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Piltdown Man

It is highly speculative, but an attractive thought, that the Zeitgeist of the early twentieth century produced or induced two events; the development of the modern law of Negligence and the perversion of truth by the Piltdown Man hoax.

They are connected in one respect; a lawyer was at the centre of each event.

Lord Atkin, in the House of Lords, delivered the seminal judgement in Donoghue v Stevenson, and Charles Dawson, a solicitor, “found” the skull of Piltdown Man in an English gravel pit.

Mr. Dawson was a very respectable person, as witnessed by the fact that after his find of Piltdown Man, (officially named “Eoanthropus dawsoni”) critics of the claim that his find were the remains of an early human, were attacked in personal terms.

He allegedly found the remains in 1912. As late as 1938 a memorial was erected at the gravel pit in these terms;

Here in the old river gravel Mr Charles Dawson, FSA found the fossil skull of Piltdown Man, 1912-1913, The discovery was described by Mr Charles Dawson and Sir Arthur Smith Woodward in the Quarterly Journal of the Geological Society 1913-15.”

The memorial was, probably, a desperate last stand of the respectable people. The hoax was fully exposed in 1953 in, inter alia, the “Times”; but the truth had been available since 1923.

Ango Irish Bank Corporation (1)

Arguably, it is too soon to make a comment on the Ango Irish Bank debacle. But this post is a comment and is timely, so the argument tips to comment, rather than no comment. A newspaper suggestion that the Irish Financial Services RegulatorY Authority (“IFSRA”) had actual knowledge of Sean Fitzpatrick’s loans, and their size, for years, shows that the situation may develop at considerable speed, justifying a torrent of comment now and not later.

Undoubtedly, the timely moment for full assessment must surely lie with the occasion that the Office of Director of Corporate Enforcement (“ODCE”) issues a report of some kind. The public and the shareholders need that; currently, too much is unknown.

The Irish Times reports

A DUBLIN solicitor has said it is a “racing certainty” that shareholders will be taking a case for damages arising from what has happened with Anglo Irish Bank.

My solicitor colleagues who are consulting counsel are to be commended for their spirit, but counsel are not a source of evidence, just opinion, and what we lack is not opinion but evidence. There is, of course, the small matter of the need to avoid making defamatory statements; so any comment cannot be full.

What we know is that a sense of grievance in shareholders is not, itself, a spur to action. After all, if the sense of grievance springs from the loss in value of the Anglo Irish Bank shares, it has a weak foundation. Did they not know of the Anglo Irish Bank “business model”? Is it not the failure of that model that has caused the major part of the shareholder loss?

There is a good argument to excuse the shareholders; it is, surely, a legal and business fiction that shareholders know what they are doing? It is equally a fiction that it is open to them to effectively protect themselves (other than by selling their shares)?

That reflection suggests the principal ground for any useful legal action (from a shareholder viewpoint; there are other viewpoints). The only useful “entitlement” of an Anglo Irish Bank shareholder was the right to full disclosure of the way in which Anglo Irish Bank was being managed. Anything less placed the shareholders in the category of “outsiders” as opposed to “insiders”. There is no evidence, or insufficient evidence, on that topic currently. That is the kind of information that an investigation will look at (but will it?) and we should turn our eyes to the ODCE rather than to the Law Library for that information.

What counsel can currently tell us (well, some of them anyway), is that on the available information, Anglo Irish Bank Corporation is the obvious plaintiff for any contemplated proceedings against the Bank’s directors. Under the rule in Foss v Harbottle (1843), a shareholder is not entitled to litigate, save by derivative action, a wrong done to a company. A derivative action is possible only where the shareholder can prove a fraud.

(Before I am assailed with suggestions on this topic, consider the question of reliefs; what is the point, say, of seeking a winding up order against Anglo Irish Bank Corporation?)

So, is there any hurry? Not really; the Statute of Limitations is indulgent (relative to plaintiffs suffering personal injury) to aggrieved shareholders.

What might be useful currently is the formation of a network of support by shareholders.

By the same token the directors will, presumably, form an equivalent network of support among themselves. (On current information a cool headed gambler would put his money on the directors to fend off any challenges from shareholders. That simply shows that information is the key and the shareholders lack information).

Last comment: questions about insider trading belong, in the regulatory sense, to IFSRA and not ODCE. IFSRA was never intended to function to protect people like the the Anglo Irish Bank shareholders. If the Government had intended any such purpose it would have made provision for shareholders to bring a class action themselves and, just as importantly, would have given them a specific right to cite breaches of statutory duty as a ground for a civil claim by them. The whole thrust of modern government in Ireland is to prevent any such personal action of vindication.

Charlie Chaplin and Ingenuity?

Interestingly, it was during the last major credit crunch (the Wall St. Crash) that the law of Torts was inflated to almost rival the domination of criminal and contract law in the common law legal world.

It happened in 1932, in Donoghue v Stevenson [1932] AC 562. The defence in the case relied on the fact that the Plaintiff had no privity of contract with the Defendant. She, the Plaintiff had consumed some of the contents of a bottle of ginger beer. She discovered what she perceived as the remains of a decomposing snail in the bottom of the bottle and became ill as a consequence. She had been given the beer by the purchaser.

The court found in her favour by extending the reach of of the law of negligence. Before 1932 the law of negligence was a wilderness of special circumstances in which liability would be fixed on particular people. The liability of common carriers was typical of this.

The consequential growth of the law of negligence was limited by the fault principle and the proximity principle. The defendant would only be liable if the plaintiff could show that the defendant was guilty of doing something or failing to do something which the defendant ought to have done or not done and thus caused the damage to the plaintiff. In addition, the plaintiff had to show that the injury to the plaintiff was reasonably foreseeable by the defendant. If the causation chain was too long the defendant was not liable.

The law of tort does not deliver the benefits of universal insurance.

12th January 9 A.D.

In 8 A.D. the Emperor Augustus condemned the poet Ovid to live in Tomis in Moesia.

Tomis was at the edge of the Roman Empire on the Black Sea, near the mouths of the Danube, a mere 450 miles or so from a bend in the Volga where Stalingrad would later be sited.

Ovid’s trial was held in camera before the Emperor. His ostensible offence was the writing of the Ars Amatoria. Eight years had passed since its publication: the Emperor’s real motivation lay in the discovery of the wanton life of his daughter Julia and he was in search of a scapegoat.

Ovid was that scapegoat.

This truth, or context, deprived Ovid of the chance to address the Emperor’s motivation in condemning him to exile, as he wrote from Tomis to his friends and public in Rome.

In the face of power, formally judicial or otherwise, it is necessary to be circumspect.

As Ovid discovered, and told his Roman readers, the Danube and even the Black Sea would freeze over in winter. He expressed his anguish in the recollection of his last moments in Rome;

Iamque quiescebant voces hominumque canumque,
Lunaque nocturnos alta regebat equos.

At last all noise of men and dogs was still,
The moon was driving high o’er heaven’s hill.”

His life in Tomis is recalled and examined in “An Imaginary Life” by David Malouf. Malouf’s book, a sustained work of imagination, is a reflection on what it is to be human. Ovid’s humanity, in the loneliness of his exile, is counterpointed by the strange example of a feral boy found by the inhabitants of Tomis and brought in from the barbarous wastes of the steppe.

12th January 1943

On 22nd June 1941 Germany attacked the Soviet Union. The attack was a surprise, and in breach of the Molotov-Ribbentrop Non-Aggression Pact of 1939 and, by that token, without a Declaration of War.

On 12th January 1943 the German 6th Army was trapped (approximately 190,000 men at that point) at Stalingrad. The Soviet Union had launched counter-offensives code named Uranus and Saturn (followed, later, by Mars).

Between 10th and 12th January 1943 the Germans at Stalingrad had lost 60,000 men: the Soviet Union had lost 26,000 there. Further north, on the Voronezh Front the Soviet Union, on 12th January 1943, committed 347,000 men to an attack on that Front against a total of Axis forces of 225,000 men. Further north, near Leningrad, the Soviet Union attacked with two armies totalling 244,000 men. The various Fronts reached from Leningrad to Stalingrad. At Stalingrad the temperature was 35 degrees below freezing.

A New Year Resolution

This post is unseemly but necessary. It proposes a resolution for others, rather than the writer.

The new year, conventionally, calls for the turning of a new leaf; what bettter leaf to turn than to rethink the granite face of Order 84 of the Rules of the Superior Courts.

Under Order 84, challenges to public law must be brought as soon as possible. They should not be brought later than 3 months after the triggering of the cause of action where Prohibition, Mandamus or Quo Warranto are sought or later than 6 months after the triggering of the cause of action where Certiorari is sought.

To save face (a granite face), there is provision to apply for extension of time to make the necessary application to court. The chances of getting an extension are vanishingly small.

The effect of this Rule is to favour the State against the citizen.

The justification for this notion (that the State should be favoured) is the supposed need for certainty in public administration. This is a peculiar idea in this context; Prohibition, Mandamus, Quo Warranto or Certiorari do not present opportunity for an appeal. They challenge the legal base of the administrative action, not the correctness of the decision. A judge is not asked in these applications to substitute his/her view for that of the Executive. The judge is asked to check a legal error.

The argument behind Order 84 is not for certainty in administration, but for loyalty to the Executive. The judiciary ought not to profess loyalty in the Executive, particularly where the expectation of loyalty involves condoning legal wrongs, by definition.

The required resolution for the new year is, therefore, for the Bar to commit to the abandonment of the current terms of Order 84. Any member of the Bar on the Rules Committee of the Superior Courts should be asked by his/her colleagues to subscribe to that commitment and to pursue the the reform of Order 84. He/she should likewise lobby any members of the Committee who is not a lawyer to do likewise and, in due course, effect the necessary reform. (As George V. Higgins has noted, judges are people who used to be lawyers).

Health Care Settings?

The High court has furnished some clarification of an important matter relating to the Personal Injuries Assessment Board Act 2003 (“the PIAB Act”), in Gunning v National Maternity Hospital & Ors.

There is provision in the PIAB Act (Section 17 (1) (b)) for the PIAB to decline to issue an assessment of compensation in respect of certain classes of injury. This, however, can relate only to claims that fall within the provisions of the PIAB Act. In Section 3 (d) of the PIAB Act, some actions for personal injury are excluded from the requirement to apply to the PIAB for an assessment. They are actions –

…arising out of the provision of any health service to a person, the carrying out of a medical or surgical procedure in relation to a person or the provision of any medical advice or treatment to a person”

The 1st Defendant in the action, the National Maternity Hospital, took issue with the alleged failure of the Plaintiff to procure a certificate from the PIAB under the PIAB Act, prior to the issuing of proceedings. (Where a certificate is required, the issue of the certificate is a condition precedent to the bringing of proceedings in court).

The Hospital argued that the pleadings in the action alleged a defect with, or in, a forceps used in the Hospital. It argued that a claim that a forceps was defective was not a medical negligence claim (“…the correctness or otherwise of the surgical procedure being carried out”), but was a defective product claim.

The court remarked on the arguments on the point as follows:

In my view, s. 3(d) of the Act of 2003 should be construed as applying to the factual circumstances out of which an action arises, rather than applying to the specific legal causes of action set out in the legal proceedings. I say this because if the latter approach is followed, it would result in some parts of the same grievance or complaint falling within the remit of the P.I.A.B and others falling outside. This would clearly be an undesirable situation, as it could result in two aspects of the same personal injury complaint proceeding in parallel in two jurisdictions, i.e. the Courts and the P.I.A.B.”

Although that is a valuable pointer, it is not now any more clear what the words “arising out of the provision of any health service to a person , the carrying out of a medical or surgical procedure in relation to a person or the provision of any medical advice or treatment to a person…” means, even in the context of “…factual circumstances…”.

Does it mean that only claims challenging the consequences flowing from the provision of such services are exempted by Section 3 (d) of the PIAB Act and not any arising in connection with the provision of such services?

If a patient in a Hospital or other health care setting slips and falls on the floor of the facility is he/she obliged to seek a certificate from the PIAB, or not? On the basis of Gunning v National Maternity Hospital & Ors, it would appear not. However, if a potential Plaintiff, taking no chances, applies for a certificate and the PIAB declines jurisdiction it would be open to the defendant Hospital or health care facility to plead that the Plaintiff had not complied with the PIAB Act. Gunning suggests that the practical solution is to treat the identity of the Defendant as indicative of the application of Section 3 (d) of the PIAB Act, but there must be a limit to that approach. Is there a difference between a patient slipping and falling in the corridor of a Hospital and the same patient (ex-patient?) being knocked down in the Hospital car park as he/she leaves?

Will the only relevant point of difference be the identity of the person causing the injury?

Representation

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.

The Madoff Mess

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.

Homework

“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.

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