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Irish developer wins appeal over attempt to enforce €6.3m judgment

At issue is investment in Polish shopping centre project

The Irish developer had appealed a decision of the High Court that the judgment against him could be enforced here. Photograph: Bryan O'Brien

Tue Apr 30 2024 - 18:16

An Irish developer has won an appeal over an attempt to enforce a €6.3 million judgment obtained against him in Poland by 57 Irish investors in a shopping centre project.

The investors claimed the way the investment scheme was handled by Michael Scully had “devastating consequences” for them and they never received any proceeds, including from the sale of the shopping centre in 2015.

Mr Scully, a Clonalkilty farmer who also co-owned Castle Carbery Properties Ltd which built the shopping centre in Opole, Poland in 2009, had appealed a decision of the High Court that the judgment against him could be enforced here.

The Court of Appeal allowed his appeal after finding that the use of a Polish special purpose vehicle (SPV) company set up by the investors, which brought the case in Poland against Mr Scully, represented “the commodification of litigation”, which was clearly prohibited by Irish public policy.

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There were 78 investors, 63 of them Irish, in the Opole shopping centre project and the investment took the form of an SPV called Coucal SP Zoo.

The 78 acquired 99.84 per cent of the share capital in the SPV while the remaining 0.16 per cent was held between Mr Scully and his Carbery co-owner Padraic Coll. To build the centre, the SPV borrowed €48 million.

By 2010 the investors were expecting a return on their investment as they were under the impression the centre had been up an running and at a profit since March 2009.

However, they alleged they were defrauded by Mr Scully when he induced them to divest themselves of their investments in the shopping centre, on terms which were unfavourable to them and favourable to Mr Scully. Those claims were denied.

As part of the new arrangement, the investors granted powers of attorney to Mr Scully in March 2011. It was claimed Mr Scully entered into transactions that were unfavourable to the investors and which they were not informed about.

In 2015, 57 of the investors assigned their rights to Coucal so that it could pursue claims against Mr Scully and other wrongdoers “across Europe”. They brought legal proceedings in Poland seeking, among other things, a declaration that the agreements entered into by Mr Scully were a nullity and seeking the return of the purchase price.

While initially unsuccessful, by 2021 the Warsaw Court of Appeal found that Mr Scully had wrongfully and without authority purported to enter into agreements on behalf of Coucal’s shareholders. It awarded judgment against him for some €6.3 million.

The Warsaw appeal court also permitted Coucal to bring proceedings in Ireland to enforce the judgment against assets he owns here, including a farm in Co Cork.

Mr Scully then brought proceedings here against Coucal Ltd seeking refusal of recognition and enforcement of the Polish judgment. The application was brought under an EU regulation, called Brussels I Recast, relating to enforcement of civil and commercial judgments across the EU.

In the meantime, Mr Scully had appealed the judgment to the Polish Supreme Court, which last February decided to make a reference to the Court of Justice of the EU relating to issues concerning judicial independence and impartiality and in particular the claimed lack of independence of one of the Polish Court of Appeal judges.

Mr Scully’s case here was rejected by the High Court in November 2022 and he appealed. Coucal opposed the appeal.

On Tuesday Ms Justice Aileen Donnelly, on behalf of a three-judge Court of Appeal, said she had “no hesitation” in finding that the recognition and enforcement of judgments may only be refused where it is manifestly contrary to public policy.

She said this was a public policy directly related to the administration of justice and stemmed from the policy here prohibiting third-party funding of litigation, known as maintenance and champerty.

“The public policy considerations are essential to the legal order in this State and the prohibition is a fundamental principle on which the courts of this jurisdiction must operate,” she said.

Such a public policy is therefore of such an exceptional nature that it comes within the relevant Brussels Recast regulation (Article 45.1.a) allowing refusal of recognition of a judgment if it is manifestly contrary to the public policy of the member state, she said.

In light of her finding on this, it was not necessary to deal with the issue raised by Mr Scully in relation to the independence of the Polish judiciary, she said.

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