Harrington v Harrington

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Mark Sanfey
• Judgment Date: 24 March 2021
• Neutral Citation: [2021] IEHC 213
• Year: 2021
• Docket Number: [Record No. 2018 69 COS]

IN THE MATTER OF KUSH SEAFARMS LIMITED AND IN THE MATTER OF SECTION 212 OF THE COMPANIES ACT 2014

BETWEEN

FLOR HARRINGTON

APPLICANT

AND

JOHN HARRINGTON

AND

KUSH SEAFARMS LIMITED

RESPONDENTS

AND

BORD IASCAIGH MHARA

NOTICE PARTY

AND

MALACHY LYNCH

NOTICE PARTY

[2021] IEHC 213

Mark Sanfey

[Record No. 2018 69 COS]

THE HIGH COURT

JUDGMENT of Mr. Justice Mark Sanfey delivered on the 24th day of March 2021.

1 On 20th February, 2020, I delivered a judgment in relation to an application by the applicant, Mr. Flor Harrington, against the respondents pursuant to s.212 of the Companies Act 2014. That judgment (‘the substantive judgment’), which is cited at [2020] IEHC 72, should be read in conjunction with the present judgment, which concerns the costs of the application, in respect of which the parties have each made detailed written submissions.

2 The proceedings concerned a long-running and unfortunate dispute between the applicant and the first named respondent, who are brothers, each of whom is a director and 50% shareholder of the second named respondent (‘the company’). As is clear from the substantive judgment, a feature of the dispute between the parties is that the brothers have long recognised that a parting of the ways between them would be necessary. When the matter came before me, the parties managed to agree that the only issue that it would be necessary for the court to resolve would be the appropriate multiplier to be applied to the EBITDA – an acronym for earnings before interest, taxes, depreciation and amortisation – of the company. This would in turn enable the valuation of the company to be completed, and thus the price at which the applicant's shareholding in the company would be bought out by the first named respondent.

3 This was not a simple issue however. An expert in valuation of company shares on each side gave evidence over a number of days, in which they each contended for widely differing values to be used as a multiplier. This evidence, and the court's conclusions in relation thereto, are set out at length in the substantive judgment.

4 In the event, I decided that a multiplier of four would be appropriate. This was considerably less than the figure of eight suggested by the applicant's expert, and within the general range suggested by the respondent's expert for entities the size of the company. However, it is fair to say that I was critical of the methodology of both experts, and departed from their evidence in reaching my conclusions.

5 Having given judgment, I adjourned the matter at the request of the parties to enable the order of the court to be considered. This involved the parties applying their minds to the manner and timescale in which the buy-out of the applicant's shares by the first named respondent would be effected.

6 Unfortunately, this process was not completed until almost a year later. The first named respondent intimated to the court that the COVID-19 pandemic, and the consequent paralysis which descended upon the activities and trading of the banks from mid-March 2020 onwards, had made it difficult for him to raise the finance necessary to complete the share purchase. The matter was adjourned on a number of occasions with a view to monitoring the attempts by the first named respondent to raise finance, a task which he had not anticipated would cause undue difficulty. As time wore on, and it seemed increasingly difficult to resolve the matter, the understandable exasperation of the applicant was evident, and I was urged at various times to make an order notwithstanding the first named respondent's difficulties, and at one point even to make a winding-up order in the absence of a resolution.

7 Ultimately, on 10th February, 2021, I indicated some dissatisfaction with a proposal made by the first named respondent, and indicated that I would give one final adjournment for two weeks, after which, if the parties had not resolved the matter, I would proceed to make orders without further reference to the parties. By letter of 22nd February, 2021, the respondent's solicitors wrote to the court indicating that a formula for acquisition of the shares had been agreed by the parties.

8 A draft order was agreed by the parties and made available to the court. On 24th February, 2021, I indicated that the only matter requiring to be finalised was that of costs, and gave the parties fourteen days in which to make submissions in this regard.

9 There is no dispute between the parties as to the legal regime which governs the award of costs. The applicable statutory provisions are ss. 168 and 169 of the Legal Services Regulation Act 2015 (‘the 2015 Act’) and the recast O.99 of the Rules of the Superior Courts as introduced by the Rules of the Superior Courts (Costs Order) 2019 SI 584/2019.

10 The applicant submits that it seems clear that neither party was “entirely successful” in the proceedings. It is suggested that “…there was only one issue to be determined and it cannot be said that there was any other issue in play in which it could be said either side was successful…[I]n circumstances where no …Calderbank offer has been made by either party and where it seems that neither party has been successful it seems to follow the most appropriate Order for Costs is that neither side should be awarded its costs”. [Paragraph 3 written submissions].

...