Supreme Court allows appeal where vendor's misrepresentation cannot be excused by purchaser's failure to investigate.

THE SUPREME COURT

Appeal No. 67/2015

Denham C.J.

McKechnie J.

MacMenamin J.

Dunne J.

O’Malley J.

Between/

The Leopardstown Club Limited

Plaintiff/Appellant

and

Templeville Developments Limited and Philip Smyth

Defendants/Respondents

Judgment delivered the 11th day of July, 2017 by Denham C.J.

1. This is an appeal by Leopardstown Club Limited, the plaintiff/appellant, referred to as ‘Leopardstown’, from the judgments delivered

on the 28th July, 2015, by the Court of Appeal and the order of the 15th October, 2015.

2. The defendants/respondents, Templeville Developments Limited and Philip Smyth are referred to collectively as “Templeville”, and

when necessary Philip Smyth is referred to separately as “Mr. Smyth”. The Court of Appeal allowed the appeal of Templeville against

the order of the High Court (Charleton J.), which dismissed their counterclaim.

3. This Court has given leave to Leopardstown to appeal against the decision of the Court of Appeal.

Background Facts

4. I gratefully adopt the description of the basic facts as set out by Hogan J. in his judgment in the Court of Appeal. Leopardstown is

the owner of Leopardstown race course. Racing takes place on the course on approximately 25 days in the year. Leopardstown has

begun to diversify activity.

5. Mr. Smyth is the principal shareholder and a director of Templeville. Templeville has had a business relationship with Mr. Smyth

since the 1970s.

6. On the 1st January, 1998, Leopardstown granted Templeville a 35 year lease of certain of the lands and premises of the

racecourse. Mr. Smyth is a party to the lease as surety for the payment of the rent. In June, 1998, Leopardstown and Templeville

entered into further agreements supplemental to the lease. This included a licence over some lands, and payments and a licence

relating to parking arrangements at the racecourse on race days. As Hogan J. recorded, to that end Leopardstown entered into a

lease with Templeville over certain parts of the land in the early 1980s. There was a further lease in 1993, and a lease in 1998, and a

licence in 1998.

7. Templeville took possession of certain lands for the purpose of constructing a sports club, the West Wood Club, and facilities,

including a cafeteria. Templeville arranged for the construction of eleven tennis courts, seven of which were indoor in Dome No. 2,

and the remaining courts to be outdoor courts.

8. Hogan J. noted that the relationship between the parties has nearly always been strained and fractious, and that there have been

a number of legal disputes between the parties.

9. In September, 2011, there were nine major items of actual or threatened litigation between the parties. The parties then entered a

complex mediation process. This mediation resulted in the Mediated Settlement Agreement on 26th October, 2011, which is referred

to as “the MSA”.

10. The MSA is a written agreement between Leopardstown, Templeville and Mr. Smyth. It includes maps and a solicitor’s note of

26th October, 2011. The maps were prepared by Arup Engineers. A series of maps numbered 1000 were prepared, then a 2000 series,

and ultimately the parties used a 5000 series of maps, with numbers 5001, 5002 and 5003 being attached to the MSA. The maps were

signed by the parties. A consultant to Arup, Mr. Ian Roberts, was primarily responsible for the preparation of the maps.

11. The MSA was received and made a rule of court in proceedings, 2004 No. 10825, on 3rd November, 2011. In accordance with the

MSA, Templeville was to make certain payments to Leopardstown. The initial payment was made. But by 2012 the relations between

the parties had deteriorated.

12. By February, 2012, there were a number of disputes between the parties. There were alleged breaches by both parties.

13. On the 10th July, 2012, Leopardstown issued proceedings seeking a declaration that the MSA remained in full force. Leopardstown

also sought judgment for a liquidated sum, allegedly monies due and owing, damages and other reliefs.

14. Pleadings were entered, the proceedings advanced, and the case was listed for hearing in the Commercial Court on the 11th June,

2013.

15. Hogan J. records the sequence:-

“On the 24th May, 2013 [Templeville] delivered a proposed amended defence and counterclaim and were given

liberty to do so pursuant to an order of the trial judge, Charleton J., on the second day of the trial, i.e., the 12th

June, 2013. The amended defence and counterclaim pleaded for the first time the claim of [Templeville] which, as

it happens, is now the only issue on the appeal. The new claim was that by furnishing a map used in the

negotiations leading to the MSA and referred to in the MSA, Leopardstown had misrepresented that a site which

pursuant to the MSA was to be endorsed on the lease from Leopardstown to Templeville “was not matrially

affected by an underground ESB cable”. It was further pleaded that [Templeville] relied upon the said

representation which was false in entering into the MSA and are now entitled to rescind the MSA.”

16. It was also pleaded that the MSA was voidable at the instance of Templeville for mistake.

17. In an amended defence, delivered on the 13th June, 2013, Leopardstown denied the alleged misrepresentation and mistake. It

was pleaded that Templeville, its servants and agents and experts, were aware of both the ESB cables, including the cable traversing

part of the site prior to the execution of the MSA. It was also pleaded that Templeville were not entitled to void the MSA.

The High Court

18. The case was at hearing before the High Court for fourteen days. There were fifteen witnesses for Leopardstown and nine for

Templeville. On the 2nd September, 2013, the High Court gave judgment for Leopardstown against Templeville: Leopardstown Club Ltd

v. Templeville Developments Ltd [2013] IEHC 526. There were further hearings and findings. On the 14th November, 2013, in the final

order, the High Court dismissed Templeville’s counterclaim, except in respect of relief against forfeiture.

Judgment of High Court

19. There were a number of key findings. On the issue of misrepresentation, mistake and the agreement Charleton J. held:-

“64. Mistake and the agreement

Templeville and Philip Smyth complain that the mediation settlement agreement was undermined by

misrepresentation by Leopardstown as to a transverse 220 kV oil-surrounded ESB cable that ran through the site

of the seven new tennis courts that would be covered by a dome or domes. A brief word about this cable may put

this matter in context. There are two cables running through the Leopardstown campus. One of them, which

transverses the seven tennis courts site, is apparently there since the 1970s. This is the transverse cable. The

second one, which goes along the edge of the car park and Dome 2 skirting the seven tennis courts site, was laid

by the ESB in 2000 and commissioned in 2001. This is the skirting cable. Dome 2 was originally planned much closer

to the new seven tennis courts site than it now sits. It was moved by Templeville so as to ensure that its

foundations missed any cable. This dome now sits as to its foundations as close as just under 3 m to such a cable.

These domes need an air pumping system. These sit outside the line of the foundations of the dome and push air

inside. One of the air pumping stations in Dome 2 is over a cable. This establishes knowledge by Templeville that

this cable existed and that no dome could be built above it or, according to the ESB position, no foundation could

be laid within 5 m of it. Philip Smyth gave evidence that he thought that what was happening in 2000/2001 was

that the ESB was decommissioning the original transverse cable, which is the inner cable for these purposes, and

replacing it as to function with the skirting cable. This evidence is improbable. In addition, apart from all of this, it

should be noted that on the site of the seven tennis courts there are three side-by-side ESB manhole covers,

clearly marked with a lightning symbol. This establishes to anyone considering taking any interest in this site that

there is a major ESB cable under the ground there. It is not possible to move any of these cables save with the

expenditure of millions of euros. This site with the manholes so marked has been in the effective occupation of

Templeville for many years.

65. In addition, the site was the subject of a planning application in 2007. At that stage Templeville were planning

to construct seven outdoor tennis courts and to this application Leopardstown put in an observation. This was

made by Ian McGrandles on behalf of Leopardstown through a firm called Tíros Resources. In the observation, he

refers to an earlier planning application that had been made by Leopardstown in 2002 that included this site. This

application showed both cables. It is inconceivable that Templeville did not have regard to this application which

was lodged together with appropriate drawings on the 12th July, 2002. In it, drawing D 2443-11 C121 PL1 showed

an alignment of two almost parallel 220 kV underground cables one of which traversed the application site. In the

observation by Leopardstown on the planning application which was lodged on the 21st February, 2007, and

directly relevant to the application being made by Templeville, the following was pointed out: “there are two 220

underground kV ESB cables and an associated wayleave at the western edge of the proposed site” and an

observation was made that it was not shown on the site plan as required under the relevant Planning and

Development Regulations. That is not all. The local planning authority then engaged by seeking additional

information from Templeville, stating: "it will be necessary to consult with ESB regarding the potential impact of

development on the ESB cables indicated as traversing the site. Please submit written evidence of consultation

with ESB on this matter.”

66. On the 19th July, 2007, Brendan O'Sullivan, on behalf of Templeville,

responded to this request including a revised position of the access to the site showing the line of the ESB cable

traversing the site marked in yellow and in ESB link box within the application site. Evidence was also submitted of

consultation with the ESB by Templeville about the cable traversing the site. Following a meeting with John Daly,

who is a manager for high-voltage cables, an e-mail was exchanged between them summarising their discussion as

to this transverse cable and making the following points:

• The proposed tennis courts have been generally located not to conflict with the line of the cable.

However, there are possible conflicts on the access routes. Some trial holes were carried out, but it

was agreed to carry out a further series to confirm both the position and levels of the cable, as the

original levels have been changed, and as there would appear to be a discrepancy between ESB record

of the cable and your drawing. Declan Mullen will arrange this with you. An outage of this cable is

planned in any case over the summer to carry out annual maintenance testing

• The curved pedestrian entrance will be redesigned to avoid a conflict with the cable circus at the

steps, if it proves necessary

• The lower vehicular entrance will be moved from the NE corner to the SE side to avoid conflict

• The proposal to install low shrubs over part of the cable route is acceptable to ESB, provided no

trees are installed

• The cable was originally installed in this area in non-road construction, so at all traffic crossing

locations, the back filling must be replaced to road construction standards. If the cable depth has been

compromised, this may require special provisions to spread traffic loading, such as steel

plates/concrete slabs

• All planned signage and fencing posts must be designed to avoid the cable route

• ESB Central Site should be re contacted to obtain an up-two-date record of all ESB services in the

area.

67. This matter could not have been forgotten by Templeville as a corporate entity, nor could Philip Smyth as its

controlling mind have been unaware of it or have forgotten it. It is far too important for that.

68. On the 26th May, 2008, a position paper was submitted by Templeville during the course of the arbitration to

Paul Gardiner SC. Since this arbitration was about the land which Templeville claimed to be entitled to, the

submission by Templeville described the land and at para.13.5 added:

A further significant consideration in respect of this strip of land, which Leopardstown seems to have lost sight of,

is the fact that an underground ESB cable runs through same. As part of Templeville's planning application process,

Templeville has been in discussions with the ESB with regard to its proposed development. Templeville proposed

plans to construct the graded embankment with no groundcover planting, the new footpath, the 4 m high fence

and the pedestrian entrance gates and parts have been approved in principle by the ESB, subject to final approval

at the time of the construction of these works. The ESB's primary concern is to preserve the integrity of this

cable. This again is a further complication in relation to this site, and Templeville needs to be granted sufficient

land to enable it to carry out the development. Further reference is made to this issue at the top of page 2 of the

report prepared by ...

69. Whilst that arbitration process was ongoing in 2008, Philip Smyth swore an affidavit dated 10th June, 2008, in

which he referenced an earlier hearing of April 21st, 2008 and enclosed a copy of the transcript in his affidavit by

way of an exhibit. In that transcript, counsel for Templeville referred to a problem with an ESB cable and said: “It’s

a huge mains cable, apparently, and there are difficulties about building over it or around it.” During the mediation

process in 2011, a replying position paper was admitted to the mediator Paul Gallagher SC (sic) by Templeville.

This refers to the new site as not being level and the difficulties concerning the site are specifically referenced to

the position paper of the 26th May, 2008 which is appended to that paper. This document goes on to state that

Templeville would like the opportunity to have the map within the mediation process, which only shows the skirting

cable and not the transverse cable, reviewed by its own expert and compare it with what is marked out on the

ground. The map there referenced, Arup 1004, shows a jagged and not a squared off edge to the site, though this

was later conceded by Leopardstown, and the transverse cable is absent.

70. It is impossible not to be satisfied that Templeville had knowledge of the transverse ESB cable. I am satisfied

that Philip Smyth, in claiming no knowledge of the cable is giving evidence that, in these circumstances, a court

could not accept.

[Emphasis added]

71. Unawareness of this transverse cable, of which Templeville clearly had knowledge, is blamed on Ian Roberts,

the engineer who drew up the relevant map and who decided as a matter of subconscious prudence not to show

any features on the interior of the site. Thus, the maps used in the mediation process, including for instance Arup

D4352-20, show the skirting ESB underground cable in an approximate position. Ian Roberts was skilfully cross-

examined. I entirely accept all of his evidence. In particular, whether conscious or unconscious, putting nothing on

the inside of the sites that was to be devised to Templeville was entirely prudent and completely in accordance

with a fair-minded desire to avoid trouble. As he put it in the witness box, if in marking the cable within the site he

had been even inches out, the result would have been another court case. This is a prudent observation.

72. On the 27th March, 2012, Toal Ó Muiré wrote to the solicitor for Templeville in the following terms:

Brenda [Flood] rang me to ask the question (which I could not answer) as to what Ian Roberts meant

by mentioning a "well" in the draft agenda he sent me on 12 March. She was curious because that

date was two days before Templeville’s testing rig arrived at the racecourse. I said I did not know

what Ian meant at the time, and I confirmed to her that I have been instructed by you to deal only

with the setting out of boundaries and levels ... I also clarified that the Arup drawings I posted to

Kieron [Flood] on 20 March are those which I received that afternoon from Ian [Roberts], which I trust

are those Kieron is using to check boundaries and levels. Brenda says she will phone Kieron to check

this, and will ask him to ring me to let me know what anomalies there may be between that latest set

of Arup drawings and the Arup drawing Philip [Smyth] signed as part of the Mediation Settlement last

year.

73. It is disturbing, and it also shows the prescience of Ian Roberts, that Philip Smyth would instruct a highly

respected professional person to look for anomalies in an agreement that he had signed months earlier. On the 4th

April, 2012, Pat Keogh invited Templeville to a meeting to review the car parking facilities upgrade. Templeville

never turned up, and that was done deliberately.

74. While Philip Smyth was in France, on the 26th March, 2012, acting on an earlier instruction from him, Kieron

Flood had walked site with a view to finding differences between the signed map in the mediation agreement and

the latest general arrangement of map and he said, among other things: "the underground ESB lines now appear

to be running within the site as opposed to along the access road and car parking on the signed map.” Brenda

Flood was again placed in an impossible position on the instructions of her employer. It is highly probable that she

drew this to his attention during one of the several phone calls that she made reporting general and important

affairs to him in France 2 to 3 times a week. Yet, in the correspondence, this is not at all mentioned. Philip Smyth

did not claim that it was part of his reasoning for not paying the full rent to Leopardstown on the 15th March,

2012.

75. In terms of what is probable or improbable the situation as it ostensibly developed rules out any acceptance of

his evidence. He claims that on June 14th, 2012, he walked the site and noticed blue lines. This happened only by

accident, he says, because there was a race meeting on and he was stopped at the Carrickmines car park, which

is a pleasant walk in good weather from Dome 2. He claims to have telephoned, through Brenda Flood, Kieran Flood

and to have been surprised that there was a transverse ESB cable which might compromise the number of courts

that he could put on that site. Kieran Flood described a recollection of Philip Smyth being apparently surprised.

Brenda Flood had little recollection of the event. The next day the letter claiming termination for fundamental

breach of contract went out. It, however, has no mention of the cable. If there was a horrible surprise, this was

the time to mention it. Not until the 20th July, 2012, was the cable referenced in correspondence among a

number of points of difficulty as to the site of the seven tennis courts. In the meantime, a letter of the 20th June,

complained of a rainy 14th June, race day with only four cars in the Dome 2 carpark, rubbish, a forklift and

security barriers. This, in comparison, would be trivial stuff. I regret that I cannot accept any evidence that the

cable was first discovered on the 14th June, 2012. Nor can I accept that Ian Roberts acted dishonestly, or gave

untruthful evidence, or that there was any kind of sharp practice by Leopardstown, or that Templeville made a

mistake or that any misrepresentation of any kind was made by Leopardstown.

76. Although it is not essential to this decision, which would have been made in the absence of this principle, the

failure by the defendants Templeville and Philip Smyth to call Brendan O'Sullivan makes it reasonable to

independently reject this evidence.”

Appeal

20. On the 28th February, 2014, Templeville lodged a notice of appeal to this Court. There were multiple grounds of appeal set out.

The appeal was transferred to the Court of Appeal, pursuant to a direction of the Chief Justice given with the concurrence of the

other members of the Supreme Court, in accordance with Article 64 of the Constitution, on the 29th October, 2014.

Court of Appeal

21. The appeal pursued in the Court of Appeal was confined to the rejection by the High Court of Templeville’s claim to be entitled to

rescind the MSA, or claim damages in the alternative, on the grounds of the alleged misrepresentation in the map attached to the

MSA referred to as “Arup drawing No. [5002]” in showing only one ESB cable and failing to show a second cable which transverses

part of a site proposed to be demised to Templeville pursuant to the MSA.

22. Hogan J. reached conclusions as to the state of Templeville’s knowledge regarding the transverse cable, as set out in his

judgment at paras. 82 to 88.

“82. Following a review of this evidence, the following emerges.

83. First, there was evidence that Templeville was aware of the existence of one cable which either traversed the

tennis court site or which went close to the edge of the site. The only evidence that Templeville was ever told of

the existence of two cables was the statement to this effect which was contained in the letter of objection from

Tíros in February 2007 in the course of the planning process. Even then, however, the potential significance of this

statement (i.e., as to the presence of the two cables) was dissipated by the fact that in their subsequent

correspondence both the planning authority (i.e., Dún Laoghaire Rathdown County Council) and the ESB only

referred to the existence of one cable in their subsequent correspondence and exchanges with Templeville in

relation to this issue.

84. Second, Leopardstown were fully aware of the existence of the two cables. There is, however, no evidence

that any stage after February 2007 was this knowledge drawn to the attention of Templeville. The Arup map

showed only one cable (i.e., the skirting cable but not the traversing cable).

85. Third, no one on either side gave any thought during the mediation process to the question of whether (a)

there was a traversing cable and (b) if so, whether this would appreciably impede Templeville’s declared intention

of constructing seven indoor tennis courts on the tennis court site.

86. Following a review of this evidence what conclusions can properly be draw at this juncture? It is true that

Brendan O’Sullivan must have been aware in February 2007 of the fact that Leopardstown (correctly) believed that

there were two ESB cables “at the western edge of the [tennis court] site”. But, as has already been noted, the

impact of that statement must have been dissipated by the fact that in his subsequent dealings with the planning

authority and the ESB the only reference which both of these bodies made was to one cable.

87. This conclusion is re-enforced when one reflects on the fact that there was no evidence that any witness

(whether from Templeville or from Leopardstown) gave consideration in the course of the mediation process to

the presence of the traversing cable or, if so, what the impact this would have had for Templeville’s plans for the

tennis court site. If Templeville did have actual and complete knowledge of the traversing cable at the time, it

seems curious that this issue would not have been raised by them in the course of the mediation process or that

they would ever have agreed to this given that this would have had implications – perhaps even serious

implications – for the construction of the seven courts which they had planned.

88. In these circumstances, before considering whether the inferences drawn by the trial judge as to Templeville’s

state of knowledge are sustainable, it is necessary first to give consideration to the Supreme Court’s decision in

Hay v. O’Grady.”

23. Having considered the extent to which the Court of Appeal was bound by the principles set out in Hay v. O’Grady [1992] 1 I.R.

210, Hogan J. held:-

“118. In the present case, I do not consider that this is a case in which an inference could properly be drawn from

the failure to call Mr. O’Sullivan as a witness. Here it must be recalled that it is accepted that the issue of the

traversing cable was not adverted to, or discussed, by either Mr. Roberts, Mr. Ó’Muire or Mr. O’Sullivan at their

meeting in the West Wood club cafeteria on 25th October 2011. It is further accepted that Mr. O’Sullivan knew of

the fact that there was a traversing cable when he prepared revised drawings in July 2007, but it has never been

suggested that he knew of the existence of two cables, save for a fleeting reference. In essence, his position is

(at best) really no different from that of Leopardstown witnesses such as Mr. Roberts, Mr. O’Dwyer or Mr. Jones

who all knew of the existence of the traversing cable, but all of whom had not adverted to the presence of this

cable during the course of the mediation process.

119. In essence, therefore, no adverse inference could properly be drawn because – just as in cases such as

McQueen and Whelan – the plaintiff had failed to establish a prima facie case that Templeville had full and

complete knowledge of the traversing cable. The matter would naturally have been different if, for example, Mr.

Roberts had stated that the issue of the traversing cable had in fact been discussed in Mr. O’Sullivan’s presence at

the West Wood cafeteria meeting on 25th October 2011. But since this was not the case and as no such prima

facie case was so established, I do not consider that any such inference could properly be drawn from the fact

that Mr.O’Sullivan was not called as a witness.”

24. Hogan J. concluded:-

“120. I may endeavour to summarise my principal conclusions as follows:

121. First, as Charleton J. made no findings of fact regarding whether there had been a representation or

whether, if it had, it constituted a misrepresentation of a material fact which induced the parties to enter the

contract, this Court as an appellate court cannot now substitute its own findings of fact.

122. Second, it is clear from the case-law that if Leopardstown could establish on the balance of probabilities that

Templeville and/or Mr. Smyth had actual and complete knowledge of the traversing cable prior to entering into the

MSA agreement, this would in itself constitute a complete defence to a claim of actionable misrepresentation,

even if such were ever to be established by Templeville.

123. Third, the findings made by the High Court to the effect that Templeville had such knowledge cannot be

sustained. Specifically, the trial judge did not apply the correct legal test in assessing this question, since he should

have considered whether Leopardstown had established on the balance of probabilities that Templeville had actual

and complete knowledge of the existence of the traversing cable in the manner required by the Supreme Court in

Gahan. It was not enough, for example, to point to the existence of ESB manholes on the tennis court site in order

to fix Templeville with knowledge, as this would go constructive rather than actual knowledge only.

124. Fourth, it follows, therefore, that in the light of these conclusions that the appeal must be allowed. For the

reasons I have given, the Court finds itself with no real alternative other than to remit afresh the question of

whether there was actionable misrepresentation to the High Court. For the avoidance of any possible doubt,

nothing in this judgment should be interpreted as a positive finding that Leopardstown could not establish at that

fresh hearing that Templeville had a full and complete knowledge of the true state of affairs regarding the

traversing cable: all that I have decided is that the High Court’s findings to this effect which are under appeal in

this case cannot, for the reasons I have just stated, be sustained.

125. I have had an opportunity of reading in draft the judgment of Finlay Geoghegan J. I agree with what she says

at paragraphs 37 and 38 of that judgment and the precise order she proposes.”

25. In the Court of Appeal Finlay Geoghegan J. held:-

29. It was not in dispute on appeal that Templeville and Mr. Smyth did have actual knowledge in 2007 and 2008 (in

the context of the 2007 planning application and the 2008 arbitration) of the existence of one ESB cable which

traversed the tennis court site. The finding of the trial judge that they had knowledge in 2007/2008 of one

transverse ESB cable is supported by the evidence. However, insofar as the trial judge appears to have concluded

that they had knowledge even in 2007/2008 of two cables then, for the reasons set out by Hogan J., I agree such

finding is not supported by the evidence. Further, the evidence related to the knowledge in 2007/2008. Even at

that point in time it does not appear to constitute complete knowledge of the true situation.

30. In accordance with the authorities the relevant question is whether Templeville and Mr. Smyth had actual and

complete knowledge of the true situation in 2011 at the time of entering into the MSA. Gahan makes clear

constructive knowledge is not sufficient it must be actual knowledge. The trial judge did not make findings

supported by evidence from which such inferences could be drawn. Part of the difficulty undoubtedly was the

failure by the trial judge to identify what was (if he so thought) the misrepresentation made and consequently

what was the true situation of which Templeville and Mr. Smyth had to have actual and complete knowledge.

31. I would also like to add that I have very carefully considered the submission of Leopardstown that having

regard to the credibility findings of the trial judge in relation to Mr. Smyth that the appeal should be dismissed.

There was inter alia, ample evidence to support the conclusion of the trial judge to reject the evidence of Mr.

Smyth that he first discovered the existence or location of the transverse cable on the 14th June, 2012. Further,

the subsequent complaints and delay in alleging misrepresentation are not consistent with the position of a person

who was surprised to learn of the second cable and its position. Nevertheless it does not appear permissible on the

evidence to draw an inference from this behaviour in 2012/2013 that Leopardstown had established that Mr.

Smyth had actual and complete knowledge at the time of the completion of the MSA in October 2011. There is no

obvious answer to the question (not considered by the trial judge) as to why Mr. Smyth, if he had actual and

complete knowledge of two ESB cables in October 2011, one in a position, it is agreed, prevents (at least without a

move at significant cost) the erection of Dome 3 (which was sought as important and conceded in negotiations),

would have entered into the MSA. The onus on this issue of actual and complete knowledge is on Leopardstown

and it does not appear that it can be considered as discharged by such credibility findings of the trial judge.

26. Finlay Geoghegan J. concluded:-

37. I would allow the appeal of Templeville and Mr. Smyth against so much of the judgment of the trial judge as

dismissed the counterclaim of the defendants to rescind the Mediated Settlement Agreement of the 26th October,

2011, upon grounds of alleged misrepresentation in the map referred to as Drawing No. 5002 (and prior 1000 and

2000 versions) showing only one ESB cable and failing to show a second cable which transverses part of a site

proposed to be demised pursuant to the Agreement and the alternative claim for damages.

38. I would remit to the High Court for retrial before a different judge the single issue on the counterclaim and the

defence thereto in relation to the above alleged misrepresentation by Leopardstown.

27. The third member of the Court of Appeal, Peart J., agreed with both judgments.

Determination

28. Leopardstown applied to this Court for leave to appeal from the decision of the Court of Appeal delivered on the 26th July, 2015.

The Court granted leave to appeal on the 9th February, 2016: [2016] IESCDET 19. Two points were identified in the determination:-

(a) The principle and application of the rule in Hay v. O’Grady [1992] I.R. 210 and the jurisprudence derived

therefrom. The legal status of explicit or implicit findings of fact, and inferences by a trial judge, are fundamental

to the role of appeal courts and a matter of general public importance. In essence did the Court of Appeal exceed

its jurisdiction by misapplying Hay v. O’Grady?

(b) The test and criteria to establish misrepresentation are matters of law which were addressed by this Court in

Gahan v. Boland [1985] I.L.R.M. 218. The Court was not asked to overrule Gahan v. Boland. An issue was raised as

to the nature of what should be proved in order to show misrepresentation, and, in particular, whether it must be

shown that the representee was actually induced to enter into the transaction by reason of misrepresentation.

Can constructive knowledge be a defence? (It was noted that since s. 86 of the Land and Conveyancing Law

Reform Act, 2009, there are new rules regarding constructive knowledge. The Act of 2009 is not in issue on this

appeal).

29. Consequently, these are the two issues which arise for consideration on this appeal.

Submissions of Leopardstown

30. Leopardstown submitted that the Court of Appeal erred and misapplied the principles in Hay v. O’Grady and/or the law on

misrepresentation. Accordingly, Leopardstown sought an order setting aside the decision of the Court of Appeal and restoring the

judgment of the High Court, which rejected Templeville’s claim of misrepresentation.

Submissions of Templeville

31. Templeville submitted that the Court of Appeal judgments were correct, should be upheld, and that the appeal should be

dismissed.

Two Broad Issues

32. There are thus two broad issues:

(i)The principle and application of the Hay v. O’Grady jurisprudence. Did the Court of Appeal exceed its jurisdiction?

(ii)The issue of misrepresentation and the application of the correct law.

The Hay v. O’Grady Jurisprudence

33. At the core of the appeal are the principles established in Hay v. O’Grady [1992] 1 I.R. 210, and their application.

34. In Hay v. O’Grady at pp. 217 – 8 McCarthy J. stated:-

“1. An appellate court does not enjoy the opportunity of seeing and hearing the witnesses as does the trial judge

who hears the substance of the evidence but, also, observes the manner in which it is given and the demeanour of

those giving it. The arid pages of a transcript seldom reflect the atmosphere of a trial.

2. If the findings of fact made by the trial judge are supported by credible evidence, this Court is bound by those

findings, however voluminous and, apparently, weighty the testimony against them. The truth is not the monopoly

of any majority.

3. Inferences of fact are drawn in most trials; it is said that an appellate court is in as good a position as the trial

judge to draw inferences of fact. (See the judgment of Holmes L.J. in “Gairloch”, The S.S., Aberdeen Glenline

Steamship Co. v. Macken [1899] 2 I.R. 1, cited by O’Higgins C.J. in The People (Director of Public Prosecutions) v.

Madden [1977] I.R. 336 at p. 339). I do not accept that this is always necessarily so. It may be that the

demeanor of a witness in giving evidence will, itself, lead to an appropriate inference which an appellate court

would not draw. In my judgment, an appellate court should be slow to substitute its own inference of fact where

such depends upon oral evidence or recollection of fact and a different inference has been drawn by the trial

judge. In the drawing of inferences from circumstantial evidence, an appellate tribunal is in as good a position as

the trial judge.

4. A further issue arises as to the conclusion of law to be drawn from the combination of primary fact and proper

inference - in a case of this kind, was there negligence? I leave aside the question of any special circumstance

applying as a test of negligence in the particular case. If, on the facts found and either on the inferences drawn by

the trial judge or on the inferences drawn by the appellate court in accordance with the principles set out above,

it is established to the satisfaction of the appellate court that the conclusion of the trial judge as to whether or

not there was negligence on the part of the individual charged was erroneous, the order will be varied accordingly.

5. These views emphasise the importance of a clear statement, as was made in this case, by the trial judge of his

findings of primary fact, the inferences to be drawn and the conclusion that follows.”

[Emphasis added]

35. In Hoare v. Allied Irish Bank [2014] IESC 73, the Court continued to emphasise the importance of an appellate court not

interfering with findings of fact reached by a trial judge who has heard and seen the witnesses. In that case I stated:-

“34. In this case the learned trial judge heard and observed the witnesses. The findings of fact were supported by

credible evidence. In the circumstances the Court would not interfere with the findings of fact of the learned trial

judge.”

36. M.C. (A Ward of Court) v. F.C [2013] IESC 36 restated the position of an appellate court:-

“3. Article 34.4.1 of the Constitution provides that the Supreme Court is the Court of Final Appeal. This Court

exercises an appellate jurisdiction from the High Court. The jurisdiction of this Court on such appeals is addressed

in the case of Hay v O'Grady [1992] I.R. 210. This Court does not engage in a complete re¬hearing of a case on

appeal. It proceeds rather on the facts as found by the trial judge and his inferences based on these facts. As Hay

v O'Grady makes clear, if the findings of fact made by a trial judge are supported by credible evidence, then this

Court is bound by those findings, even if there is apparently weighty evidence to the contrary. This Court will only

interfere with findings of the High Court where findings of primary fact are not supported by evidence, or cannot in

all reason be supported by the evidence (see also Pernod Ricard and Comrie plc v Fyffes plc (Unreported, The

Supreme Court, 11th November 1988)). Furthermore, in Hay v O'Grady, McCarthy J. pointed out that an appellate

court will be slow to substitute its own inference of fact for that of the trial judge, where such inference depends

upon on oral evidence or recollection of fact. In drawing of inferences from circumstantial evidence, an appellate

tribunal is, of course, in as good a position as the trial judge (see also O'Connor v Dublin Bus [2003] 4 I.R. 459;

Quinn (A Minor) v Mid¬Western Health Board and Another [2005] 4 L R. 1).

4. It is necessary to re-iterate that these basic principles as the appeal, presented by F. C., the first named

defendant in person, appeared to be premised on the assumption that there were some segments of evidence

before the High Court judge which should have lead him to a different conclusion. The questions are whether the

findings of fact are based on evidence; and whether inferences are correctly and factually drawn. Moreover, the

Court would point out that the main evidence in defence of this claim came from F.C. himself. The trial judge

rejected this evidence as being entirely unreliable on a range of the fundamental issues in the case.”

37. MacMenamin J. pointed out:-

“14. The defence of the claims hinged on F. C's credibility. The judge found him to be an entirely unreliable

witness. He concluded that his testimony was inconsistent, and that, when information and documents became

available which demonstrated his initial evidence was incorrect, the appellant demonstrated a willingness to

change his evidence without regard to the truth. The judge concluded that his evidence was ‘so unreliable and so

inconsistent and shifting that I concluded that I was able to place little reliance on F. C's willingness to truthfully

account for his dealings with his aunt's monies.’”

38. The appeal was dismissed by MacMenamin J. stating:-

“26. The High Court's findings here were highly dependent on factual context and his view of the nature and quality

of the evidence. This Court is entirely satisfied that the High Court judgment was correct in fact and law. The

findings of fact were founded on credible, weighty, testimony; the inferences drawn were based on clear,

supporting evidence. The judge was well¬ entitled to hold that the appellant had not discharged the evidential onus

of showing the gift was the independent and well understood act of a person in a position to exercise free

judgment.”

Credibility

39. In reviewing the findings of a trial Court, a finding of credibility is a finding of fact. I agree with the statement of

Hardiman J. in McCaughey v. Irish Bank Resolution Corporation Limited and Mainland Ventures Corporation [2013]

IESC 17, where he said at para. 106:-

“In every case where the credibility of a witness is at stake – credibility in the sense of whether or not the witness

is giving a credible account, not necessarily whether he is lying – are of necessity issues of fact.”

40. Thus, at the core of the appeal is the proper approach of an appellate court in light of the established jurisprudence.

Submissions on behalf of Leopardstown

41. Written and oral submissions were made on behalf of Leopardstown.

42. Inter alia, on behalf of Leopardstown it was submitted in written submissions that the proper application of the Hay v. O’Grady

jurisprudence ought to have prompted the conclusion by the Court of Appeal that the findings made by the learned trial judge in the

High Court conclusively determined the proceedings against Templeville. That the High Court had found that Templeville had

knowledge of the transverse cable at the time of entering into the MSA. Templeville had been in exclusive occupation of the site with

the three ESB manhole covers. Further, that during the mediation the position paper submitted by Templeville referred to difficulties

with an ESB cable. Reference was made to the finding of the learned trial judge that the evidence of Mr. Smyth could not be

accepted, and to the failure to call Brendan O’Sullivan as a witness. It was submitted that there were errors made by the Court of

Appeal. It was submitted that it was very difficult to see how the Court of Appeal could have concluded as it did, consistent with the

principles in Hay v. O’Grady, in the circumstances where the learned trial judge reached the decision he did as to the credibility of Mr.

Smyth. It was submitted that the Court of Appeal did not comply with Hay v. O’Grady. In addition, it was submitted that the Court of

Appeal made two errors in applying Hay v. O’Grady. First, in dismissing certain matters as constructive knowledge only, it ignored the

fact that constructive knowledge is something from which, in all the circumstances, actual knowledge may be inferred. Further, in

seeking to overrule the learned trial judge’s decision, after a full hearing, to reject the oral evidence given by Mr. Smyth and Conor

Halpenny, the Court of Appeal fell outside the principles in Hay v. O’Grady.

43. As to the issue of misrepresentation, it was submitted that the Court of Appeal’s conclusion that the learned trial judge failed to

make any finding as to misrepresentation, and that the burden of proving knowledge rested on Leopardstown, which had failed to

discharge it, is based on an erroneous interpretation of the law, in particular a fundamental failure to consider the factual finding that

Templeville totally failed to prove inducement. In the alternative, if the Court of Appeal was correct in its application of Gahon v.

Boland [1985] I.L.R.M. 218, the authorities relied on by it requires reconsideration by this Court. In such circumstances, even if

(which is denied) the learned trial judge did not make any finding of actual knowledge of the transverse cable by the defendants at

the date of the MSA, or such findings were not supported by credible evidence, constructive knowledge on their part ought to be

enough to defeat their claim for misrepresentation.

44. Oral submissions on behalf of Leopardstown were made by Michael McDowell S.C. Counsel drew the Court’s attention to the

precise terms on which Templeville made the claim of misrepresentation. At para. 15A of the Amended Defence and Counterclaim the

misrepresentation is stated to be:-

“… that the ‘New Site’ was not materially affected by an underground ESB cable and in particular that the

suitability of the said site for the development contemplated by the Mediation Settlement Agreement (including

paragraph 5.4 thereof) was not materially compromised by any such cable.”

This misrepresentation is pleaded to have taken place:

“In the course of the negotiations leading to the execution of the Mediation Settlement Agreement.”

This was the issue before the Court of Appeal.

45. It was submitted that while the collateral issue as to whether Templeville was aware of the existence of more than one cable in

the vicinity of the new site arose in the High Court hearing and dominated the defendants’ case in the Court of Appeal, it is clear from

the judgment of the learned trial judge that he concentrated on determining whether or not Templeville was actually aware at the

time of the MSA agreement that an ESB cable, “the transverse cable”, traversed the land comprised in the New Site in the location

described in Templeville’s own revised planning application in 2007. It was submitted that the learned trial judge correctly addressed

the misrepresentation claim as pleaded.

46. It was submitted that the Court of Appeal (Hogan J.) failed to understand and assess the evidence of Templeville’s knowledge.

Counsel argued that there were at least five separate occasions when Templeville was informed of the two cables:-

(i) The original Tiros letter.

(ii) The Arup Report sent to Templeville, Brendan O’Sullivan and DLRCC in response to Brendan O’Sullivan’ report of

6th February, 2007, at para. 11 the “cables” are referred to.

(iii) Another Report from Arup dated 15th December, 2006, addressed to Horse Racing Ireland was also furnished

to Templeville and Paul Gardiner S.C. for the purposes of the arbitration. At paragraph 6 Arup recite that there

were two 220 kv underground ESB cables near the edge of the site.

(iv) The Report by Brendan O’Sullivan, who was planning agent of Templeville, prepared for the arbitration in April

2008, addressed to Templeville and provided to Paul Gardiner S.C., repeats one year later Mr. O’Sullivan’s

understanding that there were two 220kv underground ESB cables in the way.

(v) Kilroys Solicitors on behalf of the plaintiff provided Templeville and the arbitrator with a letter. Appendix I to

that letter of the 1st December 2008 states that there are two 220 kv underground cables involved. Appendix III

to the letter refers to the strip of land between the tennis courts and the road and draws attention to the

substantial charges that were made in Templeville’s 2007 planning application “due to the location of the ESB

cable.”

47. Counsel made submissions pointing to what he argued were errors by the Court of Appeal (Hogan J.), including serious errors of

fact. Counsel examined the four reasons advanced by Hogan J., from paras. 98 to 103 of his judgment, for ruling that the finding of

facts by the learned trial judge were not permissible, and for his conclusion that the learned trial judge had no basis for forming the

view that Templeville had full and complete knowledge of the transverse cable.

48. It was submitted that it was totally legitimate for the learned trial judge to consider together all the evidence on the issue of

Templeville’s first knowledge of the existence of the transverse cable, including the false testimony of Mr. Smyth in determining whom

to believe as to whether Templeville had that knowledge at the time of the MSA.

49. It was submitted that regardless of where the onus of proof on any fact or matter originally lies in any issue in a civil case, the

onus is discharged if, at the completion of all the evidence, the trial judge is satisfied that the fact or matter has been established on

the balance of probability, regardless of which party has adduced the evidence.

50. It was submitted that, contrary to the finding of the Court of Appeal (Hogan J. at para. 119), Leopardstown had established a

strong prima facie case by credible, admissible evidence that Templeville had actual knowledge of the existence and location of the

traversing cable; that it had also done that in respect of Templeville’s knowledge of two cables.

51. It was submitted that the Court of Appeal paid lip service to the Hay v. O’Grady and following cases, but then departed radically

from them. It was submitted that an appellate court is bound by findings of the trial judge unless it concludes for good legal reason

that the supporting evidence is not credible or is absent, or that the trial judge has erred in law in drawing or failing to draw

inferences from the evidence considered at trial, or in properly applying the law and legal presumptions to the consideration of the

evidence.

52. It was submitted that the evidence of knowledge of Templeville of the existence and location of the transverse cable was not

circumstantial evidence, it was as direct as such evidence can reasonably be.

53. It was pointed out that Finlay Geoghegan J. adopted the factual analysis of Hogan J., and that consequently her findings as to

the facts and inferences are largely and incurably flawed to the same extent as those of Hogan J.

54. Counsel submitted that the Court of Appeal’s criticism of the learned trial judge’s judgment, structure and content “is a classic

case of failing to see the wood for the trees”. He submitted that the primary finding of the learned trial judge that Templeville knew of

the existence and location of the transverse cable, meant that he did not have to decide separately whether the MSA map could

amount in law to a representation that there was only one cable or could amount in law to a representation that the New Site

contained no cable as pleaded, or whether it did so in fact. These legal issues became moot because of the primary finding of the

learned trial judge.

55. It was submitted that the evidence in the hearing clearly and unambiguously established as a matter of probability to the

satisfaction of the learned trial judge that Templeville had full knowledge and had not forgotten in October, 2011, of the existence

and location of the transverse cable. Thus, he was obliged to reject the misrepresentation claim as pleaded in the Amended Defence

and Counterclaim.

Submissions on behalf of Templeville

56. Written and oral submissions were made on behalf of Templeville.

57. In written submissions on behalf of Templeville the judgments of the Court of Appeal were addressed. It was submitted that the

Court of Appeal did not err. It was submitted, inter alia, that the principles governing the proper approach of an appellate court to

findings of primary fact made, and to inferences drawn, by a trial judge were correctly set out in the judgment of Hogan J., and were

applied properly. That Hogan J. had explicitly accepted that the trial judge was entitled to reject Mr. Smyth’s evidence, but held that

that in itself was not enough. Counsel commended to the Court Hogan J.’s review of the evidence concerning the four matters relied

upon by the trial judge as supporting his finding that Templeville knew the true location of the transverse cable. Counsel referred to

case law, especially Gahan v. Boland [1985] I.L.R.M. 218, Redgrave v. Hurd (1881) 20 Ch. D.1., Smith v. Chadwick (1884) 9 App.

Cas. 187, Peekay Intermark Limited v. Australia and New Zealand Banking Group Limited [2006] EWCA Civ. 386, Carey v.

Independent Newspapers (Ireland) Limited [2004] 3 I.R. 52.

58. It was submitted that all the authorities relied on by Templeville and cited by the Court of Appeal accept that inducement must

be shown, and that Henchy J. in Gahan v. Brown insofar as it discusses the defence of full and complete knowledge, presupposes

that inducement has been established. It was submitted that there was evidence before the High Court by Mr Smyth (for himself and

Templeville) that he was induced by the maps into entering into the MSA. It was submitted that the learned trial judge failed to make

findings in relation to such ingredients and that is why the Court of Appeal held that it was compelled to remit the matter to the High

Court. It was submitted further, that without a finding in relation to inducement, the Court of Appeal was compelled to approach the

question of Templeville’s knowledge of the true facts on the basis that inducement was established, that is to say as going to a

defence on which Leopardstown bore the burden of proof. Had it done otherwise, it was submitted, it would have been unfair to

Templeville.

59. Also, it was submitted that the learned trial judge did not direct himself properly to the law when approaching questions of

inducement, knowledge and the burden of proof. It was submitted that, it was as if, having determined the dozen or so disputed

issues between the parties, he could not accept that “any misrepresentation of any kind was made by Leopardstown”, by way of “an

overall conclusion on the issue”.

60. It was submitted that the learned trial judge rejected the evidence of Mr. Smyth, that he first became aware after the execution

of the MSA of the presence of the transverse cable when he walked the Dome 3 site with Brenda Flood (Managing Director of

Templeville) on the 14th June, 2012. However, in relation to the misrepresentation issue, the key question was what was Mr. Smyth’s

state of knowledge in October, 2011, when the MSA was signed, not on 14th June, 2012.

It was submitted that some of the factors relied on by the learned trial judge relate to events several years before the MSA. The

exception is the manhole covers, which were a physical feature of the Dome 3 Site in October, 2011. However, Mr. Smyth said he

was not aware of the manhole covers.

61. Counsel submitted that the learned trial judge failed to address the question of whether there had been a misrepresentation, and

further that the trial judge failed to address the impact of that misrepresentation on the state of mind of Mr. Smyth.

62. It was submitted that the judgments of the Court of Appeal were correct and should be upheld. That the learned trial judge had

rolled everything onto a single question of whether Templeville knew of the transverse cable. He failed to direct himself properly on

the law, and failed to make findings regarding essential elements of the misrepresentation counterclaim, including whether there was a

misrepresentation, whether it was material, and whether it induced Templeville to enter into the MSA. Because of these failures, it

was submitted, he could not approach questions concerning the state of knowledge of Templeville with the necessary regard to the

proper burden of proof. It was stated that the Court of Appeal was compelled to assume (without deciding) that the ingredients of

misrepresentation might be established, so that the burden fell on Leopardstown to prove actual and complete knowledge. This, it

was submitted, was the proper approach. It was submitted, that it was because of the learned trial judge’s failure to appreciate the

nuances relating to the burden of proof, that his reliance on a simple rejection of Mr. Smyth’s evidence was insufficient. It was

submitted that the Court of Appeal was correct to characterise the issue of knowledge as based on inference and not on findings of

primary fact. It was submitted that the primary facts were not in dispute. Thus, it was submitted, the Court of Appeal was in as good

a position as the learned trial judge to draw such inferences as appropriate. Viewed properly, it was submitted, as it was by Hogan J.,

the facts did not support the inference of full and complete knowledge. At best, they support an inference of knowledge by

Templeville in October, 2011 of one cable in the vicinity of the site, it was submitted. Further, that having regard to the absence of

findings on essential elements of the misrepresentation counterclaim, it was submitted that the Court of Appeal was correct to remit

the matter for retrial to the High Court and this Court was urged to do the same.

63. Oral submissions on behalf of Templeville were made to the Court by counsel. Paul Sreenan S.C. made submissions on a general

overview; Michael Collins S.C. discussed the jurisprudence of Hay v. O’Grady [1992] I.R. 210, and Brian Moore S.C. made submissions

on misrepresentation.

64. Inter alia Mr. Sreenan made a number of points:- When addressing knowledge of a misrepresentee in a misrepresentation case,

context is everything. The learned trial judge took the wrong approach, Templeville were entitled to have the legal issues raised and

addressed. Having mounted a claim on misrepresentation, a litigant is entitled to have the following, inter alia, decided: Was there

misrepresentation of a fact, what was it? Was it false? Was it in the documents for the contract? Was the misrepresentation

material? Would it be likely to affect a reasonable person in relation to a contract? It was submitted that the High Court did not

decide these facts. Counsel brought the Court to Gahan v. Boland [1985] I.L.R.M. 218; Redgrave v. Hurd (1881) 20 Ch. D. 1 and

Smith v. Chadwick (1884) 9 App. Cas. 187. He said it is only if you have actual knowledge that you negate the inducement issue. He

submitted that the law on misrepresentation is well established since Gahan v. Boland. Counsel submitted that knowledge in the

context of a misrepresentation claim is a very particular type of knowledge, it is knowledge at a particular point in time. Thus, there

would need to be knowledge by Mr. Smyth in 2011. Counsel argued that Templeville was induced to enter the MSA, including by a

misrepresentation on Mr. Smyth.

65. Michael Collins S.C. addressed the function of the Supreme Court under Article 34.5.3° of the Constitution when hearing an appeal

from the Court of Appeal. He submitted that this appeal was before the Court to see if the Court of Appeal correctly understood and

applied the legal principles of Hay v. O’Grady [1992] I.R. 210. He submitted that it is not for this Court to second guess the Court of

Appeal, and if the Court of Appeal did not interfere or overturn in any unjustifiable way, any primary fact (and he submitted that it did

not), then that is the end of the matter for the Supreme Court. The Supreme Court does not engage in a rehearing to consider if the

Court would make the same decision on the inferences. The Supreme Court is not a further Court of Appeal, he stated, it is a new

layer of supervisory jurisdiction, and the scope of review by the Supreme Court is narrower. Counsel stressed that the issue was

whether the Court of Appeal understood and applied Hay v. O’Grady. He submitted that it did. He argued that the Court of Appeal

understood and applied Hay v. O’Grady, did not disturb any primary finding of fact, and addressed inferences only. Counsel agreed

that Mr. Smyth and Templeville understood in 2007 and 2008 that there was a single cable and that it traversed the site. Asked how

a company forgets, counsel submitted that a company acts through agents, any misrepresentation made applies to the knowledge of

the individuals in the company who are the agents during that transaction. Mr. Smyth’s state of knowledge was the key. The question

and knowledge of the state of mind of Mr. Smyth was exclusively a case of inference. Thus, the Court of Appeal was entitled to

analyse the inferences. Counsel highlighted the four grounds of the learned trial judge addressed by Hogan J. in paras. 50 to 56 of his

judgment. He brought the Court to Mr. Halpenny’s evidence. He addressed the issue of the manhole covers and stated that there is

no warrant for saying that the manhole covers indicate the presence of two cables; that at best it is a matter a decision maker is

entitled to look at, as a matter of inference, and said that is what Hogan J. stated at para. 65:

“… one way or another, I do not consider that the presence of the ESB manhole covers assists the contention of

Leopardstown that on the balance of probability that Templeville had actual and complete knowledge of the

traversing cable.”

66. Counsel referred to Leopardstown’s map for the MSA which showed only one cable. Counsel stated that Leopardstown’s engineer,

who drew the map, knew there were two cables, he knew one traversed the site, and he deliberately did not draw that cable on the

site. Counsel questioned why he did not give an approximate position, or put a note saying there was a second cable? Counsel then

stated it was remarkable that the learned trial judge said it was prudent of Mr. Roberts to do so. Counsel submitted that no one

remembered that there were two cables. Reference was made to the evidence of Matt O’Dwyer given during cross-examination before

the High Court on Day 4 of the trial, where he said he knew of the second cable in 2002, in 2007, in 2008 and in 2012, but that in

October 2011 he had forgotten. Counsel argued that the Court of Appeal could draw the inference that Mr. Smyth had also forgotten.

Counsel argued that there was nothing wrong with the Court of Appeal holding that Mr. Smyth did not remember. It was stressed that

the Court of Appeal acted within the scope of Hay v. O’Grady.

67. Brian O’Moore S.C., for Templeville, addressed the Court on the issue of the burden of proof, the law, and argued that

Leopardstown had accepted in the Court of Appeal that the burden was on them to establish actual knowledge, and addressed

Redgrave v. Hurd (1881) 20 Ch. D.1. He stressed that the onus was on Leopardstown to prove actual knowledge by Templeville. He

argued that if the representation is material then there is a presumption that places an onus on the representor to show there was no

reliance. He argued that there were three stages with three questions: (i) Was there a representation? (ii) What was its materiality?

(iii) How would a reasonable person react? He submitted that in this case there was a jump to actual knowledge, and that

Leopardstown were making the case that “either you knew about the transverse cable or you knew there were two” and, “if you

knew there were two, you can’t have been deceived by a map that only showed one”.

Decision

Jurisdiction of the Supreme Court

68. (i) Counsel for Templeville made submissions as to the function of the Supreme Court under Article 34.5.3° of the Constitution

when hearing an appeal from the Court of Appeal, as referred to earlier in this judgment. He was correct in submitting that the

Supreme Court does not engage in a re-hearing to consider if the Court would make the same decision. The Supreme Court is not a

further Court of Appeal.

68. (ii) The starting point is the wording of the relevant provisions of the Constitution itself. Article 34.5.3° provides:-

“The Supreme Court shall, subject to such regulations as may be prescribed by law, have appellate jurisdiction

from all decisions of the Court of Appeal, it the Supreme Court is satisfied that:

(i) the decision involves a matter of general public importance, or

(ii) in the interests of justice it is necessary that there be an appeal to the Supreme Court.”

Article 34.5.4°, on the other hand, provides:-

“Notwithstanding section 4.1 hereof, the Supreme Court shall, subject to such regulations as may be prescribed by

law, have appellate jurisdiction from a decision of the High Court, if the Supreme Court is satisfied that there are

exceptional circumstances warranting a direct appeal to it, and a precondition for the Supreme Court being so

satisfied is the presence of either or both of the following factors:

(i) the decision involves a matter of general public importance, or

(ii) the interests of justice.”

68. (iii) Under the Constitution there is an entitlement to an appeal as of right. The fundamental right of appeal from the High Court is

now to the Court of Appeal. In this case the fundamental right was exercised and there was an appeal from the High Court to the

Court of Appeal.

68. (iv) There is no right of appeal from the Court of Appeal to the Supreme Court. There is a right to apply to the Supreme Court for

leave to appeal. It is then a matter for the Supreme Court to determine whether the application meets the criteria established in the

Constitution for granting leave to appeal.

68 (v) On the application of Leopardstown to the Supreme Court leave to appeal was granted. Such jurisdiction may only be exercised

where the Court is satisfied that the decision of the Court of Appeal “involves a matter of general public importance”, or that it is “in

the interests of justice” necessary that there be an appeal to this Court. In this case the determination stated that the Court was of

the view that the issues raised were matters of general public importance, and that it was in the interests of justice that there be an

appeal to the Court.

68. (vi) Thus, what was sought, and granted, in this case was a second appeal. It is no longer the primary function of this Court to

correct errors of a trial court. The Court of Appeal now has that role. This Court has a supervisory jurisdiction in cases where it has

determined that the constitutional criteria have been met. Where the constitutional criteria have been met the Court can fully

examine and explore the issues on which leave has been granted.

68. (vii) In this case the supervisory jurisdiction is exercised over the two issues identified in the determination, (a) the principle and

application of the rule in Hay v. O’Grady [1992] I.R. 210, and the jurisprudence derived therefrom, and, (b) the test and criteria to

establish misrepresentation.

The principle and application of the Rule in Hay v. O’Grady

69. At the core of this appeal is the issue of the proper approach which the Court of Appeal should adopt to Hay v. O’Grady.

70. The starting point in this regard is the new counterclaim which was permitted to be entered by Templeville on the second day of

the trial in the High Court, i.e. 12th June, 2013. The counterclaim pleaded that by furnishing a map in the negotiations leading to the

MSA, Leopardstown had misrepresented that the site in issue was not materially affected by an underground ESB cable; this was the

only issue before the Court of Appeal. This is the cable referred to as ‘the transverse cable’. In its amended defence, delivered on the

13th June, 2013, Leopardstown pleaded that Templeville, its servants, agents and experts, were aware of the location of both ESB

cables, including the cable traversing part of the site prior to the execution of the MSA.

71. Thus, the issue of the knowledge of the transverse cable is at the core of the case heard by the High Court. For this Court the

kernel issue, as described in the determination, is the application by the Court of Appeal of principles principally found in Hay v.

O’Grady.

72. The case was at hearing before the learned trial judge in the High Court for fourteen days; fifteen witnesses were called for

Leopardstown, and nine for Templeville. Thus, it was a trial in which there was considerable oral evidence before the learned trial

judge. There was a reserved judgment delivered on the 2nd September, 2013, there were further hearings, and on 14th November,

2013, the High Court dismissed Templeville’s counterclaim on the issue of the transverse cable.

73. At the core of the case is the issue of knowledge of the transverse cable. Mr. Smyth denied such knowledge. The High Court

found his evidence “improbable”. This is a primary finding of fact.

74. The High Court referred to factors relevant to knowledge of the transverse cable by Leopardstown. Thus, for example, reference

was made to the planning application of Templeville in 2007. In response to that planning application, Leopardstown had put in an

observation where reference was made to an earlier planning application by Leopardstown in 2002, which showed two cables on the

site. The High Court found that it was inconceivable that Templeville did not have regard to that application, where in the 2002

application two cables were shown, one of which, traversed the site. In 2007, the observation on behalf of Leopardstown pointed out

that there were two ESB cables not shown on the site plan. The Local Authority then sought information from Templeville, saying that

it would be necessary to consult with the ESB regarding the impact of the development on the ESB cables, indicated as traversing the

site.

75. The High Court found that on the 19th July, 2007, Brendan O’Sullivan on behalf of Templeville responded showing, inter alia, the

line of the ESB cable traversing the site. There was evidence also of consultation with the ESB by Templeville about the traversing

cable. The High Court pointed out that Templeville, as a corporate persona, could not have forgotten. The High Court found that Mr.

Smyth “… as its controlling mind” could not have been “… unaware of it”

76. The learned High Court judge held:-

“It is impossible not to be satisfied that Templeville had knowledge of the transverse ESB cable. I am satisfied that

Philip Smyth, in claiming no knowledge of the cable is giving evidence that, in these circumstances, a court could

not accept.”

As to the issue of the maps, and in particular the evidence of Ian Roberts, the learned High Court judge stated “I entirely accept all

of his evidence”.

77. The manhole covers on the site were another specific issue. This was a physical feature of the dome site in October, 2011.

However, Mr. Smyth said he was not aware of the manhole covers, as he stated under cross-examination on Day 10 of the trial.

Michael McDowell S.C. asked him:-

“Although you now accept there is a great big manhole in the middle of the site marked with ‘ESB’, and you have

seen the photographs of it, that you were utterly unaware of it when you were in Kilroy’s, is that right?”

Mr. Smyth replied:-

“Well it wouldn’t have mattered to me, and I didn’t know it, but it wouldn’t have mattered to me.”

Counsel sought further clarification:-

“ … you are saying you had forgotten completely about the manhole if you had ever seen it?”

Mr. Smyth replied:-

“If I had ever remembered it, I didn’t notice it.”

On this the learned trial judge concluded:-

“There are three manhole covers with the electricity caution symbol on them towards the middle of the site.

People who buy or lease land, absent any such history, at the very least have a duty of reasonable investigation as

to what they are taking on. Philip Smyth swore an affidavit about this issue in a legal context. I cannot accept that

forgetting something, if that happened, which is very improbable, amounts to a lack of knowledge about it.”

Counsel for Templeville submitted that notice of the fact is not sufficient to counteract a misrepresentation.

78. The High Court ruled out any acceptance of the evidence of Mr. Smyth as to what was probable or improbable. As to this core

issue, the learned High Court judge indicated clearly that he could not accept Mr. Smyth’s evidence, stating:-

“I cannot accept any evidence that the cable was first discovered on the 14th June, 2012. Nor can I accept that

Mr. Ian Roberts acted dishonestly, or gave untruthful evidence, or that there was any kind of sharp practice by

Leopardstown, or that Templeville made a mistake or that any misrepresentation of any kind was made by

Leopardstown.”

79. It is the primary duty of a trial judge to hear evidence and make a decision thereon. An appeal court does not have the

opportunity to see and hear the witness, or to observe the manner in which the evidence is given, or the demeanour of the witness.

As McCarthy J. held in Hay v. O’Grady [1992] 1 I.R. 210, at 217:-

“If the findings of fact made by the trial judge are supported by credible evidence, this Court is bound by those

findings, however voluminous and, apparently, weighty the testimony against them.”

This is the principle of law to be applied by the Court of Appeal. It is the principle which was accepted by the Court of Appeal.

However, in its application the Court of Appeal erred.

80. The High Court made a clear finding of fact in relation to the evidence of Mr. Smyth, that he was not believable. There was

credible evidence to support that finding. The decision as to the credibility of a witness is itself an issue of fact: McCaughey v. Irish

Bank Resolution Corporation Limited [2013] IESC 17.

81. In this case, while the Court of Appeal referred to the principles of Hay v. O’Grady, and the findings of fact by the trial judge, it

then proceeded as if it were a trial court re-hearing a case and considering evidence afresh. It dismissed the learned trial judge’s

findings as to credibility and facts.

82. The principles identified by the Hay v. O’Grady jurisprudence include the following:-

• An appellate court does not proceed by way of a full re-hearing of a case.

• An appellate court is bound by the findings of fact of a trial judge which are supported by credible evidence.

• In general, an appellate court proceeds on the findings of fact of a trial judge.

• The fact that there is contrary evidence does not alter the position.

• An appellate court should be slow to substitute its own inferences of fact where such depends upon oral

evidence, and a different inference has been drawn by the trial judge.

• The fact that there is some evidence before a trial judge which may lead to a different conclusion does not alter

the fundamental principle.

• A finding of the credibility, or not, of a witness is a primary finding of fact.

83. I am satisfied that the Court of Appeal exceeded its jurisdiction by misapplying Hay v. O’Grady. The learned trial judge heard and

observed the witnesses, and his findings of fact were supported by credible evidence.

84. The learned trial judge made a primary finding of fact that Mr. Smyth was not a credible witness. The finding was made after oral

evidence given by Mr. Smyth.

85. The Court of Appeal held correctly that the learned trial judge was entitled to reject the evidence of Mr. Smyth. There was no

contradicting evidence. Mr. Smyth asserted that he did not know of the transverse cable and this evidence was rejected. The learned

trial judge heard all of the evidence in the case. The role of an appellate court in relation to such findings of fact has been clearly

stated in Hay v. O’Grady, cited previously.

86. In the neighbouring jurisdiction the role of the appellate court was described in SS Gairloch [1899] 2 I.R. 1 where Holmes L.J. held

at p. 18:-

“Where a judge, after trying a case upon viva voce evidence, comes to a conclusion regarding a specific and

definite matter of fact his findings ought not to be reversed by a court that has not the same opportunity of

seeing and hearing the witnesses unless it is so clearly against the weight of the testimony as to amount to a

manifest defeat of justice.”

87. In McCaughey v. Irish Bank Resolution Corporation Limited, Hardiman J. stated that this was to practically the same effect as the

well known passage from McCarthy J., in Hay v. O’Grady.

88. In other words, an appellate court should not interfere with a primary finding of fact by a trial court which has heard oral

evidence, unless it is so clearly against the weight of the evidence as to be unjust.

89. This test was applied by Hardiman J. in McCaughey v. Irish Bank Resolution Corporation Limited, where he stated:-

“106 I do not consider the relevant findings in this case are findings which rely on inference rather than findings of

primary fact. In every case where the credibility of a witness is at stake credibility in the sense of whether or not

the witness is giving a credible account, not necessarily whether he is lying, are of necessity issues of fact.

107 The finding as to Mr. McCaughey is intending to invest in the fund regardless of what he was told about the

zoning issue is a finding as to his state of mind.”

90. The Court of Appeal erred in its application by, in effect, overturning the primary finding of fact by the trial judge as to Mr.

Smyth’s credibility, based on his oral evidence, and other evidence such as the evidence of Mr. Smyth’s prior knowledge of the

transverse cable. The Court of Appeal overturned the finding of the trial judge as to credibility in effect, and substituted its own

inferences of fact. The issue as to credibility depended on the oral evidence of Mr. Smyth and the Court of Appeal in essence turned

the findings of the High Court on its head.

91. The issue before the High Court in the late filed amended defence and counterclaim by Templeville raised the question whether by

furnishing a map used in negotiations leading to the MSA Leopardstown had misrepresented that the site was not materially affected

by the transverse cable. In replying proceedings, on the third day of the trial, Leopardstown pleaded that Templeville was aware of

both ESB cables, including the transverse cable. Thus, the case proceeded and at the core was the issue of whether Templeville was

aware of the transverse cable. The High Court held that it was. The High Court then proceeded on the basis that this concluded the

matter. Any further issue as to the knowledge of Templeville was moot. In light of the findings on this appeal I would agree. Thus, the

second issue does not arise for decision, in all the circumstances.

Misrepresentation

92. However, looking at the second issue, it was raised by Templeville, that there was misrepresentation that the site was not

materially affected by an underground cable, and that the suitability of the site for the development contemplated in the MSA was

not materially compromised by any such cable.

93. The learned trial judge concentrated on determining whether Templeville was aware at the time of the MSA that an ESB cable

traversed the site.

94. Great weight has been laid on the decision of the Supreme Court in Gahan v. Boland & Boland [1985] I.L.R.M. 218, where Walsh J.

and Hederman J. agreed with the judgment of Henchy J. The facts of that case were that the defendants were a husband and wife

who had an offer on a property. The plaintiff, a solicitor, entered into a written contract for the purchase of the property. He sought

an order for the rescission of the contract. He succeeded in the High Court. There was an appeal to the Supreme Court. The events

leading to the plaintiff’s claim were as follows. He visited the property and made enquiries. One of his inquiries was whether a

projected motorway would affect the property. He gave evidence that Mr. Boland assured him that the property would not be

affected by the proposed motorway. He gave evidence that this assurance led to him entering into a written contract for the

purchase of the property. It was common case that the proposed motorway was routed to pass through the property. The plaintiff

did not discover this until after he had signed the contract.

95. Henchy J. held:-

“There was a conflict of evidence as to what representation, if any, was made as to the motorway. The judge,

however, having reviewed the evidence was of the clear opinion that an innocent but false representation was

made by Mr. Boland to the effect that the property would not be affected by the motorway, if and when it came

to be constructed; that this representation was a material one made with the intention of inducing the plaintiff to

act on it; and that it was one of the factors that induced the plaintiff to enter into the written contract on the

following Monday to purchase the property.

Having perused the transcript of the evidence, I am satisfied that there was ample evidence to support those

findings as to the misrepresentation relied on by the plaintiff for the rescission of the contract. Once there was

evidence to support the judge’s findings in that respect, the defendants’ main ground of appeal, namely that the

findings as to misrepresentation are unsustainable, must be held to fail. This Court cannot set aside primary facts

of that nature found by the judge and supported by evidence.

The alternative or secondary ground of appeal argued was that, even if the defendants’ argument as to

misrepresentation fails, the claim for rescission should have been rejected because the plaintiff should be held to

have had constructive notice of the true position as to the route of the proposed motorway. It was suggested

that the plaintiff, a solicitor and an intending purchaser, having made inquiries of the vendors as to whether the

property would be affected by the motorway, was required, by the application of the doctrine of constructive

notice, to pursue those inquiries in quarters where he would have been reliably informed as to the true position.

For that reason, it is submitted, he should be held disentitled, for the purposes of rescission, to rely on the

misrepresentation made and should be deemed to have constructive notice of the true position (as to the route of

the motorway).

I was unable to accept this argument. I consider it to be well settled law that the only knowledge that will debar a

purchaser from repudiating a contract he has been induced into by the vendor’s misrepresentation is actual and

complete knowledge of the true situation. It does not lie with a vendor, who has by his misrepresentation induced

the purchaser to enter into a contract to purchase, to have his misrepresentation excused or overlooked and to

have the purchaser deprived of a right to rescind because he did not ignore the misrepresentation and pursue

maters further so as to establish the truth of what was misrepresented. That would be unconscionable and unfair.

The doctrine of constructive notice, as it arises under s. 3 of the Conveyancing Act, 1882 and as it was applied by

this Court in Somers v. W 1979 I.R. 94, has no application to the facts of the case.

I would dismiss this appeal.”

[Emphasis added]

96. In Redgrave v. Hurd C.A. (1881) 20 Ch.D.1, at p. 24 Lush L.J. gave his view of the law:-

“… where a false representation has been made it lies on the party who makes it, if he wishes to escape its effect

in avoiding the contract, to shew that, although he made the false representation the Defendant, the other party,

did not rely upon it. The onus probandi is on him to shew that the other party waived it, and relied on his own

knowledge.”

97. Was there a duty on Leopardstown to bring positive proof that on a particular day Mr. Smyth’s frame of mind was that he was

consciously aware of the position of the transverse cable? I do not believe such a duty was established by Gahan v. Boland. In this

case there was a conflict of submissions, but not of evidence. There was the evidence of Mr. Smyth, which the learned trial judge,

having considered all the evidence, was of the clear opinion was not credible. There was ample evidence to support such a finding.

98. As stated in Gahan v. Boland, once there was evidence to support the judge’s findings, Templeville’s claim as to

misrepresentation, must fail. An appeal court should not set aside primary facts of that nature found by the trial judge and supported

by credible evidence.

99. That concludes the finding in relation to the issue of misrepresentation. The second issue in Gahan v. Boland, constructive notice,

does not arise on the facts of this case.

Conclusion

100. There were two issues before this Court:-

(i) First, in essence, did the Court of Appeal exceed its jurisdiction by misapplying Hay v. O’Grady? I would answer

this in the affirmative, for the reasons given.

(ii) Second, the issue of misrepresentation and the application of the correct law. The Court was not asked to

overrule Gahan v. Boland. Once there was evidence to support the learned High Court judge’s finding, as to the

credibility of Mr. Smyth, this was a finding of primary fact which should not be set aside by an appellate court as it

was supported by credible evidence. Further aspects of the law on misrepresentation did not arise.

101. Consequently, I would allow the appeal, set aside the judgments and order of the Court of Appeal, and affirm the judgments and

order of the High Court.