Marc S. Dreier, a New York attorney has been arrested. He, among other things, (allegedly) passed himself off as, variously, representing persons he did not, being a person he was not and having authority he did not have.

The US authorities have taken a dim view of this and he is currently held without bail.

His firm on Park Avenue, New York, has filed for bankruptcy and the staff are fleeing the offices without their wages.

One wonders what would happen to him in Ireland.

What Bernie Madoff did has relevance to Ireland. Ireland is part of the globalised financial services industry through the Irish Financial Services Centre.

Some of the entities operating there have lost money by Bernie’s activities.

Significantly, Bernie had a British subsidiary in London to transact European business, presumably.

Assuming Bernie’s guilt; (he has, allegedly, confessed to running a pyramid, or “Ponzi” scheme), liability for these losses may fall not only on Bernie and/or his corporate creatures but on others also, under the following heads of claim;

A Breach of Contract;
B Negligence and Deceit;
C Breach of Fiduciary Duty;
D Conversion;
E Restitution;
F Statute:

BREACH OF CONTRACT

Bernie (“Bernie” includes any of his complicit corporate entities) received money under, in each individual instance, a contract. The place of the making of the contract will have varied from case to case. Each contract included express and, usually, implied terms. It was, undoubtedly, an express and, if not express, then implied term that he was to invest received money in asset backed securities. (For the purposes of this post, a definition of “securities” is not necessary; it is sufficient to know that Bernie’s appropriation of the money was not within contemplation).

Many contracts with Bernie were made by agents holding, apparently, discretionary investment powers. Agents are agents under a contract. Those contracts also would contain express and, usually, implied terms. The principal of those agents would have rights under the contract made by the agent with Bernie and also under the contract made with the agent by the principal. That principal might well be a “consumer” under Irish law (assuming that Irish law is the proper law of the relevant contract). Irish law could be the proper law of an agency agreement made by a foreign principal with an Irish resident agent.

There is an obligation on a person who undertakes duties under a contract, to deliver on those duties, irrespective of the level of skill and care actually exercised. If the contract contains an express or an implied term (as found by a court) that an agent, say, will invest, or cause to be invested, money in asset backed securities, there will be a breach of contract if he/she/it does not do this. Bernie, of course, is guilty of that breach. Any agent, from whom Bernie received the money of the agent’s principal, whose contract imposed such a duty will also be in breach.

NEGLIGENCE/DECEIT

Bernie was guilty of deceit. The evidence for this, currently, is his (alleged) confession. Presumably his financial records will corroborate this. Normally the heavy burden of proof to prove fraud militates against a finding of deceit in a civil action. Assuming access to the evidence against Bernie, that burden can be discharged and it would thereafter be otiose to consider allegations of negligence against him. More importantly, Bernie’s possession of the money delivered to him was never lawful; it was obtained fraudulently. Therefore he could not pass a good title to that money to any person to whom he, in turn, passed it. The money, in principle, may, therefore, be traced and, when traced, recovered from its subsequent holder/s.

There is, it seems, good evidence of negligence on the part of the agents from whom Bernie received much of the funds he allegedly misappropriated. Bernie divulged little of his investment strategy. He failed to reveal the exact securities in which he was, ostensibly, investing. To credit Bernie in those circumstances was a classic case of “buying a pig in a poke”. Furthermore, the return, offered by him, on the money was not, it appears, credible. The agents from whom he often received the funds were themselves professionals in the same field. They could not find investments in the markets returning the result that Bernie claimed for his “investments”. That is why they passed the money to him. That they believed him trustworthy is irrelevant. They knew, or ought to have known, that he was not, in fact, making his “returns” from investments in any known market. They were, in short, negligent.

BREACH OF FIDUCIARY DUTY

Bernie appears to have breached his fiduciary duties. The facts of each case require examination to determine the identities of the beneficiaries of the duty breached.

Currently, there are no publicly known facts showing breach of fiduciary duty by any agent whose principal has lost money, but that may change.

CONVERSION

Conversion is what a thief does when he steals. Essentially, that is what Bernie is reported as having confessed to. The remedy for conversion is the return of the stolen property, or, in default, damages.

RESTITUTION

A claim of restitution arises where, inter alia, a claim for money had and received can be made. Such a claim would lie against Bernie. The remedy for a claim of money had and received is the return of the property, or, in default, damages. Such a claim would also lie against an agent who believed that Bernie’s formula for generating his “returns” was, although effective, illegal. That they believed he was making the “returns” by trading on insider information, if true, is evidence of knowing receipt.

STATUTE

Financial management is, reputedly, a highly regulated field. Whether that is so in Ireland is already in doubt. The Madoff Mess may show the truth of the situation. That aside, Ireland’s financial regulatory laws make provision for claims in civil law for breaches of certain duties imposed by statute. The facts of each case will determine if these are available to investors to recover their losses.

“I was there!”

Sometimes, hopefully not. Avoid the car crashes of life, if you can; car crashes as described HERE
.
The “car crashes” arose because of the poor quality of judgments in three cases, English, Withers and Verrechia.

In English, the court of appeal remarked:

The Judge could have explained the issue and his reasoning process in comparatively few words. It is regrettable that he did not do so and that it has taken the appellate process and the assistance of counsel who appeared at the trial to enable us to follow the Judge’s reasoning. Having done so we conclude that this appeal must be dismissed.”

In Withers the court remarked:

We turn to the section of the judgment dealing with causation. We have not found this easy to analyse. We have been able to identify a number of different reasons for the Judge’s conclusions, but these are not set out in logical order; they are intertwined. So far as the expert evidence is concerned, the Judge has attempted to summarise the technical issues, but on occasion fallen between two stools, so that the relevance of the facts set out in the judgment to the particular issue is incomprehensible.”

In Verrechia the court, although finding, substantially in favour of the Plaintiff did not award him his costs. It gave no reasons for this course.

Matters were in each case made more difficult by the decision of the court of appeal in concluding that, while the judgments were deficient, it was possible to discover what the reasons for the judgment were in each case. Consequently, the appellants although aggrieved at the absence of reasons in the original judgments did not win on appeal and lost more money on legal costs.

The Courts Service in Ireland is an improvement over previous “arrangements” for the delivery of justice.

Inevitably, it being an infant body, it has and will make mistakes. A relatively small but irritating mistake is the installation of “security” in the Four Courts.

Currently,* access by the public to the Four Courts is through a kind of porta-cabin, at what used to be the Morgan Place entrance on the quays. There, one has to pass through a metal detector and put one’s luggage through a scanner. Harmless enough, but expensive, and ineffective to prevent terrorist Muslim attacks.

What Muslim attacks?

There have been none in Ireland.

Of course, they might be launched. Nobody can say they would not be launched.

However, the history of Ireland is replete with times and periods when very real domestic threats of terrorism existed. Frequently, the Four Courts was the scene of forensic points of conflict between the State and an irregular armed power.

There was, effectively, no permanent “security” in the Four Courts during those times.

In the judgment of this writer, the decision to install the current security arose out of a bomb scare in the building which saw the Supreme Court, as a collective, with every other user of the building, walking about on the pavement outside the building and drinking take-away coffee from the back of an entrepreneurial van parked in a loading bay in Chancery Place.

But the solution, the current “security” is not effective. It does not eliminate bomb threats. It is not a proper source of confidence that any bomb threat is a hoax. (It is too easy to circumvent the “security”).

There is an alternative, chilling, explanation; we are aping the US Supreme court. It, too, has closed the front door of the court and is breaking the architectural integrity of its building.

What if terrorist Muslims really are a threat to the Four Courts?

We should spend our money supporting the programme, of Lord Weidenfeld’s Institure for Strategic Dialogue, for a European Muslim Professionals’ Network. That way, at least, Muslim barristers will find a support group to hand when they encounter the dress code of our Rules Committee of the Superior Courts.

Whatever about dress codes, many people would be glad to see the departure of the “security”, including members of the judiciary and at least one senior barrister who, I understand, refuses to produce his electronic pass to gain access to the courts. (Too much; don’t go there).

*(Note; never “presently”, when you mean “at present”. “Presently” means in a “little while” or “shortly” or “in due course”).

I seem to have picked up the impression that the Irish Supreme Court thinks it is overworked or is burdened by cases without merit.

In the US Supreme Court, they are not obliged to take any and every appeal.

Nevertheless they allowed THIS CASE in the door.

Rubbish accumulates everywhere, it seems.

The logic in the title to this post is lurking in every action alleging negligence, but it is a formidable retort in a medical negligence action.

In Chester v Afshar [2004] UKHL, the Defendant adopted that retort. He had operated on the Plaintiff for lower back pain. He had failed to warn her of a possible dangerous outcome of the operation. That outcome transpired. She became partially paralysed. This was a 3%-4% chance outcome of the operation.

Generally, to secure a victory in such circumstances a Plaintiff will be heard to say that, if the appropriate warning had been given the Plaintiff would have declined the operation. Ms. Chester declined to say that. Instead, she said she would have declined the operation that day. By this she meant she would have taken time to reflect on the terms of such a warning; she would have consulted friends and relations and then she would have decided.

The House of Lords found in her favour. In the majority, Lord Hope stressed that to deny her the verdict would render the requirement on doctors to advise and warn their patients of such risks, “…useless in the cases where it may be needed most”.

The Court conceded that in reaching this verdict, it was adjusting the usual burden on Plaintiffs in medical negligence actions.

The outcome was fair. After all, should the Defendant not, in those circumstances and on those facts, be required to prove that the Plaintiff would, in due course and despite the warning, have proceeded with the operation? In all such cases that is the implicit assumption of such Defendants. What is valid about that assumption?

A blog is just a blog and is rarely definitive. I missed two elements of the post relating to the contamination of Irish pork products.

A. Irish farmers sell their pigs to factory processors; it is from the processor that the supermarket/retailer gets supplies. (So too, will a secondary processor such as a sausage maker). So, the retailers will have a claim against the processors; the processors will have claims against the farmers.

B. My post assumed delivery of the oil at its source. If delivery is at and to the Irish pig feed manufacturer in Ireland, Council Regulation 44/2001 will apply. Jurisdiction in those circumstances will be Ireland, not the place of the location of the supplier of the oil.

Details of the indemnity to the factory processors, by the Irish Government, are not to hand. Accounts suggest it is not a full indemnity. If so, the processors will be able to properly claim the balance from the farmers, who will in turn be able to make a claim against the pig feed supplier.

A sensible arrangement for the Government indemnity would have made provision for Ireland to be entitled to receive a proper portion of compensation recovered from farmers and/or the pig feed supplier.

A matter of great interest is the level of insurance cover of the farmers and the pig feed supplier. As always, the practicality of litigation is important.

Yet again we see the urgent necessity of legislation in Ireland to provide for Third Party rights under insurance and other contracts.

In the UK they have had that for 70 years and do not appear to have had any problems. What’s keeping us, (besides ineptness)?

In construction contracts the payment of liquidated damages is a benefit to the parties. Depending on the circumstances it can benefit the developer by relieving it of the obligation to prove a loss, whereas it can generally benefit the contractor in relieving it from the necessity to resist a [valid] claim and also introduces certainty as to consequences of the contractor’s default. Both parties can avoid expensive disputes in the courts with consequent delay for the project.

However, it is not a carte blanche for the contractor to neglect its obligations in terms of time, say.

In Bath and North East Somerset District Council -v- Mowlem Plc [2004] CA, Mowlem refused to follow an architect’s instruction. The developer council advised Mowlem that if it persisted in its refusal the council would engage another contractor to do the work. Mowlem again refused to do the work and the council instructed another contractor on the matter whereupon Mowlem refused to allow the replacement contractor on the site to do the work.

The council applied for an injunction to effect entry for the replacement contractor. Mowlem, in resisting the application, claimed that the only loss accruing to the council was a loss of time and that was capable of being remedied under the terms of the contract, which fixed liquidated damages for the delay.

The court disagreed and stated:

Mowlem is not entitled to breach its contract. The agreement on liquidated and ascertained damages is not an agreed price to permit Mowlem to do so, and it does not preclude the court granting any other relief that may be appropriate. In my view, the Council’s case is right in principle.”

There was evidence to show that the council’s loss would exceed the liquidated damages and the court affirmed the injunction granted in first instance to the council.

It was a measure of the complexity of medical negligence litigation that Lord Woolf in his now famous and influential report devoted a special mention to those proceedings.

A plaintiff must prove the liability of the defendant. This is not equivalent to proving causation. Liability may arise where proof of an error in judgment or management is established, but the plaintiff must go in to prove that that error was the cause, or a cause, of the untoward outcome for the patient.

Very often this requires the evidence of two separate experts on behalf of the plaintiff, one on liability and the other on causation.

The accounts of Minister Eamon O’Cuiv’s assault on a student are somewhat confused. He admits grabbing the student by the arms.

He justifies this, it appears, by claiming to have been acting in defence of his secretary. The uncertainty lies in the issue as to why she needed defending. The Minister according to one account believed the secretary “felt” threatened and on another account asserted that she had been assaulted (by being kicked) and that the person he, the Minister, grabbed (or restrained) had been armed with a piece of wood.

Mr Ó Cuív said he acted in defence of his secretary who had been threatened by an individual who was wielding “a piece of timber” and had to act to defend his secretary and himself.

“I think I was right to defend my secretary. She was very, very upset because one of the protesters had a piece of timber. And it was the second time in a week that she had been intimidated by some of the same students because they forcibly entered my office last week. They occupied my office and there was only female staff there at the time,”

Subject to qualification, if the latter account is accurate, the Minister has a good defence. Section 18 of the Non-Fatal Offences Against The Person Act 1997, provides:

18.—(1) The use of force by a person for any of the following purposes, if only such as is reasonable in the circumstances as he or she believes them to be, does not constitute an offence—“

This is a somewhat peculiar expression. It alludes to an objective standard (“…as is reasonable in the circumstances…” and also to a subjective standard (“…the circumstances as he or she believes them to be…”).

The Minister’s articulation of his justification is itself a complicating factor; he was, variously defending himself and his secretary and/or his secretary, and was doing so because of an immediate threat (“wielding a piece of timber”) but also because of the perceptions of the secretary and the quality of the threat as revealed by the alleged (by the Minister) behaviour of some of the students in the previous week in occupying his office. Later, his office asserted the secretary was being squashed against a wall and was being kicked.

The Minister is certainly entitled to defend himself:

( a ) to protect himself……………. from injury, assault or detention caused by a criminal act;”

and to defend another person;

( a ) to protect himself ………… or another………”

He is also entitled to use force:

( e ) to prevent crime or a breach of the peace.”

In any prosecution of the Minister for the assault on the protester, the prosecutor would have to negative the Minister’s defence of acting within the provisions of Section 18.