Slattery v Friends First

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Ryan P.,Irvine J.
• Judgment Date: 10 July 2015
• Neutral Citation: [2015] IECA 149
• Docket Number: [2013/337],[C.A. Nos. 924 & 933 of 2014]
• Date: 10 July 2015

Between

Dómhnal Slattery

Appellant

and

Friends First

Respondent

[2015] IECA 149

[2013/337]

THE COURT OF APPEAL

Appeal – Confidentiality – Deed – Clause – Declarations – Counterclaim – Damages – Practice and Procedures – Protected Sources – Third Parties – Defamatory Comments

Facts: In this case, the appellant appealed against the judgment and orders of the High Court dismissing his primary claim for declarations upholding the effect of a clause in a Deed executed by him and Friends First, the respondent, on 20th July 2009. Secondly, the respondent appealed against the award of €100,000 that the High Court made in favour of Mr. Slattery in respect of breach of confidentiality.

Held by Justice Ryan in light of the available evidence and submissions presented that for the appellant to be entitled to retain his award, it had to be the case that Friends First was prohibited from revealing to third parties that he had misled them into executing a deed containing a vital provision to which they had not agreed. The Court could not see how such information could amount to protected confidential material so as to give rise to a claim for damages even if it was true. Irrespective of motive, if what was said was untrue, it was clearly defamatory and Mr. Slattery was entitled to claim for damages. In this case it was reasoned that, the appellant did not have an account with Friends First and neither did the company, Claret Capital. The information that Mr. Van den Heuval revealed was not derived from any account, and it did not concern the state of the company”s relationship with its bank. It concerned Mr Slattery”s conduct. The information that Mr Van den Heuval revealed did not emanate from a protected source in the records held by Friends First about the company or Mr. Slattery. In all the circumstances, while the Court understood how the trial judge came to be critical of Mr. Van den Heuval”s behaviour and disbelieved his account, it could not agree that it gave rise to a claim in damages for breach of confidentiality. The Court found is unnecessary to reach a conclusion as to whether it was possible to have an award for aggravated damages where the plaintiff had failed to prove a loss that would justify compensatory damages. The Court accordingly allowed Friends First”s appeal against the award of damages on the counterclaim.

JUDGMENT of the Court delivered by the President on 10th July 2015

Introduction

1 This matter comes before the Court, firstly, by way of an appeal by Mr. Slattery, the appellant, against the judgment and orders of the High Court dismissing his primary claim for declarations upholding the effect of a clause in a Deed executed by him and Friends First, the respondent, on 20th July 2009. Secondly, the respondent appeals against the award of €100,000 that the High Court made in favour of Mr. Slattery in respect of breach of confidentiality.

2 At all material times, Mr. Slattery was a director and shareholder of an investment company named Claret Capital. The parties' dispute had its origins in a loan of $14.05m made by Friends First to a Claret Capital company that was part of a consortium acquiring the St. Regis Hotel in Washington D.C. A sister company was involved also and Claret Capital became the General Partner or asset manager. The hotel was operated by a management company under the St. Regis brand.

3 Mr. Slattery and fellow directors of Claret Capital signed joint and several Guarantees in respect of the loan of $14.05m. The Deed of Guarantee is dated 18th March 2008. There was an ongoing issue that surfaced subsequently from time to time whereby Mr. Slattery and his fellow guarantors protested that they had not known they were making such a commitment and had only signed the back page of the Guarantee document. However, Friends First rejected those allegations and insisted on the validity of the Guarantee. The issue ultimately evaporated and Mr. Slattery accepted in the High Court that he was bound by the Guarantee until the execution of another Deed on 20th July 2009.

4 As the trial judge found and is not disputed, there were difficulties with the investment. It had been intended that the money advanced was bridging finance which was to be replaced by the introduction of new investors but matters did not proceed as has been anticipated. The defendant was concerned about the performance of the loan. Friends First sought additional collateral for the loan in the form of the interest in the hotel that was acquired by the money that had been lent and it also sought security of shares in an aircraft leasing company named JetBird in which Mr. Slattery had a significant shareholding.

5 By a Deed of Pledge that was executed on 20th July 2009, the plaintiff charged shares in JetBird in favour of the defendant. One provision in the Deed of Pledge — Clause 2.2 — expressly limited the plaintiff's liability under that agreement and also under the Guarantee of the 18th March 2008 to the value of the shares in JetBird that were charged in favour of the defendant, thereby — if effective — liberating Mr. Slattery from any further burden from the Claret Capital loan. The circumstances in which that clause came to be inserted in the Deed of Pledge are the essence of the dispute in this case.

6 In these proceedings, the plaintiff, Mr. Slattery, sought declarations affirming the validity of the clause and its effect of restricting his obligations to the JetBird shares, in addition to claiming damages for breach of confidentiality because of things that were said about him by a senior manager of the defendant's parent company. The defendant, Friends First, in its counterclaim, sought rectification of the Deed of Pledge to remove the disputed clause, claiming that it was inserted into the draft Deed without its knowledge and that it had executed the Instrument by mistake in circumstances that warranted and even demanded equitable intervention in the interests of justice. Friends First denied the plaintiff's entitlement to damages for breach of confidentiality.

7 The defendant claimed that the plaintiff misrepresented the contents of the Deed of Pledge, that it had executed it under a mistake, that the mistake made by the defendant was at all material times known to the plaintiff and that the conduct of the plaintiff and his servants or agents was such that it would be unconscionable for the plaintiff to rely upon the defendant's unilateral mistake and/or where the plaintiff was estopped from denying the agreement in the form mistakenly believed to exist by the defendant.

8 In a judgment delivered on 15th March 2013 in the High Court, McGovern J. upheld the defendant's counterclaim and ordered rectification of the Pledge Agreement by removal of the offending clause. The plaintiff did, however, succeed on his claim for damages; the judge awarded €100,000 for breach of confidentiality. Each of the parties appealed to the Supreme Court against the decision that was unfavourable. The appeals were referred to this Court by direction of the Supreme Court under Article 64 of the Constitution.

9 In his judgment the trial judge set out the following issues:

(i) Are the terms of clause 2.2 of the Deed of Pledge clear on their terms? If so, what is the effect of the document on its face?

(ii) Was the Deed of Pledge executed in circumstances of mutual mistake or unilateral mistake? If so, is the defendant entitled to rectification or rescission?

(iii) If there was no mutual or unilateral mistake, is the defendant bound by the terms of the Deed of Pledge and is the plaintiff entitled to the declarations which he seeks?

(iv) Did the defendant owe to the plaintiff a duty of confidentiality? Was the defendant in breach of that duty or in breach of contract?

(v) If the defendant was in breach of a duty of confidence or in breach of contract, did any loss flow from this such that would entitle the plaintiff to damages?

The plaintiff's appeal concerns the judge's findings on the first three issues.

10 Clause 2.2 of the Deed of Pledge reads as follows:

‘2.2 The liability of the Pledgor to the Pledgee under this Deed and the Guarantee shall be:

2.2.1 limited in aggregate to an amount equal to that recovered by the Pledgee as a result of the enforcement of this Deed with respect to the Charged Assets; and

2.2.2 satisfied only from the proceeds of sale or other disposal or realisation of the Charged Assets pursuant to this Deed; and

2.2.3 the Pledgee shall not have any recourse under this Deed or the Guarantee to any assets of the Pledgor other than the Security Assets.’

11 The judge held that the terms of clause 2.2 of the Deed of Pledge were clear but their effect was less obvious when considered beside Clause 4 of the Guarantee whose provisions it purported to affect radically. The former provision was obviously in sharp conflict with the latter, which said that it was ‘… in addition to and independent of every other Guarantee or security which Friends First may any time hold in respect of all or any of the Guaranteed Obligations’. The judge also found further conflict between the Pledge and the guarantee and noted another difficulty. If Mr. Slattery were to be liberated from any liability under the guarantee by this deed affecting him personally in his relations with Friends First, that would have implications for his fellow guarantors under the 18 March 2008 guarantee, who were now destined to become his former fellow guarantors. In the event, these complications did not arise but they remain relevant to the interpretation of the disputed clause. It is also of interest to look at the clause in relation to the deed as a whole, a matter which is addressed later.

12 The judge analysed the sequence of events that culminated in the executed Deed containing Clause 2.2. The dramatis personae on the Claret...