High Court: ‘Fraud’ in interrogatories is equitable definition

Andrew McKeown BL

About this case:

• Citation:
  [2020] IEHC 539
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Garrett Simons

Background

The proceedings arose out of an “arrangement” entered into between Nahj Company for Services (NSfS) and the Royal College of Surgeons in Ireland (RCSI) in respect of the recruitment of Saudi Arabian students for RCSI’s medical commencement programme. The precise nature of the relationship between the parties is disputed, with NSfS contending that the arrangement was in the form of a partnership, and RCSI contending that the agreement was an exclusive agency agreement.

The Ministry of Higher Education of the Kingdom of Saudi Arabia (the Ministry) provided state-funded scholarships to students to participate in medical courses. NSfS claims that it was to receive a commission in the sum of €5,000 in respect of each Saudi Arabian student recruited to RCSI’s medical commencement programme.

RCSI maintains that it received a directive from the Ministry in June 2010 that all students were to be recruited through the Saudi Arabian London Embassy, and that it was to cease recruiting students in Saudi Arabia. The fees to be charged to the Ministry for the students in future were to be reduced by an amount equal to the commission which had, until that date, been paid to NSfS by RCSI. RCSI claims that this directive rendered its agreement with NSfS impossible to perform, and relies on the doctrine of frustration.

NSfS claims that RCSI not only failed to disclose a previous error in respect of the amount of fees payable, but sought to “disguise” this, and that it breached the “fiduciary duties” which it is said to owe NSfS.

Interrogatories

In McCabe v Irish Life Assurance plc [2015] 1 IR 346, the Court of Appeal encouraged the use of interrogatories. Interrogatories may be served in relation to facts directly in issue, but also in respect of facts the existence or non-existence of which is relevant to the existence or non-existence of facts directly in issue. The right to serve interrogatories is not confined to facts which are in the peculiar knowledge of the other party. Rather, they may also be used for the purpose of obtaining an admission from the other side (Goodbody Ltd v Clyde Shipping Company Ltd, unreported, Supreme Court, 9 May 1967).

Interrogatories will not be allowed where what is being sought is not an answer in respect of a factual matter, but rather relates to the interpretation of the contents of a document (Bula Ltd v Tara Mines [1995] 1 ILRM 401, and Woodfab Ltd v Coillte Teoranta [2000] 1 IR 20).

Order 31 RSC prescribes the procedure governing the delivery of interrogatories. A distinction is drawn between proceedings in which interrogatories can be served as of right, and proceedings in which the prior leave of the court is required. If relief is sought on the ground of “fraud” or “breach of trust”, then either party may deliver interrogatories without leave.

If relief is not sought on these grounds, then it is necessary to apply to the court for prior leave. On such an application, the moving party must satisfy the court that the interrogatories are necessary either for disposing fairly of the matter or for saving costs. In assessing necessity, the court is obliged under Ord.31 r.2 to take into account any offer, made by the party sought to be interrogated, to deliver particulars, or to make admissions, or to produce documents. The judge must consider whether the objective of the interrogatories might be achieved instead by an alternative procedural mechanism, such as the delivery of particulars or the making of admissions.

RCSI delivered interrogatories in October 2019 without the prior leave of the court. No substantive response was received. In response to a reminder letter from RCSI’s solicitors, NSfS’ solicitors sent a holding reply in November 2019. NSfS argued that RCSI was not entitled to delivery them without prior leave of the court, as the pleadings did not expressly allege fraud or breach of trust.

Mr Justice Garrett Simons said that the requirement for the prior leave of the court, while an important safeguard, is not the only protection afforded to the party to be interrogated. A party is entitled to impugn interrogatories on a wide range of grounds, including inter alia that they are unreasonable, oppressive or irrelevant.

Mr Justice Simons noted that the procedural device of interrogatories was one originally available only in the Court of Chancery, and the concept of “fraud” should therefore be interpreted as it would have been understood by courts exercising equitable jurisdiction.

In this regard, counsel for RCSI cited the House of Lords decision of Lord Chancellor Haldane in Nocton v Lord Ashburton [1914] AC 932 as authority for the proposition that, in the Court of Chancery, the term “fraud” came to be used to describe what fell short of deceit. An actual intention to cheat does not always have to be proved: “What it really means in this connection is, not moral fraud in the ordinary sense, but breach of the sort of obligation which is enforced by a Court that from the beginning regarded itself as a Court of conscience.”

Conclusion

Mr Justice Simons found that NSfS’ case involved allegation of dishonesty against RCSI. These suggestions of dishonesty mean in substance, that the cause is grounded on a claim of “fraud” in the equitable sense. RCSI was therefore entitled to deliver its interrogatories without prior leave of the court.