Donegal Investment Group Plc v Danbywiske

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Mr. Justice Cregan
• Judgment Date: 27 July 2016
• Neutral Citation: [2016] IECA 226
• Docket Number: Record No. 2015/486
• Date: 27 July 2016

Finlay Geoghegan J.

Hogan J.

Cregan J.

IN THE MATTER OF ELST

AND

IN THE MATTER OF SECTION 205 OF THE COMPANIES ACT 1963

AND

IN THE MATTER OF SECTION 213(F) OF THE COMPANIES ACT 1963

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 – 2012

BETWEEN

DONEGAL INVESTMENT GROUP PLC

PETITIONER/APPELLANT

- AND -

DANBYWISKE, RONALD WILSON,

THE GENERAL PARTNERS OF THE WILSON LIMITED PARTNERSHIP 1,

MONAGHAN MUSHROOMS IRELAND

AND

ELST

RESPONDENTS

[2016] IECA 226

Record No. 2015/486

COURT OF APPEAL

Costs – Valuation – Remedy – Respondents seeking to appeal against costs order – Whether there should be no order as to costs

Facts: The High Court (McGovern J), on 5th December, 2014, after a lengthy hearing referred to as the ?valuation module?, delivered a judgment in which he fixed the price at which the respondents, Danbywiske, Ronald Wilson, the General Partners of the Wilson Limited Partnership 1, Monaghan Mushrooms Ireland and Elst, might purchase the shares of the petitioner/appellant, Donegal Investment Group Plc, in the company at ?30.6million. The High Court order was perfected on 16th January, 2015. Subsequently, in a second, one day, hearing, referred to as the ?remedy module?, McGovern J, pursuant to a judgment delivered on 21st May, 2015, ordered that the respondents purchase the petitioner?s shares. This order was perfected on 5th June, 2015. McGovern J concluded that the petitioner was entitled to its costs in the High Court of the petition to include the valuation module, the remedy module and all reserved costs. The respondents appealed that costs order to the Court of Appeal. In relation to the valuation module, the respondents submitted that they effectively ?won? the valuation in the High Court because the price fixed by the High Court was much nearer to that which was argued for by the respondents than the petitioner. In broad terms, the petitioner argued for a value of approximately ?63.5 million; the respondents argued for a figure of between ?22.3 million and ?22.6 million and the court decision was for a sum of ?30.6 million. The petitioner submitted that the sum which was awarded by the High Court was greater than the sum which was offered to the petitioner by the respondents before the commencement of proceedings and on that basis, the petitioner submitted that it was successful in the High Court. The petitioner submitted that, as it had been successful on the valuation appeal, it should be awarded its costs on the basis that the costs follow the event. In relation to the costs of the remedy appeal, the respondents submitted that they were clearly successful in the remedy appeal and on that basis the respondents were entitled to their costs of the remedy appeal.

Held by Cregan J that, on the special and unusual facts of the case and in order properly to do justice between the parties, the appropriate order in relation to the High Court costs under appeal was that there should be no order as to costs on the petition in the High Court to 5th June, 2015 (to include all costs in relation to the valuation and remedy modules and all reserved costs).

Cregan J held that the appeal would be allowed and that the order for costs in the High Court order of 5th June would be vacated.

Appeal allowed.

JUDGMENT (No. 2) of the Court delivered by Mr. Justice Cregan on the 27th day of July, 2016

Mr. Justice Cregan

Introduction

1 This judgment deals with two matters. These are:

(1) The respondents' appeal against the costs order of the High Court (McGovern J.) dated 5th June, 2015 in which the High Court awarded the costs of the High Court proceedings (both in relation to the valuation module and the remedy module) in favour of the petitioner/and against the respondents; and

(2) The costs of the appeal to this Court.

Background

2 After a lengthy hearing in the High Court, referred to as the ?Valuation Module?, McGovern J. delivered his judgment on 5th December, 2014 in which he fixed the price at which the respondents might purchase the petitioner's shares in the company at ?30.6million. The High Court order was perfected on 16th January, 2015.

3 Subsequently, in a second, one day, hearing, referred to as the ?Remedy Module?, McGovern J., pursuant to a judgment delivered on 21st May, 2015, ordered that the respondents purchase the petitioner's shares. This order was perfected on 5th June, 2015.

4 On Friday, 5th June, 2015 McGovern J. also proceeded to deliver his ruling on the costs application in relation to the petition to include the Valuation Module and the Remedy Module. In his judgment McGovern J. stated:

?I am satisfied that it was necessary for the petitioner to bring the petition. The defendants admitted non- specific acts of oppression for the purpose of giving the court jurisdiction. The value of the petitioner's shares which has been fixed by the court is greater than the value offered by the Respondents prior to the commencement of the petition. The respondent argues that prior to the proceedings commencing, the solicitor for the petitioner made a demand on the respondents that they pay ?34million for the shares and if they did not do so the matter would proceed. While it is true that the demand was made in terms which were uncompromising and the petitioner received less than that sum, there was no counter offer by the respondent.

When the third module came on for hearing the respondent admitted a specific act of oppression by way of sample and the court did not require to hear evidence on other acts of oppression. The fact that this admission was made undoubtedly shortened the length of the trial but the shortening of the length of the trial was as much to the respondents' benefit as the petitioner.

The third module was for the purpose of determining the relief to which the petitioner was entitled and that hearing was a necessary consequence of the petition being brought. While it is true that the court accepted the argument of the respondent that it should buy out the petitioner's minority interest rather than determining the matter by way of an IPO or a purchase of the majority interest by the petitioner, this does not seem to me to be a good reason for awarding the costs of that module to the respondent.

The third module was merely a consequence of the successful petition brought by the petitioner.

Having considered the arguments made by counsel on behalf of both parties I am satisfied that it was necessary for the petitioner to bring the petition. Oppression has been conceded by the respondent and the final module has determined the nature of the relief to be granted to the petitioner. In the circumstances, I am satisfied that the petitioner is entitled to the costs of the petition and the costs will include all reserved costs and the costs of discovery.?

5 Thus the learned High Court judge concluded that the petitioner was entitled to its costs in the High Court of the petition to include the Valuation Module, the Remedy Module and all reserved costs.

Submissions on High Court costs

6 The respondents have appealed that costs order to this Court. Both sides have filed lengthy submissions in relation to this appeal.

7 In relation to the valuation module, the respondents submit that they effectively ?won? the valuation in the High Court because the price fixed by the High Court was much nearer to that which was argued for by the respondents than the petitioner. In broad terms, the petitioner argued for a value of approximately ?63.5 million; the respondents argued for a figure of between ?22.3 million - ?22.6million and the court decision was for a sum of ?30.6 million.

8 The petitioner submitted that the sum which was awarded by the High Court was greater than the sum which was offered to the petitioner by the respondents before the commencement of proceedings and on that basis, the petitioner submits that it was successful in the High Court.

9 Both these arguments are based upon comparing the petitioner's and the respondents' figures for the sale or purchase of shares before the hearing with the figure eventually decided on by the learned High Court judge. However, the figure of the learned High Court judge was in turn based upon the multiplier which he decided on...