Independent News and Media Plc & Cos Acts; The Director of Corporate Enforcement v Independent News and Media Plc

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 04 September 2018
• Neutral Citation: [2018] IEHC 488
• Court: High Court
• Docket Number: [2018 No. 124 COS]
• Date: 04 September 2018

IN THE MATTER OF INDEPENDENT NEWS AND MEDIA PLC AND IN THE MATTER OF THE COMPANIES ACT 2014

BETWEEN

THE DIRECTOR OF CORPORATE ENFORCEMENT

APPLICANT

AND

INDEPENDENT NEWS AND MEDIA PLC

RESPONDENT

[2018] IEHC 488

Kelly P.

[2018 No. 124 COS]

THE HIGH COURT

Appointment of inspectors – Proportionality – Interim report – Applicant seeking an order appointing inspectors to investigate and report on the affairs of the respondent – Whether the appointment of inspectors was disproportionate

Facts: The applicant, the Director of Corporate Enforcement, applied to the High Court seeking an order pursuant to the provisions of s. 748 of the Companies Act 2014 and O. 74B, r. 3(1) of the Rules of the Superior Courts 1986 appointing inspectors to investigate and report on the affairs of the respondent, Independent News and Media PLC (the company). The Director's application was opposed by the company and its directors.

Held by Kelly P that the appointment of inspectors to ascertain the truth of what had allegedly gone on in the company was well justified and was not disproportionate. Kelly P held that none of the issues raised by the company warranted the court exercising its discretion against making the order sought. Kelly P held that the evidence merited the appointment of inspectors.

Kelly P held that this was a case where an interim report from the inspectors should be provided. Subject to any submissions either by the Director, the company or the inspectors Kelly P proposed that the first interim report be furnished to the court no later than the last day of Hilary Term 2019.

Order granted.

JUDGMENT of Mr. Justice Kelly , President of the High Court delivered on the 4th day of September, 2018

Introduction

1 The Director of Corporate Enforcement (the 'Director') seeks an order pursuant to the provisions of s.748 of the Companies Act 2014 (the 'Act') and O.74B, r3(1) of the Rules of the Superior Courts 1986 (as amended) ('RSC') appointing inspectors to investigate and report on the affairs of Independent News and Media PLC (the 'company').

2 The originating notice of motion is directed to the company and names its current directors as notice parties.

3 The Director's application is opposed by the company and the named directors.

The Director

4 The office of the Director was created by the provisions of the Company Law Enforcement Act 2001. His principal function is to enforce the Act and to encourage compliance with it. He is also given power to conduct investigations and to make an application such as this.

The Respondent

5 The company is a public limited company. It publishes several of Ireland's daily and weekly newspapers. It has 815 direct employees. It has over 7,800 shareholders.

6 The company was incorporated in 1904 and was originally known as Independent Newspapers Ltd. It was re-registered under the Companies Act 1983 on 6th February, 1985 as 'Independent Newspapers, Public Limited Company'. It changed its name to 'Independent News and Media Public Limited Company' with effect from 9th June, 1999. The Independent News and Media Group ('INM Group') consists of the company together with its subsidiaries, associates and joint ventures. It describes itself as 'the leading newspaper and online publisher on the island of Ireland'. It has its headquarters in Dublin and its shares are listed on both the Irish and London Stock Exchanges. Some of its better known titles are 'The Irish Independent', the 'Sunday Independent', the 'Herald', the 'Sunday World', the 'Star' and the 'Belfast Telegraph'.

Section 748

7 Section 748 is contained in Part 13 of the Act which deals with investigations. The section creates a specific statutory entitlement on the part of the Director to apply to the court for the appointment of an inspector. This power of the Director has been described by Keane C.J. in Dunnes Stores Ireland Company v. Ryan [2002] 2 I.R. 60 at p.77 as 'undoubtedly one of the most important powers which he or she enjoys'.

8 Section 748(1) provides:-

'On the application of the Director, the court may appoint one or more competent inspectors to investigate the affairs of a company and to report on those affairs in such manner as the court directs, if the court is satisfied that there are circumstances suggesting that-

(a) the affairs of the company are being or have been conducted with intent to defraud-

(i) its creditors;

(ii) the creditors of any other person; or

(iii) its members;

(b) the affairs of the company are being or have been conducted for a fraudulent or unlawful purpose other than described in paragraph (a);

(c) the affairs of the company are being or have been conducted in an unlawful manner;

(d) the affairs of the company are being or have been conducted in a manner that is unfairly prejudicial to some part of its members;

(e) the affairs of the company are being or have been conducted in a manner that is unfairly prejudicial to some or all of its creditors;

(f) any actual or proposed act or omission of the company (including an act or omission on its behalf) was, is or would be unfairly prejudicial to some part of its members;

(g) any actual or proposed act or omission of the company (including an act or omission on its behalf) was, is or would be unfairly prejudicial to some or all of its creditors;

(h) the company was formed for a fraudulent or unlawful purpose;

(i) persons connected with its formation or the management of its affairs have, in that connection, been guilty of fraud, misfeasance or other misconduct towards the company or its members; or

(j) the company's members have not been given all the information relating to its affairs which they might reasonably expect.'

9 If he is to be successful on this application the Director must first demonstrate the existence of at least one of the circumstances set out at subparagraph 1(a) through (j) of section 748.

10 As I said in Director of Corporate Enforcement v. DCC Plc [2009] 1 I.R. 464 at p.475 ' In the absence of such circumstances no question of an appointment can arise at all.' However, as I also pointed out in that case the demonstration of the presence of one or more of such circumstances '... does not give rise to an automatic entitlement to have inspectors appointed. That is because the section is framed in such a way as to confer a discretion on the court. The Court "may" appoint inspectors; it is not bound to do so.'

11 The first issue which I must decide is whether the Director has demonstrated the existence of one or more of the circumstances prescribed in s.748(1). If I form the view that he has not, then his application fails. If I conclude that he has demonstrated such circumstances then I must consider whether, in the exercise of my discretion, it is appropriate to appoint the inspectors.

12 The Director contends that he has placed evidence before the court which ought to satisfy it that there are circumstances which would entitle the court to appoint inspectors under six of the ten headings set forth in s.748(1) of the Act. The six relevant subsections are subs. (b), (c), (d), (f), (i), and (j).

13 I turn now to a consideration of the evidence. If the Director is to succeed I do not have to make any findings concerning this evidence save one, namely, that it is sufficient to discharge the burden of proof which he has assumed. There must be established by the Director the existence of circumstances suggesting the existence of one or more of the matters identified in s.748(1) of the Act.

The allegations

14 This case has given rise to voluminous affidavits being filed by both sides. It is remarkable that despite the enormous volume of detailed material there is in truth little dispute between the parties as to the existence of the underlying facts which prompted the Director to bring this application. As I do not have to make findings other than the one identified in the preceding paragraph and as there is little or no dispute on the essentials it is not necessary for me to recite the numerous details of the evidence or the responses to the Director's statutory demands made on the company. A summary of the relevant material is sufficient.

15 The evidence relates to four different matters. They have been called by the parties the 'Data Interrogation', the 'Proposed Newstalk Acquisition/APN Transaction', the 'Independent Review Process' and the 'Market Abuse Regulations' issues. I will deal with each of them in turn. Before doing so, however, it is necessary to identify some of the people who figure in the dramatis personae.

The People

16 Mr. Leslie Buckley ('Mr. Buckley') was Chairman of the board of the company until he resigned on 1st March, 2018. He was succeeded by Mr. Murdoch MacLennan ('Mr. MacLennan'). The Group Chief Executive is Mr. Michael Doorly ('Mr. Doorly') who was appointed to that position following the resignation of Mr. Robert Pitt ('Mr. Pitt') who stepped down with effect from 13th October, 2017.

17 In 2006 Mr. Denis O'Brien ('Mr. O'Brien') acquired an interest in the company and by 2012 had become its largest shareholder. He continues to be its largest shareholder with 29.9% of the shareholding.

18 The current application has arisen from a detailed investigation conducted by the Director into allegations contained in disclosures made both by Mr. Pitt and Mr. Ryan Preston ('Mr. Preston') Group Chief Financial Officer. On foot of these the Director exercised his statutory powers by serving a series of notices on the company and its officers with a view to obtaining additional information. Much information was obtained but many questions remain unanswered. This application is brought in circumstances where he believes he has exhausted his statutory remedies in that regard and is of opinion that nothing less than court appointed inspectors will be able to get to the bottom of matters which are of...