The High Court has found that four defendants breached fiduciary duties by delaying payment of money due to three former investors in Data Code Communications Ltd and charging all legal costs and expenses against their share of a settlement fund. The court said the amount of judgment and the costs order still required further submissions.
The case arose from a 1998 settlement of proceedings against CBT Group Plc, formerly Thornton Group Plc. The plaintiffs, Charles Clements, Marcus Seigne and Charles Bryant, had invested in Data Code under the Business Expansion Scheme. They claimed a share of the settlement won by Barry Meagher, John O’Grady, Tim O’Flanagan and Philip Shaffrey, who had brought the CBT proceedings in their own names and funded them.
CBT agreed to pay US$600,000, with a further US$250,000 payable if the three plaintiffs and Michael Sweeney signed waivers releasing claims against CBT and related parties. They signed. The judgment records that the defendants accepted the plaintiffs’ entitlement to a proportion of the additional US$250,000, shared with Sweeney and subject to appropriate deductions.
The plaintiffs initially claimed 24.68% of the full US$850,000 settlement. During the hearing, they accepted that their claim was limited to their shares of the US$250,000, less an appropriate contribution to expenses and legal costs. The judge said the court therefore did not need to decide whether the full settlement was held on constructive trust or whether the defendants had acted as the plaintiffs’ agents in the earlier CBT proceedings.
The court found that a 1995 letter authorising Meagher to negotiate a settlement did not make him responsible for the plaintiffs’ interests during the later litigation. But it found that the 1998 waiver process and the defendants’ control of the settlement money created a fiduciary relationship. The plaintiffs had agreed to deductions, but the court found they had not agreed that the entire costs would come only from the US$250,000 portion. The defendants’ decision to deduct costs that way breached their duties, the judge said.
The court accepted expenses of IR£60,000 for Meagher’s work and IR£20,000 in solicitor-and-client costs. It held that the deductions should be shared proportionately across the US$850,000 settlement. It also found that payment should have been made after the costs were quantified, by 5 October 1998, and that the defendants were liable for interest because of the delay. A cheque for IR£74,813, sent in October 2001, was not cashed; the judgment provides for later interest only on the balance above the sums offered then.
The judge set out a method for calculating each plaintiff’s award, including their respective shares of the US$250,000 fund, interest, currency conversion and cost deductions. The court dismissed all claims against Carl Moynihan, finding that his receipt of half of Meagher’s agreed fee did not make him liable to the plaintiffs. The precise judgment sums and the costs order were left for further submissions.