Taylor v Smyth

• Jurisdiction: Ireland
• Judge: McCarthy, J.
• Judgment Date: 01 January 1991
• Neutral Citation: 1990 WJSC-SC 1317
• Court: Supreme Court
• Docket Number: [1981 No. 4617P and S.C. Nos. 172/173/174 of 1989]
• Date: 01 January 1991

1990 WJSC-SC 1317

THE SUPREME COURT

Finlay, C.J.

Hederman, J.

McCarthy, J.

(172/173/174-89)

TAYLOR v. SMYTH

SIDNEY TAYLOR

PLAINTIFF/RESPONDENT

AND

PHILIP SMYTH KAPE INVESTMENTS LIMITED CALLA ASSOCIATES LIMITED AND NORTHERN BANK LIMITED

Citations:

TAYLOR V SMYTH 1990 ILRM 377

SALOMON V SALOMON & CO 1897 AC 22

R V MCDONNELL 1956 1 QB 233

BELMONT FINANCE CORPORATION LTD V WILLIAMS FURNITURE LTD & ORS 1979 1 AER 118

CROFTER HANDWOVEN HARRIS TWEED CO LTD V VEITCH 1942 AC 435

CHURCHILL V WALTON 1961 2 AC 224

ORAM V HUTT 1914 1 CH 98

LENNARDS CARRYING CO V ASIATIC PETROLEUM CO LTD 1915 AC 705

SMYTH & ANOR V TAYLOR UNREP SUPREME 25.1.1984

DILLON V DUNNES STORES (GEORGES ST) LTD UNREP SUPREME 20.12 1968

MCGOWAN V MURPHY UNREP SUPREME 10.4.1967

LONRHO LTD V SHELL PETROLEUM CO LTD 1982 AC 173

LONRHO PLC V FAYED 1989 2 AER 65

METTALL UND RHOSTOFF V DONALDSON INC 1989 3 WLR 563

EEKELAAR, JOHN "THE CONSPIRACY TANGLE" 106 LQR 223

CONNOLLY V LOUGHNEY 87 ILTR 49

MESKELL V CIE 1973 IR 121

MCMAHON & BINCHY IRISH LAW OF TORTS 2ED 444–446, 574

TRU VALUE V SWITZER & ORS UNREP HIGH 10.3.1972

ROOKES V BARNARD 1964 1 AER 367

CENTRAL CANADA POTASH CO LTD V GOVERNMENT OF SASKATCHEWAN 88 DLR 609

COOPER V MILLEA 1938 IR 749

RIORDAN V BUTLER 1940 IR 347

WARD V LEWIS & ORS 1955 1 AER 55

O'MAHONY V GAFFNEY 1986 IR 36

GREEN V ROZEN & ORS 1955 2 AER 797

LONRHO LTD V SHELL PERTOLEUM CO 1981 2 AER 465

COMPANIES ACT 1948 (UK)

MERCHANT SHIPPING ACT 1894 S502

EMMET ON TITLE 19ED

WILLIAMS VENDOR AND PURCHASER 3ED V2

CLERK AND LINDSELL LAW OF TORTS 16ED

WINFIELD LAW OF TORTS 10ED

Synopsis:

ACTION

Compromise

Terms - Breach - Action - Cause - Company - Shareholder - Distinct ~personae~ - Conspiracy between controlling shareholder and company - Damages awarded against both persons - (172-4/89 - Supreme Court - 5/7/90) - [1991] 1 I.R. 142 - [1990] DULJ 166

|Taylor v. Smyth|

COMPANY

Incorporation

Effect - Person - Creation - Shareholder - Complete control of company - Distinct person - Unlawful conspiracy - Damages awarded against company and shareholder - (172-4/89 - Supreme Court - 5/7/90) - [1991] 1 I.R. 142 - [1990] DULJ 166

|Taylor v. Smyth|

CONSPIRACY

Tort

Proof - Essentials - Company - Shareholder - Distinct ~personae~ - Conspiracy between controlling shareholder and company - Damages awarded against both persons - (172-4/89 - Supreme Court - 5/7/90) - [1991] 1 I.R. 142 - [1990] DULJ 166

|Taylor v. Smyth|

1 Judgment of McCarthy, J. delivered the 5th day of July, 1990. [NEM DISS]

2 In his Judgment in the High Court, Lardner, J. detailed the somewhat complicated facts underlying these proceedings. Whilst the Notices of Appeal challenge in detail many of the inferences drawn from the facts as he found them, it is not suggested therein nor in the course of the hearing itself that any of the primary facts found by him are not open on the evidence. I therefore gratefully accept the summary of facts set out in his careful and comprehensive Judgment delivered on the 20th December, 1988.

3 By agreement between the parties, the arguments on the hearing of this appeal were first presented on behalf of Kape. Mr. Brady, S.C. submitted that Lardner, J. was wrong in

4 (1) The finding of conspiracy

5 (2) The finding of breach of contract

6 (3) The assessment of damages

7 (4) The Order over for costs.

8 In supporting these submissions, in part, Mr. Callanan, Counsel for Philip Smyth, stated that his client is sensitive to what is termed the opprobrium of being found party to a civil conspiracy. This, I think, springs from an understandable but mistaken belief that the word "conspiracy" in this context has overtones of the criminal law. This is not so. If a tort or a breach of contract be committed by two or more persons or bodies who agree to do the particular act or to do it in a particular way, who act, as it is said, in concert, then there is a conspiracy which may, in circumstances that I shall later outline, be an actionable wrong. If opprobrium there be, it derives more from the nature of the wrong agreed to be done rather than from the agreement to do it; this is all the more so where, as here, the conspiracy is alleged between Mr. Smyth as an individual and one or other or more of the companies which he controls, a question to which I now turn. It is argued that since, apart from the banks, the several companies involved in the transaction were wholly controlled by Mr. Smyth, he cannot, in law, so to speak, conspire with himself. He, it is said, is "the sole controlling agent and mind".

1. Conspiracy

9 (a) The Legal Fiction. The principle defined in Salomon and Co (1), which was a case of a "one man" company, has been qualified on many occasions

but, as I understand it, remains the law - that a company legally incorporated does not cease to be an independent legal entity, separate and distinct from the individual members of the company, simply because it is wholly controlled by one individual. But, it is said, Mr. Smyth cannot conspire with himself, which is the reality of the allegation insofar as it is said that he conspired with Kape, with Calla, or with Calder all of which companies he controls; reliance is placed upon a decision on trial made by Nield, J. in R. -v- McDonnell (2)where a criminal charge of conspiracy was brought against the Defendant and it was contended that there could be no conspiracy because there were not two persons and two minds involved. Nield, J. emphasized that it was not a company which was being proceeded against but an individual Defendant and, of course, that it was a criminal trial. He concluded that, whilst an indictment for a common law conspiracy to defraud would lie against a limited company, "the true position is that a company and a Director cannot be convicted of conspiracy when the only human being who is said to have broken the law or intended to do so is the one Director, and that is the Defendant in this case". No authority was cited in support of extending this proposition to an action for civil conspiracy. In principle, it would seem invidious, for example, that the assets of a limited company should not be liable to answer for conspiracy where its assets had been augmented as a result of the action alleged to constitute the conspiracy. Essentially, it would be permitting the company to lift its corporate veil as and when it suits. The matter is not devoid of authority. In Belmont Finance Corporation Limited -v- Williams Furniture Limited and others (3) Williams Furniture owned City Industrial Finance which owned Belmont, whose majority Directors were the seventh and eighth Defendants. Four other Defendants owned Maximum and wanted to purchase Belmont. They agreed to sell Maximum to Belmont for £500,000 and to purchase Belmont from City Industrial for £489,000. The Belmont Directors resolved to implement this agreement and the transaction was completed. Belmont went into liquidation and its Receiver sued alleging that the value of Maximum was only £60,000 but that the price of £500,000 for Maximum had been arrived at to enable those four Defendants to purchase Belmont with money provided by Belmont, in contravention of the Companies Act. It was held that since Belmont was a victim of the alleged conspiracy and the essence of the agreement was to deprive it of a large part of its assets, the knowledge of its Directors that the agreement was illegal was not to be imputed to Belmont merely because they were Directors of Belmont. Therefore, Belmont was not a party to the conspiracy. The trial Judge had held that the claim in conspiracy failed in limine on the ground that one party to a conspiracy to do an unlawful act cannot sue a co-conspirator in relation to that act. In the course of his Judgment, Buckley, L.J., (at 124) said:-

"I shall deal first with the conspiracy claim. The plaintiff's argument is to the following effect. On the allegations in the statement of claim, the agreement was illegal, and they say that an agreement between two or more persons to effect any unlawful purpose, with knowledge of all the facts which are necessary ingredients of illegality, is a conspiracy; and we were referred to Crofter Hand Woven Harris Tweed Co. Ltd. v Veitch (4) and Churchill v Walton (5). The agreement was carried out, and damaged the plaintiff.

In the course of the argument in this court counsel for the first and second defendants conceded that the plaintiff is entitled in this appeal to succeed on the conspiracy point, unless it is debarred from doing so on the ground that it was a party to the conspiracy,

which was the ground that was relied on by the judge.

The plaintiff points out that the agreement was resolved on by a board of which the seventh and eighth defendants constituted the majority, and that they were the two directors who countersigned the plaintiff's seal on the agreement, and that they are sued as two of the conspirators. It is conceded by counsel for the plaintiff that a company may be held to be a participant in a criminal conspiracy, and that the illegality attending a conspiracy cannot relieve the company on the ground that such an agreement may be ultra vires; but he says that to establish a conspiracy to which the plaintiff was a party, having as its object the doing of an illegal act, it must be shown that the company must be treated as knowing all the facts relevant to the illegality; he relies on Churchill v Walton, to which I have already referred.

The plaintiff in its reply denies being a party to the conspiracy and, says counsel for the plaintiff, it would be for the defendants to allege the necessary knowledge on the part of the plaintiff. But he further submits that even if the plaintiff should be regarded as a party to the conspiracy, this would not debar the plaintiff from relief; and he relies on Oram v Hutt (6)".

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