High Court: Mareva injunction granted in case of fraudulent conduct by project manager



In the High Court, Mr Justice David Keane has allowed two property companies and their controlling director, to succeed in an interlocutory application for a Mareva injunction – thereby restraining a former employee from “removing from Ireland, disposing of, dealing with or diminishing the value of her assets” in a case of wrongly appropriated funds through fraudulent conduct.

Stephen Evans-Freke, the controlling director of two property holding companies - Bonice Property Corporation and Octara Limited - employed Ms Anne Oakes as the project manager in the restoration of two historical buildings near the village of Rathbarry in West Cork between 2004 and 2014.

Wrongly appropriated funds

The employment agreement was that Ms Oakes would manage the restoration and maintenance of both Castle Freke and Rathbarry Castle, which involved Ms. Oakes assuming responsibility for the payment of the tradesmen, casual labourers and third party contractors who were engaged in connection with the restoration works.

Ms Oakes kept a handwritten record of those payments in notebooks that she maintained for that purpose.

Mr Evans-Freke made transfers into Ms Oakes’ bank account in Clonakilty in line with regular payment summaries that she provided to him and, during the course of his frequent visits to Ireland, sat down with her to reconcile those payments with the contents of the notebooks.

In addition to being permitted to reside rent free in an apartment in the stable block at Rathbarry Castle, Ms Oakes was paid €3,000 per week by Mr Evans-Freke in the period between 2004 and 2009 and €1,500 per week thereafter.

Mr Evans-Freke contended that Ms Oakes agreed the reduction in that weekly payment in 2009 in line with a reduction at that time in the scale of the works she was managing.

Ms Oakes contended that, rather than agreeing a reduction of €1,500 in the weekly payment due to her, she agreed to accept the indefinite deferral of payment of that amount in response to the plaintiff’s request that she do so by reference to his personal financial position at that time.

In June 2014, an employee of Mr Evans-Freke informed him of his belief that there was a discrepancy between what was recorded in the notebooks held by Ms Oakes concerning the level of payments made to certain tradesmen and what those tradesmen had told that employee about the payments they had actually received. In response, Mr Evans-Freke began to carry out enquiries.

As a result of those enquiries, Mr Evans-Freke alleges that the Ms Oakes engaged in fraudulent conduct which allowed her to wrongly appropriate an estimated €855,000.

Legal test for a Mareva injunction

Justice Keane stated that the five necessary criteria to obtain a Mareva injunction were those endorsed by the Supreme Court in O’Mahony v. Horgan 2 IR 411:

(1) The plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge to know; (2)The plaintiff should give particulars of his claims against the defendant, stating the grounds of his claims and the amount thereof and fairly stating the points made against it by the defendant; (3) The plaintiff should give some grounds for believing that the defendant had assets within the jurisdiction. The existence of a bank account is normally sufficient; (4) The plaintiff should give some grounds for believing that there is a risk of the assets being removed or dissipated; and (5) The plaintiff must give an undertaking in damages, in case he fails.

Furthermore, the test that the Court must apply in considering an application for a Mareva injunction was also set out in O’Mahony:

“ Mareva injunction will only be granted if there is a combination of two circumstances established by the plaintiff i.e. (i) that he has an arguable case that he will succeed in the action, and (ii) the anticipated disposal of a defendant’s assets is for the purpose of preventing a plaintiff from recovering damages and not merely for the purpose of carrying on a business or discharging debts.”

Justice Keane was satisfied that the criteria in O’Mahony had been met in this claim.

Hearsay

In addressing the contention by Ms Oakes that Mr Evans-Freke had failed to make out a good arguable case, Justice Keane had to consider the quality of the evidence upon which Mr Evans-Freke sought to rely upon.

Order 40, rule 4 of the Rules of the Superior Courts provides that hearsay evidence is to be admissible on interlocutory applications, stating that “Affidavits shall be confined to such facts as the witness is able of his own knowledge to prove, and shall state his means of knowledge thereof, except on interlocutory motions, on which statements as to his belief, with the grounds thereof, may be admitted…”

Further, Justice Keane indicated that it could not be ignored in the context of the submission made on behalf of Ms Oakes that, while Mr Evans-Freke sought to rely heavily on indirect evidence, Mr Oakes adduced little or no evidence of any kind in support of her denial of the claims. Consequently, he was satisfied that “indirect evidence, where admissible, may be, and frequently is, perfectly sufficient to make out a claim, especially in the absence of any significant countervailing evidence”.

Conclusion

While emphasising that in dealing with the interlocutory motion he was “not purporting to finally decide any factual or legal aspect of the conflict between the parties”, Justice Keane held that Mr Evans-Freake was entitled to succeed in a claim for an interlocutory Mareva injunction.

  • by Róise Connolly for Irish Legal News