McDonagh & Anor v Fane Investments Ltd & Ors, Fane Investments Ltd & Ors v McDonagh & Ors (Approved)

Factual and Procedural Background

This opinion addresses two sets of proceedings concerning a disputed site in County Wicklow, registered under Folio 21790F and 36738F. The main parties involved are a group of brothers ("the McDonaghs") and a corporate entity ("Company A") along with its affiliates and representatives. The McDonaghs originally purchased the Site in 2007 but defaulted on a substantial loan, leading to the appointment of joint receivers by the lender bank ("The Bank"). The Site was subsequently sold in 2021 to Company A, a special purpose vehicle established by another corporate entity ("Company B").

The McDonaghs initiated Specific Performance Proceedings seeking to enforce a Memorandum of Agreement ("the Agreement") dated December 2017, which they claim entitles them to acquire the Site jointly with Company B. They also brought claims against The Bank alleging it failed to obtain a proper price when selling the Site.

Concurrently, Company A initiated Trespass Proceedings against the McDonaghs and a partner of one of them, seeking an injunction for alleged trespass on the Site.

The litigation spans over ten years, characterized by multiple judgments and extensive court time, with the McDonaghs persistently pursuing claims related to the Site despite prior adverse findings and an existing court order ("Isaac Wunder Order") restricting further litigation by the McDonaghs in respect of matters related to the loan and Site.

Legal Issues Presented

1. Whether the December 2017 Agreement constituted a binding and enforceable contract obliging Company B to acquire the Site jointly with the McDonaghs.
2. Whether Company B or its representative was obliged under the Agreement to negotiate the written down value of the McDonaghs' loan with the lender or its assignee.
3. Whether The Bank breached its duties as mortgagee in possession by failing to obtain a proper price for the Site upon sale.
4. Whether the McDonaghs have a valid defence to the Trespass Proceedings based on their alleged rights under the Agreement or on the terms of a Declaration of Trust concerning the Site.
5. The extent and consequences of the McDonaghs’ alleged abuse of court processes and the implications of confirmation bias in their litigation conduct.

Arguments of the Parties

Appellants' (McDonaghs) Arguments

• The Agreement is a legally binding contract obliging Company B to jointly acquire the Site with them.
• Company B and its representative owed a duty to negotiate the settlement of the loan, including the written down value, on behalf of both parties.
• The Bank failed to obtain a proper price for the Site, resulting in financial loss to the McDonaghs.
• The McDonaghs have a defence to the trespass claims based on their alleged contractual rights and the terms of the Declaration of Trust.
• The Isaac Wunder Order restricting their litigation breaches their constitutional right of access to the courts, particularly as they were often defendants rather than plaintiffs in prior cases.

Respondents' (Company A, Company B, The Bank) Arguments

• The Agreement was conditional, subject to the execution of a formal shareholders' agreement, which never occurred, and was terminated in early 2018.
• There was no obligation on Company B or its representative to negotiate the loan’s written down value; the McDonaghs misrepresented that such an agreement existed.
• The Bank, as mortgagee in possession, obtained a proper and reasonable price for the Site, supported by uncontested expert and receiver evidence.
• Company A is the registered owner of the Site, and the registration is conclusive evidence of title absent actual fraud, which was not established.
• The McDonaghs’ conduct, including trespassing and repeated litigation, amounts to abuse of court process and justifies the Isaac Wunder Order.
• The McDonaghs’ evidence was unreliable, characterized by evasiveness, disingenuousness, and confirmation bias.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court undertook a detailed examination of the evidence, focusing on the credibility of witnesses, the factual matrix surrounding the Agreement, and the conduct of the parties over time.

The Court found the principal McDonagh witness to be evasive, disingenuous, and prone to confirmation bias, often selectively relying on facts supporting his claims while ignoring contrary evidence. In contrast, the Court found the key witness for Company B, an independent accountant involved in the negotiation and drafting of the Agreement, to be credible and reliable.

The Court concluded that the Agreement was a conditional contract, expressly subject to the execution of a formal shareholders' agreement, which never materialized. The Court found that Company B's representative had signaled by March 2018 that the Agreement was terminated due to McDonaghs’ misrepresentations and conduct.

The Court interpreted Clause 11 of the Agreement, concerning negotiation of the loan settlement terms, as obliging Company B only to negotiate auxiliary terms, not the principal written down loan amount, which the McDonaghs had represented as already agreed but was in fact not.

Regarding the claim against The Bank, the Court noted the absence of expert evidence from the McDonaghs and accepted the uncontested evidence of the receiver that the sale price was proper and reasonable. The Court declined to consider unpleaded claims about the lack of prior written consent to the sale by The Bank.

In the Trespass Proceedings, the Court held that Company A's registration as owner of the Site was conclusive evidence of title absent actual fraud, which was not established. The McDonaghs’ arguments based on the Agreement or the Declaration of Trust did not constitute a defence to the trespass claims.

The Court found that Mr. McDonagh knowingly trespassed on the Site on multiple occasions, including forcibly removing locks, thereby causing damage. This conduct was held to be an abuse of court process and justified injunctive relief and nominal damages.

The Court also addressed the broader issue of unmeritorious litigation by plaintiffs with insufficient resources, noting the absence of effective disincentives and the resulting unfairness to defendants who incur irrecoverable legal costs. It highlighted the risk of "consequence-free" litigation and the need for courts to be vigilant against confirmation bias in litigants’ claims.

Holding and Implications

The Court dismissed the McDonaghs’ claims in the Specific Performance Proceedings. It held that the Agreement was conditional, never fulfilled, and terminated in early 2018. Consequently, the McDonaghs have no enforceable rights under that Agreement to acquire the Site jointly with Company B.

The Court granted Company A an injunction against Mr. McDonagh to prevent further trespass on the Site and awarded nominal damages of €2,000 for trespass-related losses. The Court found no valid defence to the trespass claims.

The Court’s decision confirms the conclusive effect of registered ownership under the Registration of Title Act 1964 absent actual fraud and underscores the importance of credible evidence and proper contractual compliance in claims involving property rights.

While the Court expressed concern about the use of litigation as a tactic causing irrecoverable costs to defendants and the problem of confirmation bias, the ruling does not establish new precedent but emphasizes existing principles regarding conditional agreements, contract interpretation, and abuse of process.

The matter was provisionally listed for mention to address final orders and costs, with liberty for parties to notify the Registrar if unnecessary.