Charles Kelly Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 12 February 2010
• Neutral Citation: [2010] IEHC 38
• Docket Number: [No. 402 COS/2008]
• Court: High Court
• Date: 12 February 2010

Kelly v Kelly & Charles Kelly Ltd

IN THE MATTER OF CHARLES KELLY LIMITED AND IN THE MATTER OF THE COMPANIES ACTS 1963 - 2006 AND IN THE MATTER OF SECTION 205 AND SECTION 213(F) OF THE COMPANIES ACT 1963

BETWEEN

EDWARD GERARD KELLY

PETITONER

AND

WILLIAM KELLY AND CHARLES KELLY LIMITED

RESPONDENTS

[2010] IEHC 38

[No. 402 COS/2008]

THE HIGH COURT

COMPANY LAW

Shares

Legal ownership - Register of members - Share transfers - Share transfers not stamped - Current issued share capital - Extent of petitioner's shareholding in company - Whether petitioner member of company - Whether proper instrument of transfer - Whether failure to stamp stampable document invalidates document - Whether stamping simply revenue requirement - Whether company entitled to register petitioner as member notwithstanding that transfer not stamped - Requirements in relation to maintenance of register of members - Rectification of register - Nisbet v Shepherd [1994] 1 BCLC 300 and Re Motor Racing Circuit Limited (Unrep, SC, 31/1/1997) followed - Companies Acts 1963 (No 33), ss 31, 81, 116, 122, 123, 124, 205, 213 and appendix N - Stamp Duties Consolidation Act 1999 (No 31), s 127(1) - Held that petitioner member of company and owns 7,936 shares in company jointly with respondent (2008/402COS - Laffoy J - 12/2/2010) [2010] IEHC 38

Kelly v Kelly

Facts: The petitioner and first respondent were brothers and in the substantive proceedings, the petitioner sought relief under s. 205 of the Companies Act 1963. The petitioner did not disclose that the petitioner was a member of the company or did not disclose the number of shares held by him. The respondent denied that the petitioner and the first respondent conducted and managed the company's affairs on the basis of an equal shareholding. The Court was asked to determine whether the petitioner was a member of the company and the extent of the petitioner's shareholding in the company. A vast array of documentation was put before the Court and evidence of various share transfers, in particular from their mother, Mrs. Kelly, to the petitioner and filings made in the Companies Registration office. The Court considered in particular various transactions in 1987, 1992 and 1995. The evidence of the first respondent was that he only became aware of a document as to a share transaction in 1992 a few days before the hearing.

Held by Laffoy J. that the petitioner was a member of the company and had been since 1992 and the petitioner owned 7,936 shares in the company jointly with the first respondent. The first respondent and the petitioner held their respective share untrammeled by any trust in favour of their siblings or other members of their family. The transfers executed to create joint tenancies were intended to have effect and they took effect. S. 127 of the Act of 1963 would have to be complied with and compliance would be effected by the company. The Court had jurisdiction pursuant to s. 122 of the Act of 1963 to determine whether the register should be rectified to record various transactions which had taken place since 187 and which were not recorded. The Court would direct the company to furnish details of the rectification.

Reporter: E.F.

COMPANIES ACT 1963 S205

COMPANIES ACT 1963 S205(1)

RSC APPENDIX N FORM 1

COMPANIES ACT 1963 S31

COMPANIES ACT 1990 S213

COMPANIES ACT 1963 S81(1)

COURTNEY THE LAW OF PRIVATE COMPANIES 2ED 2002 PARA 16.007

NISBET v SHEPHERD 1994 BCC 91 1994 1 BCLC 300

COMPANIES ACT 1963 S81

MOTOR RACING CIRCUITS LTD, IN RE UNREP SUPREME 31.1.1997 1997/5/1721

COMPANIES ACT 1963 S116

COMPANIES ACT 1963 S124

COMPANIES ACT 1963 S123

STAMP DUTIES CONSOLIDATION ACT 1999 S127

STAMP DUTIES CONSOLIDATION ACT 1999 S127(1)

COMPANIES ACT 1963 S122

Miss Justice Laffoy

1 In the substantive proceedings the petitioner seeks relief under s. 205 of the Companies Acts1963 (the Act of 1963). Section 205(1) provides:

"Any member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section."

2 The company in relation to which relief under s. 205 is sought by the petitioner is the company named in the title hereof, Charles Kelly Limited (the company). The company was incorporated on 18^th July, 1932. It carries on the business of builders-merchant and retail hardware at Letterkenny, County Donegal. When these proceedings commenced in 2008 it had recorded a turnover of €10m for the previous financial year ending on 30^th December, 2007. It has 50 employees.

3 The petitioner and the first respondent are brothers. Their grandparents and their grandparents' descendants have been involved in the business of the company since 1932. When the matter came on for hearing on 15^th December, 2009 a fundamental problem in the manner in which the case had been presented immediately emerged.

4 It is stated in the petition that the "authorised share capital of the company is €19,046.07". That statement did not conform with the requirement of Form No. 1 of Appendix N of the Rules of the Superior Courts 1986 (the Rules). Apart from that it gives a misleading picture of what is at issue on the petition. The petition does not disclose that the petitioner is a member of the company, nor does it disclose the number of shares he holds. What is pleaded in the petition is that the petitioner and the first respondent have over the years conducted and managed the affairs of the company on the basis of acknowledging their equal shareholding in the company and their entitlement to share equally in the management of the company. One of the reliefs sought by the petitioner in the petition is an order directing the company to purchase the petitioner's shareholding in the company at a fair market value.

5 In the respondents' points of defence it is denied that the petitioner and the first respondent have conducted and managed the company's affairs on the basis that they had equal shareholdings in it.

6 In the light of the problem which emerged when the petitioner's case was being opened - that there is a dispute between the petitioner and the first respondent as to whether the petitioner is a member of the company and, if he is, as to the number of shares he holds in the company - it was decided that a modular approach would be adopted to the hearing of the petition and that the Court would decide the following issues first:

7 (1) whether the petitioner is a member of the company; and

8 (2) the extent of the petitioner's shareholding in the company.

9 The importance of the first issue is that, in order to maintain an application under s. 205, the petitioner must be a member of the company. In accordance with s. 31 of the Act of 1963, given that he was not an original subscriber to the memorandum of association, he must establish that he agreed to become a member of the company and, crucially, that his name is entered on the register of members.

10 The issues are to be decided on the basis of the evidence of the petitioner and the first respondent, which the Court heard on 15^th December, 2009, 16^th December, 2009 and 18^th December, 2009 and the submissions made by counsel for the parties on 18^th December, 2009 and on 28^th January, 2010. A vast array of documentation was put before the Court. An issue arose as to the admissibility of share transfers, which were not stamped. I propose leaving over determination of that issue until I have outlined the evidence.

11 In outlining the evidence, I propose setting out what might be referred to as "the big picture" with a view to identifying the current issued share capital of the company. I will then consider what the various share transfers, declarations of trust and other documentation which have been put in evidence show in the light of the evidence of the petitioner and the first respondent. On this aspect of the matter, I will also consider filings which were made in the Companies Registration Office (CRO) in accordance with the statutory requirements of the Companies Acts. I will then consider what the register of members discloses and endeavour to reconcile it with the respective positions adopted by the petitioner and the first respondent.

12 The original nominal share capital of the company was £15,000 divided into 15,000 shares of £1 each. As a result of the purchase of two tranches of shares by the father of the petitioner and the first respondent, Edward Joseph Kelly (Mr. Kelly) and the purchase of two tranches of shares by the first respondent in 1981, Mr. Kelly and the first respondent became the majority shareholders in the company. After the acquisition by purchase of the four tranches on foot of share transfers dated March and November, 1981, between them Mr. Kelly and the first respondent owned 7,938 ordinary shares of £1 each, which gave them the majority stake.

13 In 1992, as a result of the settlement of proceedings involving the then minority shareholders in this Court, the company bought back the minority stake pursuant to s. 213 of the Companies Act1990 and the Court was told that those shares were cancelled. I have had to take that at face value because not all of the documentation reflecting what happened in 1992 was put before the Court. Moreover, the register of members does not reflect the change in the issued share capital.

14 In consequence of what happened at the EGM in 1992 and subsequently, what the Court is concerned with is the current issued share capital of the company which is the Euro equivalent of IR£7,938 divided into 7,938 shares at the Euro equivalent of IR£1 each.

15 In this judgment, I will be addressing what...