Daniel McAteer v Senan Burke and Others

 
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[2015] IECA 215

THE COURT OF APPEAL

Kelly J.

Irvine J.

Hogan J.

Court of Appeal: 1184/2014
Appeal No. 137/2014
Daniel McAteer v Senan Burke & Ors.
DANIEL McATEER
Plaintiff/Respondent

- AND -

SENAN BURKE, MARK REGAN AND MILAN SCHUSTER PRACTISING UNDER THE STYLE AND TITLE OF ADAMS CORPORATE SOLICITORS
Defendants/Appellants

Shareholding – Breach of contract – Negligence – Plaintiff seeking damages for breach of contract and for negligence – Whether court should grant the plaintiff leave to amend the statement of claim

Facts: The plaintiff/respondent, Mr McAteer, in 2009, sued the defendants/appellants, Adams Corporate Solicitors, for damages for breach of contract and for negligence. The plaintiff claimed that the defendant solicitors were retained by him and his fellow investors in 2006 to draft and execute a share subscription and shareholder”s agreement. He contended that this agreement envisaged that two new companies would be established and that the plaintiff (or his nominee) would be a director of the companies. He further contended that 12 new shares would be allotted to each company and that he in turn would receive three such shares in each company. The plaintiff then said that although these two companies (Ballinorrig Developments Ltd and Ballinorrig Properties Ltd) were duly incorporated, he later discovered that he had not been in fact appointed a director of the companies, nor had his shareholding been allocated to him. He further contended that the assets of both Developments and Properties were transferred to two other companies controlled by the defendants. He further contended that the first and second defendants, Mr Burke and Mr Regan, appointed themselves as directors of both Developments and Properties. It appeared that Developments and Properties were involved in a plan to develop certain lands at Tralee, Co. Kerry for the purposes of development of a medical centre. Although the lands were re-zoned from agricultural purposes by Kerry County Council in 2007, the plan never came to fruition. This, the plaintiff said, was because the first and second defendants wrongfully involved themselves personally in these companies, wrongfully excluded him from these companies and then so mismanaged the affairs of both Developments and Properties that the plan failed. All of these events culminated in what the plaintiff claimed was considerable financial loss. The defendants denied having acted for the plaintiff in relation to these matters, while also denying all allegations of wrongdoing. In 2012, in the High Court, MacMenamin J accepted that the plaintiff had yet to provide a satisfactory explanation of which party had allegedly suffered loss and directed that the claim be stayed until the plaintiff brought forward a proper reply to particulars addressing the issues set out in that judgment. In the wake of that decision the plaintiff then issued a notice of motion and contended that he had now complied with the requirements, applying to have the stay on the proceedings lifted. That application was heard by O”Malley J in 2013. She agreed that the stay should be vacated. The defendants appealed to the Court of Appeal against that decision. At the resumed hearing in June 2015 the plaintiff furnished a further amended statement of claim in accordance with the Court”s direction. The defendants maintained that even with these amendments the claim had still not been pleaded with sufficient particularity. They contended given the delays in the prosecution of this litigation associated with the failure of pleading that the claim should at this stage be struck out.

Held by Hogan J that it would be appropriate to grant the plaintiff yet further leave to amend the (already amended) statement of claim as furnished by him in June 2015. Hogan J took account of the fact that the striking out of pleadings (and, by extension, the action) should normally be avoided if a further amendment will regularise them.

Hogan J held that he would grant the plaintiff liberty to make these amendments solely for the purpose of ensuring the case is now confined entirely to purely personal claims, while excluding all claims barred by Foss v Harbottle (1843) 2 Hare 461. He would hear the parties on the question of the finalisation of the pleadings in the light of this judgment and what steps would be appropriate to ensure that the case could be quickly heard by the High Court.

Appeal dismissed.

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JUDGMENT of Mr. Justice Gerard Hogan delivered on the 7th day of October 2015

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1. This appeal provides another example of the some of the legal difficulties which are presented where a private investor utilises a private company for investment purposes. It has been clear for over 170 years since the decision of Wigram V.C. in Foss v. Harbottle (1843) 2 Hare 461 that, generally speaking, shareholders cannot sue in respect of any loss caused to the company by the wrongful acts of another, even if such wrongful acts have the consequence of causing financial loss to the shareholders by bringing about a loss in the value of their shareholding.

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2. While the correctness of Foss v. Harbottle has never been doubted, a rigid and unyielding application of that rule sometimes causes unfairness to shareholders. In that respect, there have been some judicially created exceptions to the rule while in other cases the Oireachtas has intervened by statute to provide shareholders with a remedy. A further difficulty presented by the rule lies in the precise identification of where the supposed injury to the company begins and ends, as it is sometimes not easy to isolate any independent injury to shareholders (such as where a professional person gives negligent advice to a prospective investor in a company) from other losses which are properly regarded as occurring to the company caused by the wrongful actions of others. Many of these difficulties are illustrated by the issues arising in the present appeal.

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3. These proceedings were commenced in the High Court by the plaintiff on 29 th October 2009 in which he sued the defendant solicitors for damages for breach of contract and for negligence. While the background to the dispute is a complex one, it may, in essence, be summarised as follows: the plaintiff, Mr. McAteer, is a businessman and accountant residing in Co. Derry. The plaintiff claims that the defendant's solicitors were retained by him and his fellow investors in the summer of 2006 to draft and execute a share subscription and shareholder's agreement. He contends that this agreement envisaged that two new companies would be established and that the plaintiff (or his nominee) would be a director of the companies. He further contends that 12 new shares would be allotted to each company and that he in turn would receive three such shares in each company.

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4. The plaintiff then says that although these two companies (Ballinorrig Developments Ltd. ("Developments") and Ballinorrig Properties Ltd. ("Properties")) were duly incorporated, he later discovered that he had not been in fact appointed a director of the companies, nor had his shareholding been allocated to him. He further contends that the assets of both Developments and Properties were transferred to two other companies controlled by the defendants. He further contends that the first and second defendants appointed themselves as directors of both Developments and Properties.

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5. It appears that Developments and Properties were involved in a plan to develop certain lands at Tralee, Co. Kerry for the purposes of development of a medical centre. Although the lands were re-zoned from agricultural purposes by Kerry County Council in early 2007, the plan never came to fruition. This, the plaintiff says, was because the first and second defendants wrongfully involved themselves personally in these companies; wrongfully excluded him from these companies and then so mismanaged the affairs of both Developments and Properties that the plan failed. All of these events culminated in what the plaintiff claims was considerable financial loss.

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6. A statement of claim was delivered by the plaintiff as far back as April 2010 making allegations along these lines. The defendants delivered a defence on 7 th March 2011 in which they denied having acted for the plaintiff in relation to these matters, while also denying all allegations of wrongdoing.

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7. On 30 th July 2010 the defendants issued a notice for particulars in which they requested details on how the plaintiff maintained that he personally had sustained any loss. Although the plaintiff furnished replies to the notice for particulars on 20 th September 2010, the defendants contended that the particulars of loss were inadequate in that they did not identify with clarity which entity or entities had suffered loss. This prompted various applications to the High Court on the part of the defendants for an order compelling fuller replies to the particulars which it had raised.

The judgment of MacMenamin J.
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8. These matters were fully addressed by MacMenamin J. (then a judge of the High Court) in a reserved judgment delivered on 6 th March 2012. No appeal has been taken from that judgment. As will shortly become apparent, the present appeal has been taken against a subsequent decision of O'Malley J. (then a judge of the High Court) delivered on 13 th March 2013 which concerned itself with the question of whether the orders made by...

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