Stapleton v Doran

• Jurisdiction: Ireland
• Judge: Mr Justice Peter Charleton
• Judgment Date: 28 March 2019
• Neutral Citation: [2019] IESC 19
• Date: 28 March 2019
• Court: Supreme Court
• Docket Number: Supreme Court appeal number: 67/2012 SC [2019] IESC 000 High Court record number: 2009 4304S [2011] IEHC 528

[2019] IESC 19

An Chúirt Uachtarach

The Supreme Court

Charleton J.

Clarke C.J.

Dunne J.

Charleton J.

Supreme Court appeal number: 67/2012 SC

[2019] IESC 000

High Court record number: 2009 4304S

[2011] IEHC 528

Between

Damien Stapleton

Plaintiff/Respondent

- and -

Philip Doran

Defendant/Appellant

Loan – Contract – Summary judgment – Plaintiff seeking to appeal against High Court judgment – Whether an error essential to the proper construction of the facts had been demonstrated on appeal

Facts: At issue on appeal to the Supreme Court was whether the High Court was correct to decide that the plaintiff, Mr Stapleton, lent €300,000 to the defendant, Mr Doran, personally in July 2008. The defendant’s case was that the transfer of money, which undoubtedly took place, was part of a larger transaction whereby the plaintiff was investing in shares in Easiwrap Ltd, a company of which the defendant was the main shareholder and effective managing director. What was involved was an oral contract. Hence, there was no documentation, apart from subsequent recording of events, to support either contention. In all, the plaintiff furnished to the defendant the €300,000 in issue shortly after a meeting in the plaintiff’s home on 21 July 2008 and a further €434,000 was furnished as an investment in Easiwrap on various dates from January 2009 up to July of that year.

Hogan J, the trial judge, held by written judgment dated 20 December 2011 that this former sum was furnished as a personal loan. The latter sum, he also held, was furnished so that the plaintiff could assume a major role in Easiwrap whereby he became a shadow director. Easiwrap had since been liquidated. Thus the €434,000 paid by the plaintiff to that company was not recoverable. The purpose of the action, commenced by summary summons on 8 October 2009, was to recover the €300,000 from the defendant.

Held by Charleton J that a different view was possible to that arrived at by the trial judge in relation to the issue of whether the loan in July 2008 was to the defendant or the company, or to the company as part of an overall transaction with the object of the plaintiff gaining substantial control over it. Charleton J held that as a result of the trial judge’s interpretation of the law, he constrained his analysis in such a way that relevant events were not taken into consideration as an aid to finding out what the contract actually was.

Charleton J held that, as an error essential to the proper construction of the facts had been demonstrated on appeal, the order of the High Court of 1 February 2012 would be set aside and the matter remitted for rehearing.

Appeal allowed.

Judgment of Mr Justice Peter Charleton delivered Thursday 28th of March 2019

1 At issue on this appeal is whether the High Court was correct to decide that the plaintiff Damien Stapleton lent €300,000 to the defendant Philip Doran personally in July 2008. The defendant's case is that the transfer of money, which undoubtedly took place, was part of a larger transaction whereby the plaintiff was investing in shares in Easiwrap Limited, a company of which the defendant was the main shareholder and effective managing director. What was involved was an oral contract. Hence, there is no documentation, apart from subsequent recording of events, to support either contention. In all, the plaintiff furnished to the defendant the €300,000 in issue shortly after a meeting in the plaintiff's home on 21 July 2008 and a further €434,000 was furnished as an investment in Easiwrap on various dates from January 2009 up to July of that year. Hogan J, the trial judge, held by written judgment dated 20 December 2011, that this former sum was furnished as a personal loan. The latter sum, he also held, was furnished so that the plaintiff could assume a major role in Easiwrap whereby he became a shadow director, as defined by s 27(1) of the Companies Act 1990 as being:

a person in accordance with whose directions or instructions the directors of a company are accustomed to act (in this Act referred to as “a shadow director') shall be treated for the purposes of this Part as a director of the company unless the directors are accustomed so to act by reason only that they do so on advice given by him in a professional capacity.

2 Easiwrap has since been liquidated. Thus the €434,000 paid by the plaintiff to that company is not now recoverable. The purpose of the action, commenced by summary summons on 8 October 2009, was to recover the €300,000 from the defendant. Points of claim and points of defence were exchanged and the case proceeded to an oral hearing. Since the trial judge had the opportunity of hearing and seeing the witnesses, his decision on issues is final where there was any evidence in reasonable measure to support such findings, and his decision as to any inferences to be drawn from primary facts must be respected; Hay v O'Grady [1992] 1 IR 210 at page 217. Unless, therefore, the trial judge approached the evidence on a basis that meant that he probably did not construe the relevant testimony in accordance with law, his judgment must stand.

The judgment of the High Court

3 At the outset of his judgment, the trial judge sets out the principles applicable to the construction of a contract. In so doing, the principles to which he refers are those applicable to the construction of a contract which is in writing. In that respect, the trial judge was clearly correct. A written contract assumes form after some sort of negotiation or bargain. It is the expression of the intention of the parties as put into language for the benefit of those bound by the agreement. Hence, that expression of mutual obligations and burdens is not to be construed in accordance with their subjective views as to what the language means, much less by reference to what one or other did in purported performance of the contract, but rather by the plain meaning of words in the context of the agreement as a whole set against the factual background. The point of reducing a series of obligations to writing in a written contract is so that it will itself speak as to the agreement of the parties. Hence, the trial judge correctly approached the construction of a written contract in his judgment:

3. In a matter of this kind, the general surrounding circumstances and the relevant factual matrix of the dispute is critical. The task of the court, after all, is to determine the intentions of the parties to the contract at the time insofar as they can be objectively ascertained. As Keane J. said in Kramer v. Arnold [1997] 3 I.R. 43, 55:

‘…where the parties are in disagreement as to what a particular provision of a contract means, the task of the court is to decide what the intention of the parties was, having regard to the language used in the contract itself and the surrounding circumstances.’

4. In the case of a purely verbal contract, the examination of the surrounding circumstances assumes a particular importance. This is especially true where (as we shall see) the two parties to the verbal agreement disagree fundamentally concerning key terms of that oral contract. Of course, the general approach of the court is to confine the ascertainment of this general factual matrix to the circumstances in existence and known to the parties at the time of the entry into the contract, since as Finlay C.J. observed in Re Wogan's (Drogheda) Ltd. [1993] 1 I.R. 157, 170, ‘the mischief created by a departure from [this principle] would be in many instances considerable.’ In that case the Supreme Court refused to have regard to post-execution events for the purposes of construing whether a charge in a debenture deed was a fixed or a floating charge.

5. These sentiments were echoed by Keane J. in Bula Ltd. v. Tara Mines Ltd. [1999] IESC 17. Here the argument was that (an admittedly detailed) contract should be capable of a different construction depending on the passage of subsequent events. This was squarely rejected by the Supreme Court:-

‘….in the light of what were said to be the wholly different circumstances in which the plaintiffs found themselves at a later stage when the planning permission for an open cast mine was refused, it was reasonable to give the clause a different construction. It need hardly be said that such an approach would be wholly contrary to elementary principles of our law of contract: the meaning of any agreement is to be determined by ascertaining the intentions of the parties as expressed in the agreement (subject to such extrinsic evidence as may be admissible) at the time they entered into the agreement and not otherwise.’

6. My task, therefore, in the light of these two Supreme Court decisions is to ascertain in the first instance the relevant factual circumstances at the time of the making of the verbal contract in July 2008.

Construing a disputed oral contract

4 This, however, was not a case where there was a written contract waiting to be construed. It was keenly contested as between the plaintiff and the defendant both as to the circumstances in which the sum of €300,000 was paid over, whether to the defendant as a personal loan or, instead, to the defendant on behalf of a shareholding in the company, meaning a purchase of shares and thus an investment in the company. Within that context, it is appropriate, with a view to understanding what was agreed, to consider the conduct of the parties leading up to the contract and how they behaved afterwards from the point of view of apparently performing their obligations. Apart from a written contract, there may also be circumstances where, by action and words, it is both clear and uncontested as to what bargain the parties arrived at. For instance, if there is no dispute that at a meeting on a particular day, a bargain was struck whereby one party agreed to sell and the other to buy a particular horse for a...