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Judgment
Title:
Horan -v- O'Reilly & Ors
Neutral Citation:
[2008] IESC 65
Supreme Court Record Number:
52/05
High Court Record Number:
2001 369p
Date of Delivery:
12/15/2008
Court:
Supreme Court
Composition of Court:
Geoghegan J., Fennelly J., Finnegan J.
Judgment by:
Fennelly J.
Status:
Approved
Result:
Allow And Set Aside
Judgments by
Link to Judgment
Concurring
Fennelly J.
Geoghegan J., Finnegan J.


THE SUPREME COURT
52/05
Geoghegan J.
Fennelly J.
Finnegan J.

MARTIN HORAN

-v-

FRANK O'REILLY, MICHAEL McHALE, JOHN JOYCE, SEAMUS O'BRIEN AND AN POST NATIONAL LOTTERY COMPANY

JUDGMENT of Mr. Justice Fennelly delivered the 15th day of December 2008

1. This appeal is about a lottery syndicate. On 6th January 2001, the fourth-named appellant had the good fortune—or so it appeared at the time—to purchase a lottery ticket in Castlebar, County Mayo. The winnings were £1,577,578. The ticket was purchased on behalf of a syndicate.

2. The syndicate undoubtedly included the first four appellants. The issue is whether the respondent was entitled to be a member at the time of the purchase of the winning ticket. For clarity, I will refer to these parties by their names.

3. Clarke J, in a judgment of 3rd December 2004 held that Mr Horan was entitled to be treated as a member. The High Court made an order declaring him to be the beneficial owner of one fifth of the winnings.

4. Although breaches of fiduciary duty were pleaded, the trial judge treated the case as being laid in contract. Five individuals comprising a plant operator (the plaintiff), a publican (Mr O’Reilly), a farmer(Mr McHale) and two taxi drivers (Mr Joyce and Mr O’Brien), not surprisingly, did not reduce their agreement to unambiguous written form. The learned trial judge rightly commented on the difficulty of applying detailed legal analysis to a dispute arising from the informal legal arrangement entered into between the parties to a lottery syndicate. Nonetheless, it is the task of the courts to apply the principles of the law of contract to a transaction which has indisputable legal consequences.

5. It is common case that the five parties, all then living in or near Ballyvary County Mayo, formed a syndicate either in June 1999 or January/February 2000; that each participant was to pay £1.50 for each of the two weekly lottery draws (£3 each per week); that Mr O’Brien was to buy the tickets and generally to be in charge; most importantly, that Mr O’Brien was to collect the weekly contributions from the members; that winnings were to be shared equally between the members of the syndicate.

6. All the difficulties flowed from the fact that, in the absence of any detailed rules for payment, Mr O’Brien permitted Mr Horan to fall into arrear in his payments by carrying the arrears himself. There was a sharp dispute about whether the Mr Horan made a particular last payment of £27 in respect of his accumulated liabilities in October 2000. The learned trial judge found in favour of Mr Horan on that issue.

The contract

7. It is essential to commence by ascertaining the terms of the contract between the parties. At paragraph 7 of the statement of claim, it is pleaded as follows:
      “By oral agreement made between the Plaintiff of the One Part and the First, Second, Third and Fourth named Defendants in or about the early months of 1999 “the agreement” it was agreed that Plaintiff and the First, Second, Third and Fourth named Defendants would combine to purchase lottery tickets in the An Post National Lottery each week. It was further agreed that they would contribute to the cost of the purchase on an equal basis.”

8. It was further pleaded that it was an express or an implied term of the agreement that any winnings would be divided equally. In reply to a request for further and better particulars of the amount and frequency of the contribution envisaged Mr Horan said that it was £1.50 per draw amounting to £3.00 per week.

9. Mr Horan’s evidence, as recorded, in the absence of a transcript, in the agreed note of evidence, is that he was asked by Mr O’Brien if he would like to join in a syndicate, that “there were four people in the syndicate initially and that it was £1.50 a go or £3.00 a week.” He added that the understanding was that “Seamus O’Brien would purchase the ticket as he was driving a taxi and Castlebar was where you do the Lotto as there was no Lotto in Ballyvary.”

10. None of the foregoing seems to have been in contention. Although the learned trial judge posed the question as to what were the arrangements between the parties, and made no express findings about the original agreement, it is common case and implicit in the judgment that the basic syndicate agreement was as outlined above.

11. There was disagreement on two points: firstly whether the syndicate commenced in June 1999, as contended by Mr Horan, or in January/February 2000 on the appellants’ case; secondly whether the third-named appellant was already a member when Mr Horan joined or afterwards as he contended. Nothing crucial turns on either of these issues; the learned trial judge made no final findings on them.

12. The basic elements in the agreement can thus be stated. There were five syndicate members, Mr Horan and the four appellants; each was to contribute equally and to share equally in any winnings; each member was to make a weekly contribution of £3.00 to cover the two draws, by paying it to Mr O’Brien, who was to buy the ticket in Castlebar. Thus £7.50 would be invested in each of the two weekly lottery draws.

Treatment of arrears

13. The crucial and determinative issue, so far as the learned trial judge was concerned, was the practice regarding payment which Mr O’Brien operated in the case of Mr Horan. In this respect, the conclusions of the learned trial judge were to the following effect.
14. Mr O’Brien operated a system in circumstances where Mr Horan had not paid so that Mr Horan was “carried by the syndicate notwithstanding that he was in arrears.” For some period of time there was a process whereby tickets were bought where Mr Horan had not paid up front and Mr O’Brien bore that expense, though he could recoup it from the Mr Horan later. This had happened “on at least one occasion” and payment to catch-up was accepted. The statement, made by the learned judge at one point, that Mr Horan was “carried by the syndicate” was not completely accurate. It was qualified by his later finding that Mr O’Brien bore the expense, which was, in fact, the evidence.

15. There was a particularly sharp conflict of evidence in respect of the last payment made by the Mr Horan prior to the purchase of the winning ticket in January 2001. The evidence for the appellants, in effect that of Mr O’Brien, was to the effect that Mr Horan had paid up to April 2000 and that he made no further payment. Part of that evidence was that £72 was owed by Mr Horan to Mr O’Brien in October 2000. Mr O’Brien gave evidence that he confronted Mr Horan in Stenson’s bar in October 2000, but that Mr Horan had refused to pay and had told him, using a common-place obscenity, to “fuck off” with his lottery.

16. Mr Horan denied this. The meeting in October, he said, took place in Mr O’Reilly’s pub and, although Mr O’Brien remarked on Mr Horan being in arrears again, paid £30, of which £27 represented nine weeks arrears, the balance being left with Mr O’Brien to buy a drink. He and several witnesses said that he had not used the language attributed to him.

17. The learned trial judge resolved this important conflict of fact as follows:
      “I find on the balance of probabilities that the facts are broadly as outlined by Mr. Horan and for the reasons indicated earlier this means that I find for the plaintiff. I accept that Mr. Horan is broadly correct and in particular that the substance of the meeting in early October is as he has stated.”

18. It is common case and could not, in any event, be disputed that this finding of fact, based as it was on the live evidence of a number of witnesses heard by the learned trial judge, cannot be questioned on appeal. It cannot be contested, therefore, that Mr Horan paid any arrears due by him up to October 2000, that this was accepted by Mr O’Brien and that Mr Horan was not informed that he was out of the syndicate.

19. The essence of the conclusion of the learned trial judge, flowing from the evidence that Mr O’Brien permitted the build-up of arrears and upon which he decided the case was as follows:
      “On that basis and whatever the views of the other defendants, they allowed Mr. O'Brien to be the manager of the syndicate. Mr. O'Brien allowed arrears to build up, and therefore it seems that all the defendants are bound by the arrangements he made.”
Other matters of fact

20. Following the payment of arrears up to date in October 2000 Mr Horan made no further payments prior to the purchase of the winning ticket. Nor was he asked for any payments.

21. In addition, it is clear that from October, Mr O’Brien ceased to invest £7.50 per week in tickets so that, on 6th January 2001 only £6.00 was purchased.

22. The High Court also heard evidence regarding a transaction between Mr Horan and Mr Joyce concerning the purchase of a tractor. The only conceivable relevance of the tractor was that it might have cast light on the credibility of one or other of the parties. In the event, the learned judge obtained no assistance from it.

23. The learned trial judge, in his search for a basis for resolving the dispute, attached importance to the fact that there were occasional very small syndicate winnings and that Mr O’Brien had not dealt with the disposal of those sums. It appears that Mr O’Brien had, from time to time used those winnings to purchase extra lines, which the learned judge found it difficult to justify. He commented, in addition, that Mr O’Brien had offered no explanation as to why some arrangement was not made as to the winnings, in view of his claim that Mr Horan had left the syndicate.

24. For my own part, I find it difficult to see the relevance of the latter issue to the crucial question of whether Mr Horan remained a member of the syndicate in January 2001. I find it entirely unsurprising that it was not considered worthwhile to distribute winnings as small as appears on the evidence to have been the case. Even if there was some irregularity in respect of the accumulated winnings (and I do not see that there was any significant irregularity, in the light of Mr O’Brien’s assigned role), there was equally an irregularity on the part of Mr Horan in failing to make any further payments after October. I do not think the issue of accumulated winnings assists in the resolution of the issue.

The appeal

25. The appellants make three essential points in their notice of appeal, namely:

· Mr Horan had not contributed anything to the purchase of the winning ticket;



· It was common case that the “bet” placed by the syndicate was £6.00 which represented the contributions of only four syndicate members, not including Mr Horan;


· The non-payment of advances up front by Mr Horan and the acceptance of payment in arrears could not alter the contract entered into when the contract was formed whereby the parties agreed to pay £3 per week in advance.
26. The appellants relied in particular on the evidence given at trial by a representative of the lottery who produced the print out of the electronic record showing that the winning ticket of 6th January 2001 was part of a £6 purchase of eight lines.
27. In their written submissions, the appellants argue that the original contract could not be varied in the absence of mutual agreement between the parties. The appellants cited the decision of McCracken J in Clarke v Kilternan Motor Co Ltd (High Court unreported 10th December 1996) that, on the facts of that case there had had not been “any sufficient meeting of minds to vary the terms of the original agreement.” Williams v Roffey [1990] 1 All ER 512 establishes the need for consideration for the variation of an agreement.

28. Mr Horan relies strongly on the findings of the learned trial judge. These have been set out above. In accordance with the judgment of this Court in Hay v O’Grady [1992] I.R. 210, as followed on many occasions, this Court in the exercise of its appellate jurisdiction is bound by the findings of the High Court.

29. Mr Horan submits that the arrangement whereby Mr O’Brien permitted Mr Horan to pay in arrear was known to all members of the syndicate and accepted by them and that the ongoing relationship between the parties was supported by consideration. In particular, it was submitted that, even if the original arrangement for payment had altered or varied over time, this alteration or variation was known and accepted by all parties to the syndicate. There was no unilateral variation of the agreement.

Analysis and conclusion

30. It does not seem to me to be in doubt that, under the original arrangement, each syndicate member was to pay his contribution weekly to Mr O’Brien so that he could purchase the lottery tickets twice weekly. It was not part of that agreement that individual members could pay in arrear and, nonetheless, remain a member of the syndicate. Mr Horan did not suggest that the agreement contained any such term. Such a term would have to have been for the benefit of all members, which would have had the consequence that Mr O’Brien would be expected to purchase tickets for all members out of his own pocket. The alternative would be that a special term was agreed for one member only, in this case Mr Horan. It is improbable that such a term would be agreed by contributors to a small syndicate.

31. The learned trial judge referred to a decision of the Supreme Court of New South Wales of 16th August 1989, Cole v Crain, where the judge, Young J, observed that “the road that a person travels when he wishes to allege a ticket bought at a time when he was unfinancial is partly his property is a very hard one.” In that case, the court rejected the suggestion that there was a term that “subsequent conduct of the parties showed that the original contract was that the arrears would be accepted…” The judge found that the contract was that only those members who were “financial” when the ticket was purchased would be entitled to share.

32. That case was, of course, decided on its own facts. Nonetheless, I am struck by the remark that a person seeking to share in a syndicate when he has not paid up his share travels “a hard road.” That view accords with the ordinary sense of fairness that, in the absence of some special provision covering members in arrear, only those who pay should benefit.

33. The only real question in this case is whether the parties agreed to vary their original agreement to the intent that Mr Horan would remain in the syndicate and entitled to a proportionate share in any winnings even though in arrear in payment for an indefinite period, and that Mr O’Brien would continue to purchase tickets on his behalf in the absence of some notice of termination.

34. The conclusion of the learned trial judge is expressed as follows:

      “Having reached this conclusion and I find as a fact that the syndicate operated in a way which vested in Mr. O'Brien the authority to carry out all practical matters. Mr. O'Brien permitted the system to operate whereby Mr. Horan would be in arrears, as he was trustworthy. At Mr. O'Brien's request in late October 2000, Mr. Horan paid the arrears. At the time the winning ticket was drawn he was not in any greater arrears than in the past. I find no facts from which it can be inferred that Mr. Horan had refused to pay arrears and removed himself from the syndicate. Therefore I am driven to the conclusion that he remained in the syndicate up to the date when the winning ticket was drawn. Therefore he is entitled to share in the proceeds of the winning ticket.”
35. It is important to note that, contrary to the submissions made on behalf of Mr Horan, the learned trial judge did not find that all the other members of the syndicate were aware of the arrangements between Mr Horan and Mr O’Brien and accepted them. Throughout his findings the learned judge made a distinction. He stated repeatedly in different ways that Mr O’Brien had permitted Mr Horan to build up arrears, but that Mr O’Brien himself “bore that expense” or that it was “funded by Mr O’Brien.” It seems to me that the decisive consideration in the mind of the learned trial judge was the authority vested in Mr O’Brien: “they allowed Mr O’Brien to be manager of the syndicate;” “Mr. O'Brien [had] the authority to carry out all practical matters.”

36. This authority in practical matters vested in Mr O’Brien could not extend to varying the terms of the contract. The variation, in order to affect the right of the four appellants to share the winnings, would have to have been agreed by them. There is no evidence that it was. A variation would have needed to place an obligation on Mr O’Brien to purchase tickets on behalf of Mr Horan, even though he had not paid. It is clear that no such agreement was made. At most, then it would have to be implied. I am satisfied that it would not be obvious to any innocent bystander that such an obligation was imposed on Mr O’Brien on behalf of the other syndicate members. Can it be said that Mr O’Brien was under a legal obligation to Mr Horan to continue to purchase tickets for him? I do not think so.

37. It is important, in my view, that only £6.00 was invested on 6th January 2001. That fact indicates strongly that Mr O’Brien bought tickets for only four and not five members in the syndicate. Counsel for the appellants accepted at the hearing that, if the investment had been £7.50 instead, Mr Horan would be entitled to share.

38. In conclusion, the original agreement clearly permitted only those syndicate members to share in winnings who had paid their contributions. Mr O’Brien did not have authority to vary the agreement. His toleration of the payment by Mr Horan in arrear did not have that effect. It could not bind the other members without their agreement. Mr Horan was not a member of the syndicate on 6th January 2001.

39. I would allow the appeal and dismiss the claim.











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