Gerard Dowling and Others v Alan Cook and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 23 August 2013
• Neutral Citation: [2013] IEHC 406
• Court: High Court
• Date: 23 August 2013

Dowling & Ors v Cook & Ors

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

AND IN THE MATTER OF SECOND COUNCIL DIRECTIVE 77/91/EEC

AND IN THE MATTER OF DIRECTIVE 2001/34/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

AND IN THE MATTER OF DIRECTIVE 2009/101/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

AND IN THE MATTER OF DIRECTIVE 2004/25/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

AND IN THE MATTER OF DIRECTIVE 2004/39/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

AND IN THE MATTER OF ARTICLE 63 OF THE TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION

AND IN THE MATTER OF ARTICLE 267 OF THE TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION

BETWEEN

GERARD DOWLING, PADRAIG McMANUS, JOHN PAUL McGANN, TIBOR NEUGEBAUER, PIOTR SKOCZYLAS, MURIEL SCORER AND GEORG HAUG

PETITIONERS

AND

ALAN COOK, JEREMY MASDING, EMER DALY, MARGARET HAYES, SANDY KINNEY, RAY MacSHARRY, PAT RYAN, KEVIN MURPHY, DAVID McCARTHY, BERNARD COLLINS, ROY KEENAN, THE MINISTER FOR FINANCE OF THE REPUBLIC OF IRELAND

RESPONDENTS

[2013] IEHC 406

[No. 36 COS/2013]

THE HIGH COURT

Company Law – Financial institutions - Shareholdings - Direction order - Challenge of decision - Directorship - Articles of Association - Oppressive behaviour - Funding - Interest - Indemnity - Insurance - Costs - Credit Institutions (Stabilisation) Act 2010 - Companies Act 1963

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 on direction 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 eleven respondents were the directors of the holding company at the relevant time. 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 presented a petition on the 25 ^th January 2013, claiming that the Directors had acted oppressively and therefore in breach of s. 205 of the Companies Act 1963. An application was brought by the petitioners on the 3 ^rd April 2013 for the Director respondents to be precluded from being represented in the s. 205 proceedings at the expense of the holding company, the bank, or any of its subsidiary companies; for the Director respondents to be precluded from using these entities” resources to aid their defence; and, for the Director respondents to be compelled to reimburse any monies that these entities had paid on behalf of or for the Director Respondents in the s. 205 Proceedings.

In response, the Director respondents denied that the holding company, the bank, or any of its subsidiary companies, were funding their defence. To that end, evidence was submitted to show that an insurer – AIG - was funding the defence, pursuant to a Director and Officers Liability Policy that was held by the holding company. It was accepted that the Chief Legal Officer of the bank was representing the Director respondents; however, it was averred that AIG had confirmed that it would discharge all applicable legal costs. It was further argued that even if that wasn”t the case, the holding company and the bank would be entitled to fund the defence of the Director respondents because they had a vital interest in the outcome of the proceedings.

Held by Laffoy J that there was no suggestion that the Articles of Association of the holding company or the bank precluded them from funding the Director Respondents” defence of the s. 205 Proceedings. It was further pointed out that there was no rule of Irish law that would preclude a company, in all cases, from funding their directors” defence of s. 205 Proceedings on the ground that such funding would be improper. For those reasons, it was determined that the funding of a directors” defence by its company should only be regarded as improper if it was not sufficiently regarded as ‘necessary or expedient’ for the interests of company. In the present case, it was said that it was necessary and expedient for the interests of the company for the Chief Legal Officer of the bank to be used to represent the Director respondents, given the intimate knowledge he would possess of matters relating to the proceedings. This was particularly seen to be the case because there were related proceedings between the parties where the Chief Legal Officer was representing the Director respondents. It was also pointed out that because the court doubted whether the relief sought by petitioner could be regarded as interlocutory relief, an order in the terms sought by the petitioner would effectively make decisions on costs before the trial judge had a chance to make a determination. It was held that the appropriate course of action would be to make an application for the Director respondents to reimburse the holding company and bank at the conclusion of the substantive action.

It was further held that the court was satisfied that the Director respondents were indemnified by AIG against the costs of defending the s. 205 proceedings and that such an insurance policy was held lawfully because the Articles of Association of the holding company expressly allowed for such a policy to be acquired and held. A letter of the 3rd May 2013 from AIG to the company secretary made it clear that AIG would indemnify the Director respondents. As such, it was held that there was no basis at law or in equity for granting the reliefs sought by the petitioners on the application. It was further held that even if there was no indemnity, there would still be no basis at law or in equity for granting the reliefs sought by the petitioners at that stage of the s. 205 Proceedings.

Application refused.

COMPANIES ACT 1963 S205(1)

COMPANIES ACT 1963 S205(3)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9

IRISH LIFE v DOWLING & ORS UNREP CHARLETON 21.2.2013 2013 IEHC 75

DOWLING & ORS v COOK & ORS UNREP GILLIGAN 27.3.2013 2013 IEHC 129

DOWLING & ORS v COOK & ORS UNREP SUPREME 16.5.2013 2013 IESC 25

TREATY ON FUNCTIONING OF EUROPEAN UNION ART 267

PERMANENT TSB PLC & ORS v SKOCZYLAS & ORS UNREP COOKE 4.2.2013 2013 IEHC 42

COMPANIES ACT 1990 S160

COMPANIES ACT 1985 S459 (UK)

A COMPANY, IN RE 1993 BCC 325

PICKERING v STEPHENSON 1872 LR 14 EQ 322

CROSSMORE ELECTRICAL & CIVIL ENGINEERING LTD 1989 BCLC 137 1989 5 BCC 37

MILGATE DEVELOPMENTS LTD, IN RE 1993 BCLC 291 1991 BCC 24

INSOLVENCY ACT 1986 S127(UK)

COMPANIES ACT 1963 S218

AMERICAN CYANAMID COMPANY v ETHICON LTD 1975 1 AER 504

COMPANY, A (004502 OF 1988) IN RE EXPARTE JOHNSON 1991 BCC 234

KELLY v KELLY & ANOR UNREP LAFFOY 31.8.2011 2011/30/8160 2011 IEHC 349

BEDDOE, IN RE 1893 1 CH 574

DELANY EQUITY & LAW OF TRUSTS IN IRELAND 5ED 2011 447

FITZPATRICK v F K ORS 2007 2 IR 406

COMPANIES ACT 1963 S200

TREATY ON FUNCTIONING OF EUROPEAN UNION ART 139

1 Judgment of Ms. Justice Laffoy delivered on 23rd day of August, 2013.

The main proceedings

2 1. The main proceedings (the s. 205 Proceedings) were initiated by a petition presented to the Court on 25 ^th January, 2013. The reliefs sought therein are, primarily, reliefs pursuant to s. 205 of the Companies Act 1963 (the Act of 1963). Having regard to the multiplicity of actions initiated by the petitioners or some of them which, in broad terms, are based on the same facts as the s. 205 Proceedings, which will be collectively referred to as "Related Proceedings" and having regard to the novelty of the application to which this judgment relates, which will be outlined later, it is worth recalling at the outset what s. 205 provides. Sub-section (1) provides:

"Any member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section."

3 Sub-section (3) provides that where oppression or disregard of the interests of members is established, the Court may, with a view to bringing to an end the matters complained of, make such orders as it thinks fit, some of the types of orders which may be made being then itemised.

4 2. The company in respect of which the s. 205 Proceedings are brought is named in the title: Permanent TSB Group Holdings Plc (Holdings). It is a public limited company which is listed on the Enterprise Securities Market of the Irish Stock Exchange. According to the evidence before the Court it has over 135,000 shareholders. Another company which is involved in the Related Proceedings, Permanent TSB Plc (the Bank), is a wholly owned subsidiary of Holdings.

5 3. Two orders made by the Court pursuant to the Credit Institutions (Stabilisation) Act 2010 (the Act of 2010) are at the core of the s. 205 Proceedings and the Related Proceedings The first in time was a direction order made by the Court pursuant to s. 9 of the Act of 2010 on 26 ^th July, 2011 (the July 2011 Direction Order), in consequence of which the twelfth respondent (the Minister) became the owner of 99.2% of the issued share capital in Holdings. While the Minister is a respondent on the s. 205 Proceedings, he is not a party to, and was not heard on, the application to which this judgment...