Donegal Investment Group Plc v Danbywiske

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian McGovern
• Judgment Date: 21 July 2017
• Neutral Citation: [2017] IEHC 479
• Docket Number: [2013 No. 591 COS]
• Court: High Court
• Date: 21 July 2017

IN THE MATTER OF ELST

AND IN THE MATTER OF SECTION 205 COMPANIES ACT 1963

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

AND IN THE MATTER OF THE COMPANIES ACT 1963 – 2012

BETWEEN

DONEGAL INVESTMENT GROUP PLC

PETITIONER

AND

DANBYWISKE, RONALD WILSON, GENERAL PARTNERS OF THE WILSON LIMITED PARTNERSHIP ONE

AND

MONAGHAN MUSHROOMS IRELAND

AND

ELST

RESPONDENTS

[2017] IEHC 479

[2013 No. 591 COS]

THE HIGH COURT

COMMERICAL

Company – The Companies Act (1963 – 2012) – S.205 & s.213 (F) of the Companies Act 1963 – Valuation of shares – Test for discovery of documents – Relevancy and Necessity

Facts: The petitioner sought discovery of various category of documents from the respondents regarding the communication between the respondents in relation to the valuation of the company and the audit reports of the company subsequent to the valuation date. The petitioner contended that there had been a material change in the circumstances since the matter came back to the High Court from the Court of Appeal and the Supreme Court. The petitioner contended that there was a discrepancy between the valuation offered on the valuation date and the valuation offered to the Court by the respondents. The respondents contended that the valuation date had remained the same and the only thing that had changed was the trial date.

Mr. Justice Brian McGovern refused to grant the relief sought by the petitioner. The Court held that the documents sought were not for the purpose of checking what would be a proper estimate of the value on the valuation date but rather for the purpose of a possible challenge to the respondents' valuation. The Court held that the documents sought in all the three categories were too broad and general and not sufficient to meet the test of proving documents for which discovery was sought to a significant and important relevance of a specified and identifiable kind. The Court noted that even without the discovery sought, the applicants were in a position to adduce expert evidence on the value of the company. The Court observed that when the documents sought were created after the original process of discovery was complete, the Court had to exercise its jurisdiction sparingly and in exceptional circumstances to grant an order for discovery.

JUDGMENT of Mr. Justice Brian McGovern delivered on the 21st day of July, 2017.

1 This is an application for three categories of discovery as follows:-

Category 1

All documentation evidencing, referring and/or relating to the value of the Company communicated by: (1) Danbywiske; (2) The general partners of the Wilson Limited Partnership 1; (3) Ronnie Wilson (4) Monaghan Mushrooms Ireland to any third party in order to secure financing (whether debt or equity) and shareholder loans. This said documentation is sought from each respondent individually.

Category 2

All documents detailing the proposed Tunnel Tech South capex project of 14.36 metres of which €9.66m was included in the 2016 environmental capex budget of the company including copies of documentation shared with and correspondence directed to and from Santander Bank concerning the nature and earnings potential of the capex project.

Category 3

All documents and reports prepared by or behalf of the auditors and/or accountants of the company referring to the value of the company and or the petitioner's shares in the company.

Category 1

Category 2

Category 3

2 There have already been extensive court hearings on the petition in this matter involving the High Court, Court of Appeal and Supreme Court. These proceedings originally gave rise to two distinct modules: the valuation module and the remedy module. Each module required its own Commercial Court directions including discovery. Both modules gave rise to separate reserved judgments. The valuation judgment was delivered by this Court (McGovern J.) on 5th December, 2014, [2014] IEHC 615 and the remedy judgment was delivered by this Court (McGovern J.) on 21st May, 2015, [2015] IEHC 439. Both judgments were appealed to the Court of Appeal. The Court of Appeal upheld the appeal on the valuation judgment and made an order on 17th June, 2016, to remit the valuation of the petitioner's shares to the High Court for re-hearing. The petitioner was unsuccessful in respect of its appeal on the remedy module and the Court of Appeal ordered that the respondents purchase the petitioner's 30% shareholding in the company at a price to be determined by the High Court. The Court of Appeal fixed the valuation date as 30th June, 2016.

3 On 4th July, 2016 the High Court gave directions for the re-hearing of the valuation module and a trial date for 8th December, 2016 was fixed and any discovery requests were to be made by 8th July, 2016. Requests for discovery were made and the first to the third named respondents agreed to make discovery of thirty-one categories of documents. Discovery was made on 30th September, 2016. On 18th October, 2016, the Supreme Court granted leave to appeal against the Court of Appeal's decision on valuation and this had the effect of suspending the High Court's previous directions and required the trial date of 8th December, 2016 to be vacated.

4 On 27th February 2015 the Supreme Court delivered judgment [2017] IESC 14 in which it upheld the Court of Appeal's decision on the valuation module. On 7th April, 2017 the petitioner issued a motion to the Court of Appeal seeking to change the valuation date. The Court of Appeal refused that application and confirmed the valuation date to be 30th June, 2016. It is against that background that this application for discovery has to be considered.

5 Essentially what is sought in the application for discovery are documents dealing with two themes. The first is the question of what has been said to bankers about the value of the company (category 1 and 3) and the second theme is what has been said to a particular financier, namely Santander Bank, about whether or not the capital expenditure on one project, namely the Tunnel Tech South Project, is, in fact, earning enhancing. The petitioner and applicant in this motion claims that there has been a material change in circumstances since the matter came back to the High Court and that this information is relevant and necessary on the basis that it may show up a discrepancy between the valuation offered to the court by the respondents and the value placed on the business in discussions with financial backers and also on the issue as to whether or not, in their discussions with Santander, they made the case that the Tunnel Tech South Project was earnings enhancing. The documents sought to be discovered post date 30th June, 2016, which is the valuation date set by the Court of Appeal.

6 The respondents contend that the valuation date has remained the same and that the only thing that has changed is the trial date in the High Court.

Applicable Legal Principles

7 In Bula Ltd. v. Tara Mines (No. 5) [1994] 1 I.R. 487, Finlay C.J. acknowledged that there was a very limited jurisdiction to order discovery of...