Edward Gerard Kelly v William Kelly

• Jurisdiction: Ireland
• Judge: Mr. Justice Robert Haughton
• Judgment Date: 24 September 2021
• Neutral Citation: [2021] IECA 244
• Docket Number: Court of Appeal Record No.: 2014/624 High Court Record No.: 2008/402COS
• Year: 2021
• Court: Court of Appeal (Ireland)

In the Matter of Charles Kelly Limited

And in the Matter of the Companies Acts 1963 – 2006

And in the Matter of Section 205 and Section 213 of the Companies Act 1963

Between/

Edward Gerard Kelly

Petitioner/Respondent

and

William Kelly

Appellant/Respondent

and

Charles Kelly Limited

Respondent

[2021] IECA 244

Costello J.

Haughton J.

Murray J.

Court of Appeal Record No.: 2014/624

Article 64 Transfer Supreme Court Record No.: 466/12

High Court Record No.: 2008/402COS

THE COURT OF APPEAL

Company – Shares – Oppression – Appellant appealing from four judgments following modular hearings – Whether the trial judge erred in fact or in law

Facts: The appellant, Mr W Kelly, appealed to the Court of Appeal from four judgments of Laffoy J following modular hearings in “oppression” proceedings initiated under s. 205 of the Companies Act 1963 by the petitioner, Mr G Kelly, the brother of Mr W Kelly, and relating to Charles Kelly Ltd (the Company): Module 1 – judgment delivered on 12 February 2010 in which it was determined that Mr G Kelly was a member of the Company and had been since 30 April 1992, and that he owned 7,936 shares in the Company jointly with Mr W Kelly, the only other two shares in the Company being owned by the estate of their mother, Mrs Kelly; Module 2 – judgment delivered on 31 August 2011 in which Laffoy J concluded that Mr G Kelly had made out a case of oppression against Mr W Kelly and ordered that the Company purchase the 3,968 shares beneficially owned by Mr W Kelly at fair market value, that the share capital of the Company be reduced accordingly, whereby the court directed that Deloitte & Touche be appointed to report independently on fair market valuation of the shares as of 31st August, 2011 that there be set off against the value of the shareholding of Mr W Kelly in the sum of €180,000 (later adjusted to €165,000), and that Mr W Kelly resign as a director forthwith; Module 3 – judgment delivered on 19 June 2012 in which Laffoy J valued the beneficial shareholding of Mr W Kelly at €339,000 as at 31 August 2011 and directed that four properties of the Company situate in or near Ramelton, County Donegal be transferred by the Company in specie to Mr W Kelly as consideration for the shares of which he was beneficial owner, subject however to Mr W Kelly remitting the sum of €165,000 to the Company; Module 4 – judgment delivered on 31 July 2012 in which Laffoy J declared that Mr G Kelly be entitled to recover the costs of the proceedings against Mr W Kelly, save that the costs and remuneration to be paid to Deloitte & Touche for performing the task of valuing the shares of Mr W Kelly, which were to be discharged by the Company; whereby it was ordered that the remittal of the sum of €165,000 by Mr W Kelly to the Company should take place by 24 August 2012, that the transfer in specie from the Company to Mr W Kelly should take place by 24 August 2012; and it was ordered that each party have liberty to apply on notice. Mr W Kelly called into question almost every aspect of the judgments in the High Court.

Held by Haughton J that the trial judge did not err in fact, in law, or in the exercise of her discretion. He dismissed the appeal and affirmed the orders of the High Court, save possibly in one respect concerned with bringing finality to the dispute. Haughton J noted that despite the absence of any stay on the High Court orders, the transfer of the four properties to Mr W Kelly and the payment by him of €165,000 (together with such interest as that sum may attract since expiry of the date for transfer and payment in 2012) to the Company, had not yet taken place. That state of affairs appeared to Haughton J to be because Mr W Kelly asserted that he was not in a position to comply with the order, but it may have persisted simply because the appeal had yet to be decided. Haughton J held that the whole purpose of the order under s. 205(3) was to bring an end to the circumstances that warranted the bringing of the petition. He found that matters had drifted far enough and he proposed that in the first instance Mr W Kelly be afforded a period of four weeks from the date of publication of the judgment in which to make the payment, in exchange for transfer of the properties. Haughton J held that if Mr W Kelly was not in a position to make the payment within that four week period then, in the absence of agreement between the Company and Mr W Kelly, there should be appropriate adjustment by order of the court of the property to be transferred. This would require the matter to be re-entered before this court and for there to be up to date valuation of the four properties, and for that reason Haughton J proposed that the matter be relisted before the court for mention only in six weeks time.

Haughton J held that, as Mr G Kelly had been entirely successful in the appeal, he should be entitled to have his costs of the appeal paid by Mr W Kelly, to be adjudicated by a legal costs accountant in default of agreement.

Appeal dismissed.

JUDGMENT of Mr. Justice Robert Haughton delivered on 24th day of September, 2021

Contents

Introduction	- 3 -
The four modules and judgments	- 3 -
Background	- 5 -
Module 1	- 6 -
The Module 1 appeal	- 17 -
Decision	- 19 -
Module 2	- 25 -
Oppression	- 27 -
(1) Suspension of Mr. Gerard Kelly	- 28 -
(2) Exclusion of Mr. Gerard Kelly from the Company	- 31 -
(3) Refusal to engage or cooperate with Mr. Gerard Kelly in the management of the Company (long term loans, cost cutting), accounts, filing of annual returns	- 34 -
(4) Taking funds from the Company	- 37 -
(5) Assaults	- 39 -
Grounds of appeal in respect of oppression	- 43 -
(1) Purported suspension	- 44 -
(2) Alleged exclusion of Mr. Gerard Kelly from the Company	- 46 -
(3) Management, accounts, CRO filings and auditors	- 47 -
(4) Alleged taking of funds to pay legal fees	- 49 -
(5) Assaults	- 57 -
The Legal Argument that there was no jurisdiction to make a finding of oppression against Mr. William Kelly in his capacity as a single director	- 58 -
Discussion	- 60 -
Appropriate remedy — practical difficulties	- 70 -
The balance of Module 2, and the determination as to appropriate remedy	- 72 -
Module 3 — Valuation	- 77 -
Grounds of Appeal Module 3	- 81 -
Module 4	- 93 -
Summary	- 95 -

Introduction

1 . This is an appeal by the appellant (“Mr. William Kelly”) from four judgments of Ms. Justice Laffoy following modular hearings in what may loosely be described as “oppression” proceedings initiated under section 205 of the Companies Act, 1963 (“the 1963 Act”) by the petitioner (“Mr. Gerard Kelly”), the brother of Mr. William Kelly, and relating to Charles Kelly Limited (“the Company”).

2 . In this judgment I will outline what was decided in each module, and then give a brief background to the proceedings. I will then address in relation to each Module in turn the relevant evidence, decision and grounds of appeal/argument, and my decision on this appeal.

In addition, certain applications were made by the parties which are not central to the issues arising on this appeal, but which will be referred to as necessary in the course of this judgment.

The four modules and judgments

• • Module 1 – Judgment delivered on 12 February 2010 in which it was determined that Mr. Gerard Kelly was a member of the Company and had been since 30 April 1992, and that he owned 7,936 shares in the Company jointly with Mr. William Kelly, the only other two shares in the Company being owned by the estate of their mother, Mrs. Kelly. The High Court also noted an undertaking on the part of Mr. Gerard Kelly that certain unstamped documents would be stamped, and that pursuant to s.22 of the 1963 Act that the Register of Members of the Company would be rectified to reflect the issued share capital of the Company as a consequence of the buying back and cancellation of 7,062 shares in 1992, that the Company furnish details of the rectification to the Registrar of Companies to record various transactions that had taken place since 1987 and which had not been recorded in the Register, and that the hearing of the second module be deferred until the stamping of the various share transfer documents had taken place.

• • Module 2 – Judgment delivered on 31 August 2011 in which Laffoy J. concluded that Mr. Gerard Kelly had made out a case of oppression against Mr. William Kelly and ordered that the Company purchase the 3,968 shares beneficially owned by Mr. William Kelly at fair market value, that the share capital of the Company be reduced accordingly, whereby the court directed that Deloitte & Touche be appointed to report independently on fair market valuation of the shares as of 31 ^st August, 2011 that there be set off against the value of the shareholding of Mr. William Kelly in the sum of €180,000 (later adjusted to €165,000), and that Mr. William Kelly resign as a director forthwith.

• • Module 3 – in this judgment delivered on 19 June 2012 Laffoy J. valued the beneficial shareholding of Mr. William Kelly at €339,000 as at 31 August 2011 and directed that four properties of the Company situate in or near Ramelton, County Donegal be transferred by the Company in specie to Mr. William Kelly as consideration for the shares of which he was beneficial owner, subject however to Mr. William Kelly remitting the sum of €165,000 to the Company.

• • Module 4 – Judgment delivered on 31 July 2012 in which Laffoy J. declared that Mr. Gerard Kelly be entitled to recover the costs of the proceedings against Mr. William Kelly, save that the costs and remuneration to be paid to Deloitte & Touche for performing the task of valuing the shares of Mr. William Kelly, which were to be discharged by the Company; whereby it was ordered that the remittal of the sum of...