Blackrock Medical Partners Ltd v Marpole Ltd
| Jurisdiction | Ireland |
| Judge | Ms. Justice Pilkington |
| Judgment Date | 12 December 2019 |
| Neutral Citation | [2019] IEHC 928 |
| Docket Number | [Record No. 2016/7077 P.] |
| Court | High Court |
| Date | 12 December 2019 |
AND
[2019] IEHC 928
[Record No. 2016/7077 P.]
THE HIGH COURT
Transfer of shares – Validity – Mootness – Plaintiff seeking an order declaring void and of no effect the purported transfer by the second defendant to the third defendant of shares in the first defendant – Whether reliefs sought pursuant to the transfer were moot
Facts: The plaintiff, Blackrock Medical Partners Ltd, applied to the High Court seeking three reliefs in the following terms: (A) an order declaring void and of no effect the purported transfer by the second defendant, BMD Investments Ltd, to the third defendant, Parma Investments Ltd, of ten ordinary shares in the first defendant, Marpole Ltd; (B) an order declaring void and of no effect the purported registration by the first defendant of the aforesaid purported transfer in the register of transfers and register of members maintained in respect of the first defendant; and (C) a declaration that the second defendant is not entitled to effect any transfer of any shareholding in the first defendant otherwise than in accordance with the provisions of the subscription and shareholder’s agreement (SSA) executed by the plaintiff and all of the defendants (amongst others) on the 11th June, 2004. In essence, the case concerned the validity of a transfer of shares between the second and third defendant, in the first defendant.
Held by Pilkington J that any reliefs sought pursuant to the March 2016 transfer were moot, the omission of BMD as a permitted transferee was an inadvertent omission or drafting error and the terms of the September 2016 transfer had been effected in accordance with the terms of the 2004 SSA as amended. Accordingly, insofar as the plaintiff sought reliefs pursuant to paragraphs A, B, and C within its endorsement of claim, in respect of A and B, Pilkington J declined to make the declarations sought. With regard to paragraph C, Pilkington J did not understand the nature of the declaratory reliefs sought. In her view it was too broadly drawn and in any event the matters at issue within this litigation (as opposed as perhaps when these matters were initially drafted) were dealt with in the reliefs of A and B above. The reference to 11 June 2004 within its terms could only relate to the March 2016 transfer which Pilkington J had already dealt with. Pilkington J declined to grant any declaration in accordance with paragraph C.
Pilkington J held that she would hear the parties as to any additional orders that may be required including the question of costs.
Reliefs refused.
The Plaintiff seeks three reliefs in the following terms:-
“(A) An order declaring void and of no effect the purported transfer by the second named defendant to the third named defendant of 10 ordinary shares in the first named defendant.
(B) An order declaring void and of no effect the purported registration by the first named defendant of the aforesaid purported transfer in the register of transfers and register of members maintained in respect of the first named defendant.
(C) A declaration that the second named defendant is not entitled to effect any transfer of any shareholding in the first named defendant otherwise then in accordance with the provisions of the SSA executed by the plaintiff and all of the defendants (amongst others) on the 11th June, 2004”.
In essence, this case concerns the validity of a transfer of shares between the second and third named defendant (‘BMD’ and ‘Parma’ respectively), in the first named defendant.
The first named defendant, Marpole Limited (“Marpole”) is the operating company which owns 100% of Galway Clinic Doughiska Limited which in turn is the operating company for the Galway Clinic, a private hospital in Galway. From the outset it has submitted that it should not have been joined as a party to this litigation.
All other parties to this litigation are investors and shareholders in Marpole. In the normal course these parties entered into certain shareholder agreements, a subscription and shareholder's agreement dated 11th June, 2004 and the amendment agreement to that agreement, dated 29th June, 2015 (the “2004 SSA”) and the (“2015 amendment agreement”) respectively.
The 2004 SSA governs the relationship between the parties. Executed on 11th June, 2004 it is between Blackrock Medical Partners Limited (defined within it as “the developer”), Parma Investments Limited (the third named defendant herein and a vehicle of Mr. Goodman) (‘Parma’), BMD Investments Limited (the second named defendant and a company whose shareholding was held by Mr. Brendan McDonald and his spouse, in a shareholding ratio of 80/20% respectively), Marpole, Galway Clinic Doughiska Limited and James Sheehan and Dr Joseph Sheehan respectively.
As I understand it, in the course of seeking to develop and establish the Galway Clinic Mr James and Dr. Joseph Sheehan, for reasons that they perhaps now differ upon, but which related to the necessity for fresh investment agreed that the plaintiff to these proceedings, which up to that point was the 100% owner of the project, reduced its interest to 50% with the new investors comprising the third named defendant, Parma taking 40% and BMD, the second named defendant, taking 10%. In essence the 2004 SSA is therefore to deal with that new arrangement.
Given that this litigation concerns the validity (or purported validity) of two share transfers it is necessary to set out the background documentation and mechanisms of those transfers in some detail.
SSA
The recitals to the 2004 SSA state that both the plaintiff BMP and Galway Clinic Doughiska Limited are private limited companies and as a consequence of Marpole wishing to raise additional capital for business, that the parties have agreed to enter this agreement to:-
(i) provides for the subscription by the investors (BMP, Parma and BMD) for shares
(ii) provides for investor loans, and
(iii) regulate the conduct of the business of the companies, the boards and their relationship between the company and its shareholders.
Clause 2.1.1 states that Parma would hold 40% of shares, the plaintiff's 48% (I was told that the other two shares were also held by the Sheehan brothers bringing their then total to 50%) and 10% of the shareholding in BMD. Clause 2.1.2 stated that each of the investors would make advances by way of loan to Marpole, Parma would advance €7.2m, BMD €1.8m and the developer BMP would contribute €9 million.
In respect of those loans it was asserted that they were “subject always to any portion of the Investors Loan being repayable in accordance with Clause 7.1.4”.
Within clause 4 under the sub-heading “Restricted Transactions”, it is stated that:-
“the Companies or either of them shall not do any of the matters listed in schedule 3 without the appropriate consent referred to in schedule 3”.
The opening paragraph to schedule 3 headed “Restricted Transactions” is as follows:-
“The investors shall exercise all voting rights and other powers of control available to them in relation to the Companies so as to ensure (so far as lies within their power of procurement, individually or collectively with others) that neither the companies nor any of them will, without the prior written consent of Parma (for so long as it or its permitted transferees hold 25% of the shares) and the developer (for so long as it or its permitted transferees hold 25% of the shares …”.
There then follows a number of restricted transactions. Number 11 of the restricted transactions is:-
“Enter into any contract, transaction, agreement, arrangement or understanding which would amend the current corporate structure or shareholdings or control of the Companies or the Group in any way”.
Clause 7 (and in particular clause 7.4.1 and 7.4.4) of this agreement are the primary clause in contention. It is necessary to recite it in some detail. It is headed “Transfers and Restricted Transfers” and under the heading “Form of Transfer” states:-
“7.1.1. Any transfer of Shares or an interest in Shares contemplated under this clause 7 shall be deemed to be an obligation to transfer the entire legal and beneficial interest in such Shares or the entire beneficial interest in such interest and Shares (as the case may be) free from any lien, charge or other encumbrance of any nature whatsoever.
7.1.2. With the consent in writing of all of the investors (or their duly authorised representatives), any of the provisions of Clause 7 may be waived in whole or in part in any particular case.
7.1.3. Each investor shall at their written request of the company board keep the company informed as to the beneficial ownership and control of such investor such investor's shares and interests in shares.
7.1.4. Subject always to compliance with the provisions of clause 7.2, any investor who proposes or is required or deemed to transfer Shares or an interest in Shares (Sale Shares) pursuant to this Clause 7 (a Proposing Transfer or) shall upon completion of the sale of the Sale Shares to the transferee (the Transferee):
(1) be repaid by the Company such portion of the Investors Loan (Loan Amount) as equals the proportion which the number of Sale Shares represents of the entire Shares in issue immediately following Completion;
(2) procure that it is a term of the sale of the Sale Shares that the Transferee shall lend the Loan Amount to the Company as a new investor loan on the same terms and conditions as set out in Clause 2.1.2;
(3) procure that it is a term of the sale of the Sale Shares that the Transferee shall, subject to consent of Anglo Irish Bank Corporation PLC, … assume all of the obligations of the Proposed Transferor...
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