Jean Kennedy, Carol O'Riordan and Andrew O'Riordan v Paul Ward
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 22 March 2022 |
| Neutral Citation | [2022] IEHC 158 |
| Court | High Court |
| Docket Number | Record No. 2019/1373 S |
Record No. 2019/1373 S
THE HIGH COURT
Summary judgment – Agreement – Shareholdings – Plaintiffs seeking summary judgment – Whether consideration was paid in accordance with terms of agreement
Facts: The first and second plaintiffs, Ms Kennedy and Ms O’Riordan, and the defendant, Mr Ward, were siblings. Between them they were the owners of substantially all of the shares in a group of companies (the Ward Cinema Group). Arising from disputes between them they entered into an agreement, entitled “Binding Heads of Terms” (the BHOT) on 18 April 2019. The BHOT provided that the defendant, either by himself personally or by his nominee, would acquire the shareholdings of the first and second plaintiffs for a consideration of €31.5 million. The first instalment of the consideration in the amount of €25 million was to be paid on or before 31 October 2019. The balance was payable in three further instalments, on 31 October 2020, 31 October 2021, and 31 October 2022. The BHOT provided that in the event that the consideration was not paid in accordance with the terms of the agreement the defendant would consent to judgment in the sum of the “outstanding balance” and to a charging order in respect of his shares in the companies in that sum. The plaintiffs claimed that the consideration was not paid in accordance with the terms of the agreement and they applied to the High Court for summary judgment against the defendant in the total sum of €31.5 million. Issues were raised by the defendant concerning the capacity of the second plaintiff to enter into the BHOT and at later dates to perform her obligation to transfer shares, and regarding the commencement of the proceedings.
Held by Quinn J that Clause 1.1.1 of the agreement was not, as the defendant submitted, an “agreement to procure an agreement”; it established between the parties a binding agreement for the transfer of the shares for the consideration of €31.5m payable on the dates specified. Quinn J held that the term in Clause 1.1.1 providing that the shares be transferred to the defendant “or his nominee(s)” did not entitle the defendant to unilaterally nominate the target companies to the effect invoked by him, namely that the cash reserves of those companies would be utilised to source the funding of the consideration. Quinn J held that Clause 1.1.2 did not have the effect that where the target companies are nominated by the defendant as the transferees the cash reserves thereof could be applied to discharge the defendant’s liability for payment of the first tranche of the consideration. Quinn J held that Clause 1.1.6 did not extend to imposing on the plaintiffs an obligation to agree to a scheme, however lawful or tax efficient it may be, whereby the cash reserves of the target companies be applied to fund the discharge of the consideration; the affidavits sworn by and on behalf of the defendant revealed, if anything, his subjective intention regarding the funding of the consideration. Quinn J held that even if such evidence were accepted, it goes only to such subjective intention and could not assist in the construction of the BHOT. Quinn J held that neither Clause 1.1.6 nor 2.1 imposed on the plaintiffs an obligation to facilitate the defendant in implementing a scheme for the application of cash reserves of the target companies, whether in combination with other funding measures proposed by the defendant, or otherwise; accordingly, the plaintiffs did not act in breach of those clauses. Quinn J held that having failed to secure agreement to the proposed scheme by the deadline for payment of the first tranche of the consideration, as extended, the defendant unilaterally implemented a series of steps, including acts by the target companies, without convening meetings of the directors or shareholders thereof, as a basis for the transfer of part only of the consideration; such transfer was made after the date stipulated in the BHOT and did not constitute payment in accordance with the BHOT. Quinn J held that pursuant to Clause 2.8 the defendant was obliged to consent to summary judgment for the outstanding balance.
Quinn J held that in the absence of a valid “acceleration” clause, the outstanding balance meant the amount which had fallen into arrears, and judgment would be entered for that balance only.
Application granted.
Judgment of Mr. Justice Quinn delivered the 22nd day of March 2022
The first and second named plaintiffs and the defendant are siblings. Between them they are the owners of substantially all of the shares in a group of companies referred to in these proceedings as the “Ward Cinema Group”. Arising from disputes between them they entered into an agreement, entitled “Binding Heads of Terms” (the BHOT) on 18 April 2019. The BHOT provided that the defendant, either by himself personally or by his nominee, would acquire the shareholdings of the first and second plaintiffs for a consideration of €31.5 million.
The first instalment of the consideration in the amount of €25 million was to be paid on or before 31 October 2019. The balance was payable in three further instalments, on 31 October 2020, 31 October 2021, and 31 October 2022.
The BHOT provided that in the event that the consideration was not paid in accordance with the terms of the agreement the defendant would consent to judgment in the sum of the “outstanding balance” and to a charging order in respect of his shares in the companies in that sum.
In these proceedings, the plaintiffs claim that the consideration was not paid in accordance with the terms of the agreement and they have applied for summary judgment against the defendant in the total sum of €31.5 million.
I have concluded that the plaintiffs are entitled to summary judgment, not for the entire amount of the consideration, but for those amounts thereof which have fallen due at the time of delivery of this judgment.
The third named plaintiff is the husband of the second named plaintiff and the donee under an enduring power of attorney executed by the second plaintiff on 12 October 2016, which was registered on 7 January 2020.
Issues have been raised by the defendant concerning the capacity of the second named plaintiff to enter into the BHOT and at later dates to perform her obligation to transfer shares, and regarding the commencement of these proceedings. The court has also been informed that the second named plaintiff is now deceased. I shall return later in this judgment to the questions of capacity which were raised. Issues may also arise on which the court will hear submissions regarding the constitution of these proceedings for the purpose of any enforcement or continuance. This judgment is concerned with the merits of the application for summary judgment having regard to the affidavits exchanged between the parties and their advisors and representatives.
The BHOT was signed at the conclusion of a mediation between the parties.
In the BHOT, the defendant is referred to as the “First Party” and the plaintiffs are referred to as the “Second Parties”.
The BHOT recites that the parties are shareholders, directly and indirectly, of a number of companies, described in a certain “Crowe Valuation dated 26 September 2017” which are then referred to as “the Companies”. The BHOT recites that the parties are in dispute in relation to matters concerning the companies and that:-
“The parties have agreed to resolve their differences in accordance with the terms outlined in this Binding Heads of Terms”.
Clause 1 of the agreement is referred to as the “Settlement Terms”, clause 2 is referred to as “General” although it contains a number of the critical operative provisions which are the subject of dispute on this application.
Clause 1.1 provides:- “The parties agree to a full and final settlement of the dispute as follows”.
It is necessary to quote in full a number of the operative provisions of the agreement.
“Clause 1.1.1
The First Party agrees to procure the acquisition of all of the shares owned directly or indirectly by the Second Parties, and the Second Parties agrees (sic) to procure the transfer of those shares with unencumbered title to the First Party or his nominee(s) for a combined consideration of €31.5 million (the “Consideration”) payable as follows:-
(i) €25 million payable on or before 31 October 2019 (this was subsequently extended to 21 November 2019).
(ii) €2 million payable on or before 31 October 2020.
(iii) €2 million payable on or before 31 October 2021.
(iv) €2.5 million payable on or before 31 October 2022.
Clause 1.1.2
The Second Parties agree to procure that title to the shares owned by the Second Parties shall be transferred to the First Party or his nominee(s) upon payment of the first tranche of the Consideration pursuant to Clause 1.1.1 (i).
Clause 1.1.3.
The Consideration will be payable 50% to each of the Second Parties or their nominees.
1.1.4
The First Party agrees to procure the discharge of any outstanding amounts in connection with dividends paid out in 2017 in Galway Multiplex Cinema Limited and/or shareholder loans from Cameo Cinema Limited, to the second parties within 28 days from the date hereof, subject to certification in writing by the auditor, Eric Logan, that such sums are properly due and owing.
1.1.5
The First Party agrees to procure the payment of any management fees due and owing to Andrew O'Riordan, Carol O'Riordan and Jean Kennedy as may be certified as properly due and owing by the auditor Eric Logan and on receipt of appropriate invoices within 28 days of the date hereof.
1.1.6
The Parties will use their best endeavours to ensure that all sums to be paid to the Second Parties will be structured in a tax efficient...
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Kennedy (on Behalf of the Estate of Carol O'Riordan) v Ward
...entitlements. The High Court judgment 39 . For the reasons given in a comprehensive written judgment delivered on 22 nd March, 2022 [2022] IEHC 158 Quinn J. concluded that the plaintiffs were entitled to summary judgment for the first tranche of the consideration but declined to find that t......