Vanguard Auto Finance Ltd v Browne

• Jurisdiction: Ireland
• Judge: Mr Justice Bernard Barton
• Judgment Date: 14 October 2014
• Neutral Citation: [2014] IEHC 465
• Court: High Court
• Date: 14 October 2014

[2014] IEHC 465

HIGH COURT

[3181 P/2011]

Vanguard Auto Finance Ltd v Browne & Ors

VANGUARD AUTO FINANCE LIMITED

PLAINTIFF

AND

PAUL BROWNE, BROWNE CORPORATE FINANCE LIMITED, BAIRBRE WALL AND DAVID CONWAY

DEFENDANTS

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KLEINWORT BENSON LTD v LINCOLN CITY COUNCIL 1999 2 AC 349 1998 3 WLR 1095 1998 4 AER 513 1998 148 NLJ 1674

DUBLIN CORPORATION v BUILDING & ALLIED TRADE UNION 1996 1 IR 468 1996 2 ILRM 547 1996/10/3245

KELLY v SOLARI 1841 9 M & W 54 152 ER 24 1835-42 AER REP 320

THE NATIONAL BANK LTD v O'CONNOR & BOWMAKER IRELAND LTD 1969 103 ILTR 73

BLUE STATION LTD v KAMYAB 2007 EWCA CIV 1073

JONES v CHURCHER 2009 2 LLOYDS 94 2009 EWHC 722 (QB)

IARNROD EIREANN (IRISH RAIL) v HOLBROOKE & ORS 2000 11 ELR 109 1999/14/3918 2000 IEHC 47

TAYLOR v SMITH 1991 1 IR 142

FORSHALL v WALSH UNREP SHANLEY 18.6.1997 1998/6/1685

BRIESS v WOOLLEY 1954 AC 333 1954 2 WLR 832 1954 1 AER 909

PEARSON & SON LTD v DUBLIN CORPORATION 1907 AC 351

ANGLO-SCOTTISH BEET SUGAR CORPORATION LTD v SPALDING UDC 1937 2 KB 607 1937 3 AER 335 157 LT 450 53 TLR 822

KWEI TEK CHAO v BRITISH TRADERS & SHIPPERS LTD 1954 2 QB 459 1954 1 AER 779 1954 2 WLR 365 1954 1 LLOYDS 16

ARMAGAS LTD v MUNDOGAS SA 1986 AC 717 1986 2 WLR 1063 1986 2 AER 385 1986 2 BCC 99197 1986 2 LLOYDS 109

CREDIT LYONNAIS BANK NEDERLAND NV v EXPORT CREDITS GUARANTEE DEPARTMENT 2000 1 AC 486 1999 2 WLR 540 1999 1 AER 929 1999 1 LLOYDS 563

MCA RECORDS INC v CHARLY RECORDS LTD 2001 EWCA CIV 1441 2003 1 BCLC 93 2002 BCC 650

TOMMY HILFIGER EUROPE INC & ANOR v MCGARRY T/A LIFEJACKET GOODSTOCK LTD & ANOR UNREP CARROLL 8.3.2005 2005/56/11858 2005 IEHC 66

STANDARD CHARTERED BANK v PAKISTAN NATIONAL SHIPPING CORPORATION 2003 1 AC 959 2002 3 WLR 1547 2003 1 AER 173 2003 1 LLOYDS 227 2002 BCC 846 2003 1 BCLC 244

COURTS ACT 1981 S22(1)

Lease – Guarantee – Due Performance – Fraud – Bank – Money – Liability – Defences – Courts Act 1981

Facts: The plaintiffs brought proceedings as the assignee of a lease and guarantee on foot of a legal assignment made between the plaintiff and Lombard Ireland Ltd (the Bank) dated 18 ^th December 2012. The lease was entered into between the bank and Arnosford Ltd (hereinafter Arnosford) on the 21st August, 2008 and the due performance of the lease was guaranteed by the fourth named defendant. The first named defendant was the managing director and beneficial owner of the majority shareholding in the second named defendant company. The third named defendant was the spouse of the first named defendant. She was an interior designer carrying on practice as Bairbre Wall Interiors and was the owner of one share in the second named defendant company. In the case at hand, the court was concerned only with the plaintiffs claim as against the first and third named defendants. As against the first and third named defendants the plaintiff claimed to recover the sum of €111,320 being the proceeds of a cheque dated the 28th August, 2008 drawn by the bank in favour of the third named defendant and being a transaction which the bank alleged arose as a result of fraud, deceit and/or misrepresentation the consideration for which had wholly failed, further or alternatively, the plaintiff sought a return of the said sum as being monies had and received by those defendants to the use of the plaintiff. As against the plaintiffs claim the first defendant delivered a full defence save that he admitted that on or about the 3rd September, 2008 upon receipt of the cheque, he advised the third named defendant that the cheque should be returned to the second defendant whilst he made enquiries with the fourth defendant for the purposes of clarifying certain matters. The third named defendant delivered a defence denying liability to account to the plaintiff for the payment, however, in that defence she made a number of admissions and assertions which the court considered significant given the nature of the plaintiffs claim and the election by the third defendant, as was her right, on her application for a non-suit at the close of the plaintiff”s case, not to give evidence at the trial of the action.

Held by Justice Barton in light of the evidence and having applied the relevant laws that the bank relied on the invoice and issued a cheque under a mistake of fact, namely, that it was purchasing the goods the subject matter of the invoice and that those goods were to be supplied in the fitting out of the lodges in question. The invoice was a fiction. The order was not just unfulfilled but rather was never placed with the result that the payment was made for a consideration which had wholly failed. Whilst the court was satisfied, on the balance of probabilities, that the cheque was attached to the perforated printout containing the details to which reference had already been made that did not negative the requirement on the defendants to make enquiry as to the reason and purpose for the payment. It was reasoned that if the content of the printout provided insufficient information to satisfy the enquiry as to the purpose and reason for the payment of the cheque the obligation to obtain the answer remained and in either event and must have led to both the first and third defendants ascertaining the true state of affairs. He stated that if those defendants were unaware as to the purpose and reason for the payment, a failure to make an enquiry in relation thereto afforded neither a defence to the plaintiffs claim. Consequently, the court found that at the time of the negotiation of the cheque and the subsequent transfer of the monies to the second defendant and to Arnosford those defendants were aware of the reason and purpose for which the cheque had been paid, namely the purchase of goods for the fit out of the lodges. Justice Barton acknowledged that it had been conceded by the first defendant in cross examination that had he known the true state of affairs he would have acted differently and that it was likely that the third defendant would not have accepted his instructions. Having regard to the finding of the court that those defendants knew that the reason and purpose for which the payment was made at the time that the first defendant”s instructions were given to negotiate the cheque and dispose of the proceeds, the disposal of the funds by them for different purposes, namely, to satisfy a debt owed by Arnosford to the second defendant and a payment of the balance to Arnosford amounted to a wrong against the plaintiff for which they were both personally liable. Accepting the relationship between the third and second defendant to be one of principle and agent, with regard to the plaintiffs case against those defendants in relation to the torts of deceit and conspiracy the Court was not satisfied that the evidence would warrant a finding that Aine Boland herself acted dishonestly nor was there sufficient evidence to enable the court to reach a conclusion that she was aware that no instructions had been given to the third defendant to order or supply the goods for the fit out of the lodges. Moreover, the Court was satisfied on the evidence that the defendants negotiated the cheque and disposed of the proceeds at a time when they were both aware of the purpose for which the bank made the payment, accordingly, that constituted an unjust enrichment remediable in law and for which those defendants were jointly and severally liable to the plaintiff. The Court was further satisfied that the first defendant in giving the instructions did and with the knowledge he possessed committed a wrong for which he was personally liable. Accordingly, the law did not afford the first defendant a defence to the plaintiff”s claim on the grounds that he acted solely as managing director of the second named defendant company. As to whether or not the second defendant was also liable the court made no finding since that issue was not before the court. Finally, as both the first and third named defendants were personally involved in the negotiation of the cheque and disposal of the monies, which were paid by the bank under an mistake of fact for which there had been a total failure of consideration, and with the knowledge they had that that payment had been made for a reason and purpose other than that in respect of which the monies were utilised, the court gave judgment for the plaintiff against the first and third named defendants jointly and severally and directed payment by them to the plaintiff of the sum of €111,320 together with interest in accordance with s. 22 (1) of the Courts Act 1981.

1 1. The plaintiff brings these proceedings as the assignee of a lease and guarantee on foot of a legal assignment made between the plaintiff and Lombard Ireland Ltd (hereinafter the bank) and dated 18th December, 2012. The lease was entered into between the bank and Arnosford Ltd (hereinafter Arnosford) on the 21 ^st August, 2008 and the due performance of the lease was guaranteed by the fourth named defendant.

2 2. The first named defendant is the managing director and beneficial owner of the majority shareholding in the second named defendant company.

3 3. The third named defendant is the spouse of the first named defendant. She is an interior designer carrying on practice as Bairbre Wall Interiors and is the owner of one share in the second named defendant company.

4 4. A judgment for €123,175.18 on foot of the guarantee having been obtained by the plaintiff on the 9 ^th July, 2012, but which remains unsatisfied and the second named defendant being in liquidation with no assets, the court is concerned only in

5 5. As against the first and third named defendants the plaintiff claims to recover the...