knowledge 1 August 2019 |

Disputes – Strike Out of Conspiracy Proceedings Fails

In Trafalgar Developments Ltd v Mazepin¹, the plaintiffs owned a 70% shareholding in a Russian company. They alleged that the defendants led by the controller of a minority shareholder had actively participated in an unlawful, corrupt and oppressive scheme known as a “raider attack” to wrest control of that company from the plaintiffs by forcing the sale of their shares at an undervalue. This included pursuing unmeritorious litigation in Russia based on forged documents. The plaintiffs sought damages for conspiracy along with various other reliefs.

The defendants sought to strike out the plaintiffs’ claim under the inherent jurisdiction of the court on the grounds that it was frivolous, vexatious, factually unsustainable and bound to fail. The defendants argued that if they could show that the documents relied on by them in the Russian proceedings were genuine and therefore that their pursuit of the Russian litigation was equally genuine, then the allegation of participation in the “raider attacks” giving rise to the claim for conspiracy must fall way.

They were unsuccessful in the High Court. On appeal, Costello J said that it was recognised since Barry v Buckley² that the court’s inherent jurisdiction to strike out proceedings on the grounds that they were frivolous, vexatious or bound to fail, was “an exceptional jurisdiction to be exercised sparingly”. The question for the court was whether it “can be established that there is no credible basis for suggesting that the facts are as asserted and that, thus, the proceedings are bound to fail on the merits”.

Costello J made the point that the onus lies on the defendant to satisfy this high threshold. A plaintiff is not obliged to prove its case in resisting the motion and the court is not entitled to weigh the evidence save to a very limited extent. She emphasised that the application is not a form of summary trial and that this type of procedure is not available in Ireland.

While the parties here were agreed on the general legal principles, one matter in dispute was whether the court in dealing with the application, should have taken certain documentary evidence presented by the defendants into account? Here, Costello J pointed out that to be properly before the court, a document must be both receivable in evidence and admissible into evidence.

She said that a document will not be receivable in evidence unless the best evidence rule is satisfied. This requires a party seeking to rely on a document to produce if possible the original of that document in the first instance. In this case, unauthenticated copy documents of uncertain provenance were produced. On the admissibility issue, Costello J went to add that this was not an interlocutory application, where hearsay affidavit evidence could be admissible, but rather a final application, where it was not. The defendants could give no direct evidence on the matters contained in those documents and these were otherwise inadmissible as proof of the truth of their contents. She concluded that the documents here were not properly before the court and could not be relied upon by the defendants.

Costello J also made the point that the central allegation in this case was one of forgery. She said that a party against whom such allegations had been made would be well-advised to ensure that it complied with the rules of evidence on a motion of this kind.

Notwithstanding that these evidential difficulties were enough to defeat the application, Costello J went on to address the defendants’ substantive arguments. She concluded that the defendants had focussed on one aspect of the claim only which centred around the forging of documents, had not addressed other aspects of the plaintiffs’ pleaded claim and had not established that the plaintiffs’ case was bound to fail and should be dismissed.

Comment

This case illustrates the application of the well-established high standard to be satisfied by defendants seeking to strike out proceedings in Ireland. Article 40.3 of the Irish Constitution sets out a constitutional right of access to the courts and it is only where it is clear on the basis of incontrovertible evidence that the claim could never have succeeded that a defendant will prevail.

Our Disputes team or your usual contact at McCann FitzGerald would be pleased to provide further information on this case or on strike out generally.