The High Court has allowed Brian Connell and Florian Karrer to be added as defendants to a counterclaim alleging fraud and conspiracy over a valuable US patent. It also permitted amendments to the counterclaim to include allegations against them.
The ruling, delivered by Mr Justice Twomey on 19 November 2020, concerned a procedural application by Lexington Services Limited. The judge found Lexington had established a stateable case that Connell and Karrer may have been involved in an alleged effort to deprive it of its economic interest in US Patent No. 8,019,807. That threshold decision did not determine whether the allegations were true.
The underlying dispute concerns a 2015 settlement under which Lexington was to pay $27 million to Anthology S.A., a company nominated by the late Mortimer John Walters, in connection with the patent. Lexington alleges Walters and others improperly caused receivers to be appointed over the patent before the payment period expired. Walters and the receivers disputed that account. Lexington says the patent was expected to generate $54 million over four years.
In support of adding Connell and Karrer, Lexington relied on emails disclosed during discovery. On 30 January 2017, Walters asked Karrer to test a fax line as a deadline for delivering an annual revenue report approached. After the report was emailed to Walters the next morning, he forwarded it to Karrer and Connell. Connell remarked, “Interesting choice for mode of delivery.” The court said the newly discovered evidence plausibly supported an allegation that the two had knowledge of or involvement in actions that could amount to conspiracy.
The court also considered Karrer’s role in the company to which Walters purported to transfer the patent for €100, as well as Connell’s work as an adviser and agent for Anthology and his evidence about events around the alleged default and receivership. Walters had died in 2019, and receiver Ronan Campbell said he had no knowledge of the events surrounding the alleged default. The judge said Lexington could be prejudiced if it had to pursue the claims without Connell and Karrer as parties, including because they might not be bound by findings made in proceedings to which they were not parties.
Campbell also raised a serious issue concerning falsified emails in an affidavit of discovery filed on Lexington’s behalf. The court said that issue would have to be addressed at trial, but it was not a reason by itself to refuse joinder because those emails were not among the evidence relied on for the joinder application.
The judge accepted that adding parties could cause delay and extra costs, but found these were not substantial countervailing reasons to refuse the application. The substantive trial was not yet set down. The court allowed both the joinder and the related counterclaim amendments. It did not rule on whether the alleged default occurred, whether the receivers’ appointments were valid, or whether fraud or conspiracy took place. The parties were asked to discuss outstanding matters; if needed, the case was to be listed for mention the following week.