Dowling and Others v Cook and Others

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Gilligan
• Judgment Date: 27 March 2013
• Neutral Citation: [2013] IEHC 129
• Docket Number: [No. 36 COS/2013]
• Date: 27 March 2013

Dowling & Ors v Cook & Ors

No Redaction Needed

IN THE MATTER OF PERMANENT TSB GROUP HOLDINGS PUBLIC LIMITED COMPANY

AND IN THE MATTER OF THE COMPANIES ACTS 1963 -2012

AND IN THE MATTER OF SECTION 205 OF THE COMPANIES ACT 1963

BETWEEN

GERARD DOWLING, PADRAIG MCMANUS, JOHN PAUL MCGANN, TIBOR NEUGEBAUER, PIOTR SKOCZYLAS, MURIEL SCORER AND GEORG HAUG

PETITIONERS

AND

ANDY COOK, JEREMY MASDING, EMER DALY, MARGARET HAYES, SANDY KINNEY, RAY MCSHARRY, PAT RYAN, KEVIN MURPHY, DAVID MCCARTHY, BERNARD COLLINS, ROY KEENAN AND THE MINISTER FOR FINANCE

RESPONDENTS

[2013] IEHC 129

[No. 36 COS/2013]

THE HIGH COURT

COMPANY LAW

Directors

Interlocutory injunction - Oppression - Articles of association - Petitioners seeking injunction restraining termination of directorship of fifth petitioner pending full hearing - Petitioners seeking preliminary reference to Court of Justice of European Union - Whether serious issue to be tried - Whether injunction appropriate - Whether preliminary reference appropriate - Campus Oil v Minister for Industry (No 2) [1983] IR 88 applied - McGilligan v O'Grady [1999] 1 IR 346 distinguished - Companies Act 1963 (No 33), s 205 - Treaty on the Functioning of the European Union, art 267 - Reliefs refused (2013/36COS - Gilligan J - 27/3/2013) [2013] IEHC 129

Dowling v Cook

Facts: 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. As well as the cash injection, a direction order under the Credit Institutions (Stabilisation) Act 2010 was issued on 28th March 2012 which required the bank to sell its life assurance business and subsidiaries to the Minister for Finance with 99.2% of its shares owned by the Minister. Due to the recapitalisation of the bank, the shareholders of the holding company experienced a severe drop in the value of the shares held.

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 only director of the holding company which he claimed was because of the respondents” actions to block him from being a director of the bank. The petitioners brought a motion seeking an interlocutory injunction to prevent the respondents from taking any action to remove the fifth named respondent from his directorship before a decision could be made whether the respondent”s action amounted to oppressive behaviour in accordance with s. 205 of the Companies Act 1963.

The respondents claimed that under Art 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 at the AGM the following year. By following these articles, it was claimed that the behaviour of the respondents could not be deemed oppressive.

Held by Gilligan J that Art 87 of the Articles of Association of the Holding Company clearly required the fifth named respondent”s retirement before the forthcoming AGM with there being no scope whatsoever for discretion. There was case law that showed a court did have discretion to retrain a director”s retirement until the conclusion of a s. 205 of the Companies Act 1963 hearing but those cases were distinguishable as they did not involve a situation where a retired director could stand for re-election the following year.

It was further held that even if the fifth named respondent was not re-elected the following year (if he chose to stand), he would still be able to participate in proceedings as a shareholder. His retirement was inevitable and a condition of his appointment. It was also held that if the petitioners were ultimately successful, the fifth named petitioner”s claim for damages would afford him adequate relief and compensation. The balance of convenience was also deemed to be with resisting the application.

Motion refused.

COMPANIES ACT 1963 S205

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 267

COMPANIES ACT 1990 S160(2)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9

EEC DIR 91/1977 S29(4)EEC DIR 91/1977 ART 8(1)

EEC DIR 91/1977 ART 25(1)

EEC DIR 91/1977 ART 29(1)

EEC DIR 101/2009 ART 10

EEC DIR 34/2001 ART 5

EEC DIR 34/2001 ART 42E

EC DIR 34/2001 ART 4

5EEC DIR 25/2004 ART 2TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 6

3EEC DIR 91/1977 ART 42

EEC DIR 39/2004 ART 14(4)

EEC DIR 39/2004 ART 14(4) r15MAHA LINGHAM v HEALTH SERVICE EXECUTIVE 2006 17 ELR 137

CAMPUS OIL v MIN FOR INDUSTRY & COMMERCE (NO 2) 1983 IR 88 1983 IEHC 4

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

COMPANIES ACT 1990 S160(4)

FOSTER v BRITISH GAS CASE NO C/188-89 1990 3 AER 897 1991 1 QB 405 1991 2 WLR 258 1991 ICR 84 1990 ECR I-3313

JOHNSTON v CHIEF CONSTABLE OF RUC CASE NO C-222/84 1986 3 AER 135 1987 QB 129 1986 3 WLR 1038

Mr. Justice Gilligan

1 This is an application for an interlocutory injunction before the hearing of an action pursuant to s. 205 of the Companies Act1963 (hereinafter "the main proceedings").

2 The petitioners in this case were granted leave to issue a Notice of Motion returnable before this Court on 15^th March, 2013 seeking an interlocutory injunction restraining the respondents, by themselves or by their agents or servants or plenipotentiaries, from undertaking any actions to terminate the directorship of Mr Piotr Skoczylas (the fifth named petitioner) at Permanent TSB Group Holdings plc until the adjudication of the main proceedings. The petitioners also seek a preliminary reference under Art 267 of the Treaty on the Functioning of the European Union (the TFEU) in relation to certain questions of interpretation of EU law.

3 I have had the benefit of considering the papers, the written submissions on behalf of Mr Skoczylas, the written submissions on behalf of the first eleven named respondents and the oral submissions as given in Court by Mr Skoczylas, Mr Gallagher SC on behalf of the first eleven named respondents, Mr McCullough SC on behalf of the Minister for Finance, Ms Moynihan BL on behalf of the third and seventh named petitioners and the petitioners Mr McManus and Ms Scorer.

4 The petitioners are all members of Permanent TSB Group Holdings Public Limited Company (the Holding Company) which is a company limited by shares and incorporated under the Companies Act1963 on 24^th August, 2009. There are approximately 134,000 shareholders of the Holding Company. The Respondents are all directors of the Holding Company. Te Holding Company holds 100% of the shares of Irish Life and Permanent plc (the Bank). The Holding Company is not a credit institution but is listed on the Enterprise Securities Market of the Irish Stock Exchange. The Bank is a credit institution.

5 A scheme of arrangement (the scheme) was sanctioned by the High Court on 11^th January, 2010 whereby the Holding Company replaced the Bank as the listed holding company of the Irish Life and Permanent Group. The scheme provides that the Holding Company would be held by the shareholders in the same proportions and on the same basis as they held shares in the Bank. The Holding Company also, under the scheme, beneficially owns the issued share capital of the Bank. The scheme also provided that the Holding Company would have the same capital structure, board and management as the Bank and there would be no changes in corporate governance and the interests of the shareholders of the Holding Company in the assets and dividends of the Bank would not be effected by the scheme.

6 As part of a series of recapitalisation programmes, the economic context of which need not be set out here, the Minister for Finance (the twelfth named respondent) acquired 99.2% of the shares of the Holding Company pursuant to a direction order made on 26^th July, 2011 (the July direction order) by the High Court under the Credit Institutions (Stabilisation) Act 2010 (the 2010 Act).

7 The Bank formerly held 100% of the shares in Irish Life Group Limited until 29^th June, 2012, when the latter asset was sold to the Minister for Finance under a second direction order made on 28^th March, 2012 (the March direction order) again pursuant to the 2010 Act. Irish Life Assurance is a wholly owned subsidiary of Irish Life Group Limited and the former is an undertaking authorised under the European Communities (Life Insurance) Regulations 1994 to carry on Life Insurance Business. The Holding Company does not conduct any business itself.

8 The petitioners claim that under the terms of the scheme directors of the Holding Company must also be directors of the Bank and that a director of the Holding Company who is prevented from having access to information and involvement in the decision-making regarding the Bank is not in a position to discharge his duties as a director of the Holding Company. With the exception of Mr Skoczylas, the fifth named petitioner in these proceedings, all other members of the board of directors of the Holding Company (the first to seventh named respondents) are also members of the board of directors of the Bank. Mr Skoczylas claims that this is the result of him being "illicitly blocked from...