The Irish Times has reported Treasury Holdings v O’Kennedy (Dublin Circuit Court).

Treasury Holdings succeeded in its proceedings against Mary O’Kennedy. She failed to complete the purchase of an apartment from Treasury. She also failed to “engage” with Treasury, from which we can only surmise she did not properly defend the proceedings. Consequently we can only assume certain things;
1. She lacked the finance to buy, due to the collapse in the market providing mortgage finance; or
2. She sought to avoid completion because the market value was now less than the purchase price;
3. She was a “consumer”. She would, therefore, have had the benefit of the provisions of S.I. No. 27/1995 European Communities (Unfair Terms In Consumer Contracts) Regulations, 1995. Of course, if a proper defence is not advanced in the proceedings that benefit, if any, would be wasted
4. Her contract had a standard loan approval clause. Contracts for the purchase of property of the value of this apartment would normally contain a loan approval clause. If Ms. Kennedy was relying on drawing down borrowed finance to fund the purchase, that loan approval clause was a vital term her solicitor would require to be inserted before she signed the contract. There is no difficulty accessing suitable terms for such a clause; the Law Society of Ireland has published one (December 1979).
5. There is a problem however with most mortgage loan approvals; they do not guarantee the actual provision of the money. They are subject to conditions and the offer of finance can be withdrawn before drawdown.
6. The Law Society clause is slightly odd in its terms. It contains the words;

“…the loan approval is conditional on a survey satisfactory to the lending institution or a mortgage protection or life assurance policy being taken out or some other condition compliance with which is not within the control of the purchaser the loan shall not be deemed to be approved until the purchaser is in a position to accept the loan on terms which are within his reasonable power or procurement”

Arguably, the phrase “accept the loan” must mean “accept the money” as opposed to “accept the offer of money”.
7. There is, nonetheless, the possibility of the purchaser having a loan approval clause and a loan approval and being left without the money and with the liability under the contract.
8. Worse than that, developers often demand the deletion of the loan approval clause after the issue of the loan approval letter to the purchaser. (They refrain from returning the contract, signed by the developer, having received it signed from the purchaser). Deletion should be resisted.
9. A solicitor would be wise to get the agreement of the purchaser in writing to the deletion of the loan approval clause and wiser still to tell the purchaser in writing that the contract is no longer conditional and that he or she will be required to complete even if he or she cannot obtain a mortgage.
10. That aside, it is not wise to put up no defence to the developer’s proceedings seeking specific performance of the contract.

Auditors are “watchdogs, not bloodhounds” said the court in Re Kingston Cotton Mill Co. (No. 2) [1896] 2 Ch 279 CA. Even at the time this was a very limited view of what we can expect of auditors or their like. (It was also infelicitous; auditors are not and never were, even metaphorically, like “watchdogs”). Considering that Sherlock Holmes was an available “example” (1880 to 1907), it is surprising the judge did not feel more could be expected of the auditors of his day than he settled for.

The job of an auditor is to ascertain if the accounts provide “a true and fair view” of the company’s financial position. However, the auditor’s judgment on this is not, and should not be, absolute. After all, the auditor should not be the equivalent of an insurer where he pays if there is something wrong and loss accrues. In modern times the profession, as always, determines the liability of auditors. The profession has issued guidelines for auditors. Those guidelines now impose a higher standard on auditors than Re Kingston.

These guidelines were quoted in Moore Stephens (a firm) v Stone & Rolls Limited (in liquidation) [2009] UKHL 39

”Auditing Standard SAS 110 (issued January 1995) deals with fraud and error. It contains statements of auditing standards (SAS) and explanatory text in numbered paragraphs. SAS 110.1 states: “Auditors should plan and perform their audit procedures and evaluate and report the results thereof, recognising that fraud or error may materially affect the financial statements”. SAS 110.10 (para. 50) states that, on becoming aware of a suspected or actual instance of fraud, auditors
“should (a) consider whether the matter may be one that ought to be reported to a proper authority in the public interest; and where this is the case (b) except in the circumstances covered in SAS 110.12, discuss the matter with the board of directors, including any audit committee”.
SAS 110.12 (para. 52) provides that
“When a suspected or actual instance of fraud casts doubt on the integrity of the directors auditors should make a report direct to a proper authority in the public interest without delay and without informing the directors in advance.” “

The fact that the auditors in that case escaped by the skin of their teeth shows life is going to get difficult for the profession.

Insurance has a strange aspect which we often overlook; we are happy that we did not need it.

We do not think that the premia paid year after year to insure our house is wasted money. After all, we do not want our house to burn down; we just want to rebuild and restore it if it does. So, we pay a small sum of money to meet the possibility of having to pay the much larger sum if the house does burn down (or suffer some other form of damage).

Sometimes the question of what is a proportionate sum to pay as a premium to cover the perceived risk has to be publicly determined.

In the UK, unlike Ireland, there is anxiety that justice should be facilitated. By “justice” is meant the ready and easy opportunity to go to court seeking a remedy without being prevented by extraneous causes, like poverty. Poverty is relative; most people in Ireland would consider the costs of a High Court action (or even a Circuit court action) beyond them.

Consequently, the UK authorities have facilitated schemes intended to achieve this end.

One such scheme is to allow lawyers who work on a “no win, no fee” basis to charge a significantly higher fee when they are successful, and provide that the losing party has to pay that higher fee as a matter of course.

Another is to recompense a plaintiff his or her insurance premium for “After The Event” (ATE) insurance. This is insurance taken out to, effectively, help pay for some of the litigation costs of the plaintiff/insured.

Section 29 of the UK Access to Justice Act 1999 provides:

“Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy.”

Inevitably, the losing defendants (other insurance companies) took issue with the premia being charged for the ATE.

HERE ‘s the outcome of that dispute.

I have referred previously to the difficulties sometimes encountered with insurance companies.

However, an insurer does not always have the advantage.

If an insurer, meeting a claim of wrongful refusal of indemnity (meaning, the insured person sues for breach of contract following the making of a rejected claim), pleads a simple denial, the court will invariably restrain the defendant insurer from making an affirmative case and the insurer will be confined to undermining the plaintiff’s case (if it is possible).

This means that the plaintiff cannot and should not be surprised, in the litigation, by the advancement of some theory explaining the mechanism of loss (justifying the refusal of indemnity cover). In other words, the defendant insurer is obliged to plead its specific case and reason for refusing cover and cannot take the plaintiff by surprise in the running of the case.

Furthermore, if the defendant insurer is claiming that the claim falls into an exception specified in the contract of insurance, it is for the insurer defendant to prove that fact and not for the plaintiff insured to disprove it.

It is ironic that I should suggest HERE that an opinion should not be asked of a lawyer in any and every circumstance (or, specifically, should not be asked for in some circumstances) and then, belatedly, discover the blogging phenomenon that is Eoin O’Dell has availed of a disclaimer on his website.

What is good enough for Eoin O’Dell is good enough for McGarr Solicitors. We are now following his example (and some of his wording, which, we believe, he permits). The wording is not identical to his; his blog ranges into subjects where we do not venture. The reasons for this vary. We have, to date, for instance, refrained from telling the world our opinion of the film “The Last of the Mohicans”. (It is not a promotion of the myth of the noble savage; it rejects it. What is noble about Magua? Certainly, Uncas and Chingachgook are noble, not because they are savages but because they are civilized). (This being a blog and of limited space, it is not possible to reconcile the contradictory use of “civilized” in connection with characters unconnected with a city).

OUR DISCLAIMER

“We get some emails asking for legal advice. (Not surprisingly; that’s the business we are in).
However, this blog is not intended to convey, and should not be construed as, or used as a substitute for, legal advice. It is written for general, informational purposes, and reading it does not create a lawyer-client relationship. Moreover, this blog is always under construction, and the contents are always changing, so please do not rely on any post as a comprehensive or current statement of the law on any of the issues discussed. No responsibility of any kind is accepted for any reliance you may place on anything I have written here.
There are lots of links in my posts, but I am not in any way responsible for the content of sites linked from here – such sites are the responsibility of those who maintain them; complain to them, not to me.”

(I am going to ask our IT department to place this in a more central place; some things are beyond me).

Our offices are, almost, in Lower Bridge Street and I travel down Clanbrassil Street daily to get to them. It is an ironic occasion every morning for me to join the single lane of traffic traveling north on Patrick Street in front of St. Patrick’s cathedral. Until recently there were two lanes for the north-bound traffic; now, one is a dedicated bus lane.

In 1953, Dublin Corporation determined to ensure that traffic would not be hindered by narrow streets like Clanbrassil Street and Patrick Street. They should be widened, it felt. The Corporation persisted in this feeling from 1953 to 1989 when it finally built a “dual-carriageway” along [some of] Clanbrassil St. and on into Patrick Street.

The fact that the planned Compulsory Purchase Order, to implement this, undermined the values of the properties along the west side of Clanbrassil Street and Patrick Street, from 1953 onwards, is neither here nor there.

What is of moment is this: we no longer care about traffic, that is, the private motor car. We have changed our viewpoint. We cheerfully squeeze it daily into a narrow traffic lane in Patrick Street. That’s not the only change. Dublin Corporation is now Dublin City Council: it hasn’t gone away and it is still an institution of vision.

Currently, it has a vision for a waste incinerator in Ringsend. Perhaps we need such a thing. But will we always? Will we always think it a good thing to burn rubbish? To burn it within the city?

The answer is yes, because the operator of the proposed incinerator will compel us to do it, under the terms of a contract signed by it and Dublin City Council.

Peculiarly, the property rights in rubbish may be more easily defended than the property rights in buildings.

If a trade supplier receives a Notice of a Creditors’ Meeting it means bad news. The money owing to the creditor is in jeopardy.

On receipt of the notice, check to see if it is valid. Under the Companies Acts, the notice must be sent at least 10 days prior to the date of the meeting. The notice must be accompanied by proxy forms. (The proxy forms are important; the Directors will seek to control the meeting with proxies in their favour).

The notice must also be advertised in two daily newspapers circulating in the vicinity of the registered office or principal place of business of the company. Purchase a copy of all such newspapers, promptly. A failure to comply with this obligation will undermine the validity of acts done at the Creditors’ meeting. (The advertisement is intended to alert creditors who have not received notice in the post; if they had attended they could have altered the outcome of the meeting). It is a criminal offence to fail to give proper or adequate notice of the meeting.

The company will have appointed a liquidator at the members’ EGM. That liquidator will attend the Creditors’ meeting. The creditors may propose a different person as liquidator. If a majority of creditors carry that proposal, the “company’s liquidator” will be supplanted by the new nominee. There should not, of course, be a “company’s liquidator”; a liquidator is required by law to be independent of the company or its directors.

Creditors should prepare for the Creditors’ meeting. At McGarr Solicitors we will advise on the questions to be asked by creditors at the meeting and will attend to represent the interests of creditors if asked to do so.

1. It is arguably mistaken to anticipate professional negligence actions arising from the “Credit Crunch”. The professionals will be stockbrokers, bankers or money advisors of one sort or another in the financial services industry.

2. All of these professionals are connected to their clients by contract. The contracts cite “terms and conditions”, frequently alluding to the fact that they, no more than any professional do not guarantee a particular result.

3. What they are obliged to provide, however, is a competent careful discharge of their obligations. This covers the “duty of care” in tort law, but also any contractual or other obligations they carry.

4. In the field of Finance those obligations are considerable. They appear as contractual duties, fiduciary duties, duties of confidentiality, statutory and regulatory duties.

5. A fiduciary duty involves avoiding a conflict of interest, for instance. This is an absolute duty; it does not imply a need for care. Either there is a conflict or there is no conflict.

6. The claim of the professional that he “made a house call” will not be accepted where there was a conflict of interest between the “house” and the client.

7. The fiduciary’s duty is often expressed an obligation or duty of loyalty, but in practice inhibits behaviour which would be acceptable in other circumstances. A fiduciary is not free to follow his own interests; the interests of the client/beneficiary comes first. A fiduciary is not free to make a profit from his role; any such profit belongs to his client.

8. Many of the duties of a fiduciary are now imposed on professionals in the financial services industry as regulatory norms. Even if they are not available to be cited as the basis of a breach of duty, these regulatory norms are readily available to determine the implied contractual duties of the professional.

9. The Credit Crunch generated unprecedented circumstances for many large firms in the industry. Those are the circumstances where things are done which should not be done. In many instances, to recover losses, it is simply a matter of collecting the paper trail and instructing solicitors.

Misrepresentation is a form of fraud.

Fraud is a little like the “golden thread” [of innocence until proven guilty] running through [British] justice; it means more on some occasions than on others.

In Lazarus Estates Ltd v Beasley [1956] 1QB 702 at 712-713 Denning LJ stated:

No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever…”

The leading case on deceit is Derry v Peek [1889] UKHL

The promoters of a company issued a prospectus stating that they had a licence to use steam power to run a tram. They did not; they expected to get it as a mere formality. They were refused and the company failed. The shareholders sued for deceit. The action failed, because it was not proved that the directors lacked honest belief in what they had said.

What is in issue in an action claiming fraud is the state of mind of the defendant. It is rare that a plaintiff can prove the malignant state of mind of a fraudster.

Under Section 45 of the Sale of Goods and Supply of Services Act 1980 a right of action was created which ameliorated the burden on plaintiffs complaining of fraudulent behaviour or its equivalent.

In effect the burden of proof was reversed; the defendant must prove that he had a reasonable belief that what he said was true;

45.—(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.”

The government seems to have a furnace somewhere to dispose of old banknotes, such is their fondness, to the point of habit, for burning public funds.

Why else does the taxpayer have to pay for a contaminated pork recall?

After all, we know with reasonable, if not perfect, certainty where the contaminated pork originated.

We appear to know that the output of that factory accounted for 10% of Irish pork in the retail market. That, in the judgment of the Government, justified the recall.

Why is the taxpayer the unwitting insurer of the farmers, the factory, the processors and the retailers?

Was the recall not, again, an incident of a market loss? Is there some large Irish Insurer whose policies cover this loss and whose business cannot be allowed to fail for unknown reasons?

Is there a peculiar and particular meaning to the phrase “a perfect market”, in Ireland?