Phelan v. Goodman [2000] IEHC 159 (24th January, 2000)

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2. The proceedings herein were instituted by Plenary Summons dated the 12th June, 1989. The Statement of Claim was delivered on the 13th June, 1989, and the Defence of the first named defendant/respondent, Laurence Goodman (Mr Goodman), was delivered on the 8th January 1990. The reply to that Defence was delivered on the 27th March, 1990. An Order for Discovery was made against Mr Goodman on the 4th May, 1990. In pursuance of that and

3. In the following four years no significant step appears to have been taken by either party to process the litigation. It does appear that both Mr Phelan and Mr Goodman either directly or through companies in which they were involved experienced severe financial problems and a public investigation of the meat industry took place which no doubt required the time and attention of all of those, including Mr Phelan and Mr Goodman, who were involved in that industry. It is nonetheless surprising that proceedings involving substantial sums of money and allegations of the most serious nature were allowed by both parties to remain in limbo for such a lengthy period.

5. In the Statement of Claim it is stated that Mr Phelan avers that he and the secondly named defendant/respondent Zacharia El Taher (Mr Taher) became approximately equal shareholders in each of the ten companies in the Master Meat Packers Group (the Group) by virtue of a series of agreements made between Mr Phelan and Mr Taher on the 10th October, 1986. It is contended that Mr Taher held his shares in the Group through a Liechtenstein anstalt known as Master Meat Anstalt. The Statement of Claim goes on to contend that Master Meat Anstalt held Mr Taher’s share holding in the group companies as nominee for Mr Taher and subject to the terms of an agreement entitled “the Side Agreement” made on the 10th October, 1986, between Mr Phelan of the one part and Mr Taher of the other part. It

is contended that this Side Agreement imposed a variety of fiduciary and other duties on Mr Taher. Having then averred or recited that Mr Goodman was the controller of Goodman International and that that company was engaged in the meat business in Ireland and enjoyed a dominant position in the market the substantive averment of Mr Phelan is contained in paragraph 9 of the Statement of Claim in the following terms:-

“On or before the 15th of April 1987, the first named defendant [Mr Goodman] and the second named defendant [Mr Taher] maliciously and wrongfully conspired and combined amongst themselves to breach the agreements and to defraud and damage the plaintiff [Mr Phelan] and his shareholding in the Group with a view to eliminating the plaintiff [Mr Phelan] and the Group as a competitor of Goodman International with a view to establishing a monopoly in the beef industry in Ireland. The said conspiracy was deliberately and fraudulently concealed from the plaintiff [Mr Phelan] by the defendants [Messrs Goodman and Taher]. As part of the said conspiracy, the defendants [Messrs Goodman and Taher] on or about the 15th of April 1987, unlawfully procured the sale to another Liechtenstein Anstalt known as Tarsos Anstalt, of 80% of Master Meat Anstalt for a price of US $9, 750,000.00 and also procured the giving of an option to Tarsos Anstalt for the purchase of the remaining 20% of the Master Meat Anstalt at a nominal consideration of US $100 and to the knowledge of the defendants [Messrs Goodman and Taher] the said sale was unlawful and in breach of the Agreements.”

“In or around the time of the said state of deadlock negotiations took place between the plaintiff [Mr Phelan] and his advisors and the second named defendant [Mr Taher] and parties who held themselves out and represented themselves to be agents of the secondly named defendant [Mr Taher] but who in fact at all material times were also servants or agents of the first named defendant [Mr Goodman], which fact was deliberately concealed from the plaintiff [Mr Phelan] by the defendants [Messrs Goodman and Taher]....”

“The invoking by the plaintiff [Mr Phelan] of the deadlock provisions in the agreements as aforesaid ultimately led to the forced sale by the plaintiff [Mr Phelan] of his shareholding in the Group on or about the 16th of September 1988 at a substantial undervalue. The said servants or agents of the defendants availed of the deadlock provisions in the agreements to compel the plaintiff [Mr Phelan] to sell his shares in the group, when they had no right or entitlement to do so.”

11. The far reaching complaints of fraud, conspiracy and abuse against Mr Goodman were repeated in affidavits subsequently sworn by Mr Phelan and indeed were emphasised in the written submissions to this Court summarising the Plaintiffs claim in the following terms:-

“It is of the essence of the plaintiff’s claim that his partner (being a 50% share holder in the Master Meat Group of companies) acted in concert with Goodman to secure the removal of the Master Meat Group of companies from the meat trade in Ireland and elsewhere, whether by putting them into receivership or securing ownership and control thereof The defendants in procuring this end result committed deceitful, duplicitous acts contrary to law and to the known express provisions contained in the memorandum (sic) and articles of the various Master Meat companies, and the express and implied basis on which the partnership between the plaintiff and Taher was founded and ought to have been conducted.”

12. Having regard to the case being made by Mr Phelan it is not surprising that he views the conduct by Mr Goodman of these proceedings with suspicion and invites the Court to treat the sworn statements of Mr Goodman as at best misleading and more probably dishonest. For

his part Mr Goodman resents the allegations made against him and he and his legal advisors have expressed indignation and annoyance at what they see as the unnecessary difficulties created by Mr Phelan in relation to the matter of discovery. In any event by Notice of Motion dated the 31st January 1996 the Plaintiff made a second application for an order for further and better discovery by Mr Goodman. That motion generated numerous lengthy affidavits. Unfortunately, these affidavits are frequently repetitive and sometimes argumentative. No doubt they reflect the bitterness and distrust which exists between the parties. With a view to extracting the substantive issues between the parties Mr James Salafla, SC, counsel on behalf of Mr Phelan, focused his argument in relation to the alleged failure of Mr Goodman to disclose documents which are in his power or possession and relevant - in the broad sense in which that word is used in relation to discovery - on two or three issues. First was the alleged failure of Mr Goodman to disclose documents said to have been provided by him to Mr Peter Fitzpatrick, FCA, the Examiner appointed pursuant to the Companies (Amendment) Act, 1990, whose report to the High Court was presented on the 30th October, 1990. These are the documents sometimes described in the various affidavits as those “underpinning the Examiner’s report” .

13. Of this argument Mr Goodman and his solicitor Mr Smyth say first, that the report itself was produced and provided to Mr Phelan notwithstanding the belief of Mr Goodman that it was not relevant and further as Mr Noel Smyth swore in the affidavit dated the 18th July 1996:-

International Group and there is a very limited reference to the Mastertrade Companies and there is, contrary to what is alleged by Mr Walsh. no question of any further reports. There may well be other documentation relating to the Goodman International Group or otherwise which the Examiner studied or otherwise dealt with, and these could have no relevance to the present proceedings In any event, any discoverable documents which Mr Goodman has in this regard have already been discovered in the Discovery where relevant.”

14. An other example of alleged non discovery to which the Appellant drew attention was the much discussed bank draft in the sum of US $9,750,000. Counsel for Mr Phelan drew attention to the copy of the draft drawn on the Caisse National de Credit Agricole in London in that sum and a further document dated the 14th of April 1987 requesting a draft in that amount which was signed for and on behalf of Goodman International Limited by Mr Goodman. Having regard to the sum which it is alleged in the Statement of Claim was paid on or about the 15th April 1987 for the 80% share holding in Master Meat Anstalt the relevance of any further communications between Mr Goodman and the Caisse National de Credit Agricole could not be disputed nor has it been. Counsel on behalf of Mr Phelan asks the Court to infer that such documentation must exist or must have existed and argues that a financial transaction of that magnitude could not take place without generating further documentation the originals or copies of which would come to the possession of Mr Goodman.

“21 I beg to refer to paragraphs 23 and 24 of the plaintiff’s recent affidavit which concern a bank draft payable to the second named defendant in the sum of $9, 750,000. With regard to the said funds, the plaintiff states that he is entitled to all further documentation surrounding the said funds indicates that lam obliged to provide same. I say that I have provided all of the said documentation pertaining to the said bank draft which I have in my power, possession or procurement. I say that the said original hand written note made in the copy of the draft was produced to the plaintiff's solicitors during the course of their inspection.

44 The first complaint made of this affidavit, in paragraph 55 of the plaintiff’s latest affidavit, relates to the fact that the only documentation discovered in relation to the payment to Mr Taher was a request for a bank draft. He expresses a view that it is ‘utterly extraordinary’ that a financial organisation of the size of the first named defendant’s company would have so little documentation in relation to the undertaking of such a transaction. In fact there is nothing extraordinary about this at all. At the time, the first named defendant’s company was a very substantial undertaking whose relationship with its bankers was such that large sums of money could be transferred without the type of extensive paper work which the plaintiff seems to believe existed. As stated already, I have discovered all documents of which lam aware of (sic) in relation to this matter.”

16. These two examples fairly illustrate the issue between the parties in relation to the allegation of non discovery of material documents. Obviously Mr Phelan cannot say with certainty whether any particular document is or has been in the possession Mr Goodman. What he can do and has done is to refer to the very limited banking documentation discovered by Mr Goodman and contend that there is a very high degree of probability that other relevant documentation exists and is available to Mr Goodman. However attractive this argument may appear it is met with a firm and unequivocal denial sworn by Mr Goodman and supported, so far as his knowledge extends, by the affidavit of his solicitor. In this context the issue is not whether particular documents are relevant or privileged but whether a document or range of documents is or has been in the power or possession of the deponent. Should the Court draw the inference suggested by the Mr Phelan or prefer the sworn statement of Mr Goodman? In Sterling-Winthrop Group Limited .v. Farbenfabriken Bayer AG [1967] IR 97 Kenny J considered the issue as to how far the sworn statement of a deponent making an affidavit of discovery was conclusive. At page 103 of the report he summarised the position as follows:-

“British Association of Glass Bottle Manufacturers v. Nettle fold Ltd. [1912] AC 709 is authority for the view that the Court may order a further affidavit when it is satisfied that the party making the first affidavit has not properly understood the issues involved in the action. The speech of Viscount Haldane contains this passage:-

been wrong. If the party making the affidavit has misconceived his case, so that the Court is practically certain that if he had conceived it properly, and had acted upon a proper view of the law, he would have disclosed further documents, then the Court can refuse to recognise an affidavit as conclusive, and order a further affidavit.”

17. These principles were applied by the Supreme Court in the unreported decision of Kreglinger and Fernau v. The Irish National Insurance Company (2nd July 1954) in which the Court reversed a decision of the High Court which ordered a further affidavit of discovery”

“The authorities which I have mentioned establish that the Court should not order a further affidavit of documents unless it has been shown that there are other relevant documents in the possession of the defendants or that the person making the affidavits has misunderstood the issues in the action or that his view that the documents are not relevant is wrong. None of these matters has been established and I must therefore, refuse to make the order sought.”

19. In addition to confirming the principle identified by Kenny J the case of Kreglinger & Fernau v. The Irish National Insurance Company provided a helpful illustration of the circumstances in which the Court would not go behind the sworn statement of the deponent by whom an

affidavit of discovery was made. Furthermore, the decision of the full Court in that case was based on research undertaken and arguments addressed to the Court by the very distinguished teams of counsel (including John Kenny BL, as he then was, Junior Counsel on behalf of the Appellants) who had been assembled to contest what was probably the biggest commercial case of its time. As the two judgments delivered, those of Maguire CJ and Lavery J, are not readily available I have taken the liberty of annexing hereto copies of the approved judgments which the Court Registrar has helpfully obtained from the National Archives.

“I accept that a Court should be satisfied, as a matter of probability, that an error has occurred in an omission from an affidavit of discovery of documents on the basis of irrelevancy before making any order for further discovery and that it should not, in particular, permit the opposing party to indulge in an exploratory or fishing operation.”

20. In that case it was conceded that the deponent did have certain documents in his possession and the issue was whether his sworn statement that those documents were irrelevant was effectively conclusive. This Court rejected that proposition but held in relation to the question of relevance that the court must be satisfied on the balance of probabilities that an error has occurred. Where a deponent accepts that he does have documents in his power or possession an effective order can be made to compel their discovery. Difficulties obviously

arise in directing the discovery of documents or a particular range or class of document which the deponent denies are in his possession. To order Mr Goodman to swear a further affidavit of discovery presumably would result in his repeating the statements made and sworn by him on several occasions, namely, that he has not and never had any documents in addition to those already discovered in his power or possession relating to the matters in issue in the present proceedings. In those circumstances the Court would have to be satisfied on the evidence before it that it was making a meaningful order. Whilst I recognise the force of the arguments made by Counsel on behalf of Mr Phelan, it seems to me that the evidence presented to the High Court or to this Court on appeal is insufficient to satisfy the Court that relevant documents are or have been in the possession of Mr Goodman which should have been but have not been discovered by him.

22. Mr Phelan was entitled to point out that the first affidavit of discovery sworn by Mr Goodman was manifestly defective insofar as it failed to identify the particular grounds of privilege claimed in respect of documents identified in that affidavit. It also emerged that bundles of documents in respect of which privilege had been claimed included documents to which no privilege extended. Adding those factors to the pre-existing bitterness and distrust made it unlikely that negotiations between the parties’ legal advisors would provide an acceptable solution. Nevertheless correspondence and meetings did take place between the legal advisors and various explanations were provided for the deficiencies which had existed

and important practical steps seem to have been taken to remedy them. Indeed Mr Goodman and his representatives were indignant that matters which they felt had been long resolved were raised with a view - they argued - to delaying further the disposal of these proceedings. Undoubtedly a number of documents in respect of which privilege might have been claimed were made available to Mr Phelan and the discoverable documents (or many of them) included in the privileged section of the affidavit were specified and identified also in the open section thereof. Particular reliance was placed on the fact that by letter dated the 12th July 1996 an offer had been made on behalf of Mr Goodman to permit senior counsel on behalf of Mr Phelan to read all of the documents in respect of which privilege had been claimed “to determine whether he accepts our client’s claim for privilege”. This was not an offer to permit counsel on behalf of Mr Phelan to determine whether the claim to privilege could be sustained. What was proposed was that if counsel having read the documentation challenged the claim the matter would be reconsidered by Mr Goodman’s legal advisors. Whilst that offer would not have discharged Mr Goodman’s obligations to swear an appropriate affidavit it did give impressive evidence of the bona fides of Mr Goodman in relation to the claims which he made for privilege and the accuracy in that regard of his revised affidavit of discovery.

23. In my view the learned trial judge would have been justified on the evidence before him in dismissing the claim for further and better discovery in relation to documents in respect of which privilege was claimed. In addition, however, the learned trial judge undertook the burden of reading the numerous documents in this case and satisfied himself that privilege was properly claimed in respect of the documents. In my view that disposes conclusively of the issue in relation to discovery.

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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Phelan v. Goodman [2000] IEHC 159 (24th January, 2000) URL: http://www.bailii.org/ie/cases/IEHC/2000/159.html Cite as: [2000] IEHC 159

High Court of Ireland Decisions

Phelan v. Goodman [2000] IEHC 159 (24th January, 2000)