Dowling and Others v Cook and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Hardiman
• Judgment Date: 16 May 2013
• Neutral Citation: [2013] IESC 25
• Court: Supreme Court
• Date: 16 May 2013

Dowling & Ors v Cook & Ors

DOWLING & ORS

v.

COOK & ORS

[2013] IESC 25

Hardiman J.

Clarke J.

MacMenamin J.

126/2013

THE SUPREME COURT

Company Law - Financial institutions - Shareholdings - Direction order - Challenge of decision - Directorship - Articles of Association - Oppressive behaviour - Balance of convenience - Credit Institutions (Stabilisation) Act 2010 - Companies Act 1963

Facts: The petitioners brought an appeal against the judgment of the High Court in refusing to grant an interlocutory injunction to prevent the respondents from taking any action to remove the fifth named petitioner from his directorship before there was adjudication on the proceedings as a whole. Permanent TSB Group Holdings plc and Permanent TSB were a holding company and related bank respectively that had received a cash injection of €2.7 billion in 2011 following a decision of the Minister of Finance due to the economic recession at the time. The petitioners in this case were all shareholders of the holding company, whilst the first seven respondents were its directors. The holding company held 100% of the bank”s shares. In consideration of the cash injection, the Minister for Finance acquired 99.2% if its shares which resulted in a severe drop in the value of the shares.

The petitioners” ultimate challenge was whether the respondents had acted oppressively as described in s. 205 of the Companies Act 1963. It was the petitioners claim that under the scheme of arrangement, directors of the holding company must also be directors of the bank. The first seven respondents were directors of each. The fifth named petitioner, Mr Piotr Skoczylas, was a director of the holding company only which he claimed was because of the respondents” actions to block him from being a director of the bank. The respondents claimed that under Article 87 of the Articles of Association of the Holding Company, the longest serving director was obliged to retire prior to an AGM being held for rotational reasons and to allow the interlocutory relief as sought by the petitioners would be a breach of this article. This did not preclude that director from then standing for re-election. By following these articles, it was claimed that the behaviour of the respondents could not be deemed oppressive. The refusal to grant the interlocutory relief was appealed.

Held by Hardiman J (with Clarke J. and MacMenamin J. concurring) that if the court was to grant the interlocutory relief sought, it would effectively be blocking the major shareholder from voting as they desired at the forthcoming AGM. The petitioners had relied on the cases of McGilligan v. O”Grady & Ors. [1999] 1 IR 346 and Avoca Capital Holdings and The Companies Act [2005] IHEC 302 which concerned the court restraining a motion being brought under s.182 of the Companies Act for the removal of a director before the expiration of his period of office. However, these were distinguished from the present case on the basis that in the two cited cases, the directors had been elected as a result of an agreement of the parties interested in the company, a feature that was absent from the present case.

The fifth petitioner had also complained that his treatment amounted to a breach of European law. It was held that s. 205 of the Companies Act 1963 allowed the court to put into place any appropriate remedy if a breach was made out, but that in the circumstances of the case, it was better to decide on a remedy at the conclusion of the substantive proceedings if there was found to be a breach. On that basis, if judgment was ultimately given in favour of the petitioners, there would be an opportunity for them to be compensated for the refusal of interlocutory relief. The balance of convenience therefore favoured the respondents.

Interlocutory relief refused.

MCGILLIGAN & BOWEN v O'GRADY & ORS 1999 1 IR 346 1999 1 ILRM 303

AVOCA CAPITAL HOLDINGS, IN RE UNREP CLARKE 29.7.2005 2005/3/482 2005 IEHC 302

COMPANIES ACT 1963 S182

COMPANIES ACT 1963 S205

1 JUDGMENT of Mr. Justice Hardiman delivered the 16th day of May, 2013.

2 Judgment by Hardiman J. [nem diss]

3 This is the appeal of the petitioners against the judgment and order of the High Court (Mr. Justice Gilligan) delivered the 27 ^th March, 2013 whereby he refused the petitioners the relief which they sought. The relief sought was as follows, according to the High Court Order:

4 (1) An order by way of an interlocutory prohibitary injunction restraining the respondents or any of them whether by themselves or by their servants or agents or plenipotentiaries from undertaking any action to terminate Piotr Skoczylas Directorship at Permanent TSB Group Holdings PLC until the adjudication upon the within the proceedings and in particular the adjudication upon reliefs 11 and 12 sought in the Petition dated the 25 ^th day of January 2013 has been concluded.

5 (2) Further and without prejudice to the foregoing an order pursuant to Article 267 of the Treaty on the Functioning of the European Union that the questions raised in the Schedule hereof be referred to the European Court of Justice for preliminary ruling pursuant to Article 267 of the Treaty on the Functioning of the European Union, if the Honourable Court is uncertain regarding the interpretation of the respective provisions of European Union Law and if the Court considers that the relevant matters raised by the petitioners to enable the Court to give judgment.

6 For the purpose of this appeal hearing, it was conceded that the appellants had shown a serious issue to be tried, and therefore met the first of the Campus Oil tests.

7 On the hearing of this appeal, the real focus was on the third test, relating to the Balance of Convenience in granting or withholding interlocutory relief. It became clear that the petitioners' claim was urgent because the Annual General Meeting of the Company is due to take place on the 22 ^nd May and the petitioners apprehend that Mr. Skoczylas, the fifth-named petitioner, will be voted off the Board on that occasion. This seems likely, though the Respondents suggest that it is an open question.

8 Having regard to this time constraint the Court has decided to give a short judgment confined to the interlocutory aspects of the case.

Background.

9 The background facts in this case are clear enough, although not uncontroversial. Mr. Skoczylas was elected to the Board of the Company on the 4 April, 2012. The other Director defendants who were already members of the Board were reappointed in that capacity on the 22 ^nd May, 2012. The Company is the Holding Company for the entity conducting business of ILP Bank, a notoriously troubled Corporation. Mr. Skoczylas makes various claims in relation to what he said was a determined campaign by the other Directors and those to whom they are responsible to ensure that he was in no real sense allowed to discharge the functions of a director of the Holding Company. Moreover, he claims that he was not appointed a director of the Bank, whereas all the Directors of the Holding Company were so appointed and that he was therefore excluded from the induction process made available to...