn and Dr. Duffy (or their corporate vehicles) related to their ownership of shares in Blackrock Hospital Limited ('BHL') and these loans were secured over, inter alia, 56% of the shares in BHL. The purpose behind Dr. Sheehan purchasing and redeeming the three loans was for him and Mr. Flynn and Dr. Duffy to take control of 56% of the shareholding in BHL, which owned Blackrock Hospital in Dublin, and thereby ensure that these three individuals or their corporate vehicles would control the ownership of Blackrock Hospital.

15 It was a condition of Talos lending the €45 million to Dr. Sheehan and Dr. Dufffy, that Dr. Duffy would sign an agreement (the 'Framework Agreement'). Under this Agreement, the rights of the shareholders in BHL would be regulated regarding, inter alia, the payment of dividends. Since these dividends were to be used to pay interest on the loan from Talos, this meant that the execution of the Framework Agreement was a crucial aspect to the transaction since this was how Talos was to be paid interest on its loan of €45 million.

Deposit for Loan Sale Deed lent by Talos to JCS

16 The Facility Agreement for the €45 million borrowings was between Talos and the corporate vehicle being used on behalf of Dr. Sheehan et al, a company called Medfund. This Facility Agreement was signed on the 13th March, 2014 (the 'Facility Agreement'). However after signing this Facility Agreement, Dr. Sheehan and Mr. Flynn advised Talos that Medfund would not be able to fund the deposit of €2.4 million (the 'Deposit') which was required to purchase the loans from IBRC under the proposed loan sale...