Kelly v Kelly

• Jurisdiction: Ireland
• Judge: Mr. Justice Haughton
• Judgment Date: 17 November 2022
• Neutral Citation: [2022] IECA 264
• Year: 2022
• Court: Court of Appeal (Ireland)
• Docket Number: Record No.: 2014/624 High Court Record No.: 2008/402COS

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

[2022] IECA 264

Murray J.

Costello J.

Haughton J.

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 Court of Appeal (Haughton J, Murray and Costello JJ concurring), in a judgment delivered on 24 September, 2021 and reported at [2021] IECA 244 (the principal judgment), dismissed appeals by the appellant/respondent, Mr W Kelly, in respect of four modular hearings in “oppression” proceedings taken in the High Court under s. 205 of the Companies Act 1963. The court left over for further consideration: (1) certain issues arising in relation to the implementation of part of the order of High Court (Laffoy J) dated 31 July 2012 (perfected on 1 October 2012) made under s. 205(3) of the 1963 Act; and (2) issues of the costs on the appeal. Pursuant to directions given, the court received up to date valuations (as of June 2022, in a report dated 25 August, 2022) by Sherry FitzGerald of the four properties that were to be transferred by Charles Kelly Limited (the Company) to Mr W Kelly pursuant to the said order dated 31 July, 2012. The court subsequently received written submissions prepared by counsel for Mr W Kelly, and written submissions filed by solicitors McDermott Creed & Martyn, on record for the petitioner/respondent, Mr G Kelly, on 26 September, 2022. The court reconvened on 7 November, 2022 and heard further oral submissions from counsel for both parties.

Held by Haughton J that the court would make the following orders: an order vacating the order of the High Court of 31 July 2012 for the transfer in specie from the Company to Mr W Kelly of four properties at Ramelton as consideration for Mr W Kelly’s shareholding in the Company and substituting therefore an order that the Company do pay the sum of €339,000 to Mr W Kelly as consideration for the purchase by the Company of his shareholding in the Company; for the avoidance of doubt, an order directing that the sum of €165,000 directed by the High Court to be paid by Mr W Kelly to the Company shall be set off against the said sum of €339,000 to be paid by the Company for the said shareholding, so that the balance to be paid by the Company to Mr W Kelly as consideration for the purchase by the Company of his said shareholding is thereby reduced to €174,000; an initial stay on the payment by the Company to Mr W Kelly of the said sum of €174,000 for six months from the date of perfection of the order, and, provided that within that time the process for taxation/adjudication of the costs awarded to Mr G Kelly in the High Court has commenced, the stay shall continue thereafter until the taxation/adjudication process is finalised (including all reviews or appeals) or the costs are agreed, and thereafter for a further three month period whereupon it shall lapse unless extended by further order of the court; and in all other respects an order affirming the order of the High Court dated 31 July, 2012 and dismissing the appeal.

Haughton J refused the application of Mr G Kelly for Courts Act interest in the sum of €165,000. Haughton J ordered that Mr G Kelly recover his costs/expenses and outlays of the appeal from Mr W Kelly, such costs/expenses/outlays to be adjudicated by a legal costs adjudicator in default of agreement. Haughton J ordered that the costs of Mr W Kelly of obtaining the Sherry FitzGerald up to date valuation report in the sum of €984 inclusive of VAT is to be a deduction from the High Court costs when agreed or adjudicated. Haughton J granted liberty to all parties to apply.

Appeal dismissed.

JUDGMENT of Mr. Justice Haughton delivered this 17th day of November 2022

Introduction

1 In the judgment of this court (Haughton J., Murray and Costello JJ. concurring) delivered on 24 September, 2021 reported at [2021] IECA 244 (“the principal judgment”) appeals by William Kelly in respect of four modular hearings in “oppression” proceedings taken in the High Court under section 205 of the Companies Act, 1963 were dismissed. However the court left over for further consideration (1) certain issues arising in relation to the implementation of part of the order of High Court (Laffoy J.) dated 31 July 2012 (perfected on 1 October 2012) made under s.205(3) of the Companies Act, 1963, and (2) issues of the costs on the appeal. These issues are the subject of this supplemental judgment which should be read with the principal judgment.

2 Pursuant to directions given the court has since received up to date valuations (as of June 2022, in a report dated 25 August, 2022) by Sherry FitzGerald of the four properties that were to be transferred by Charles Kelly Limited (“the Company”) to William Kelly pursuant to the said order dated 31 July, 2012. The court has subsequently received written submissions prepared by counsel for William Kelly, and written submissions filed by solicitors McDermott Creed & Martyn, now on record for Edward Gerard Kelly (“Gerard Kelly”) on 26 September, 2022. The court reconvened on 7 November, 2022 and heard further oral submissions from counsel for both parties. It is helpful at this point to recall relevant parts of the orders made by Laffoy J., and the reasons why those orders were made.

High Court orders and judgments

3 The said High Court order of 31 July 2012 directed inter alia that in exchange for the Company acquiring William Kelly's beneficial shareholding of 3968 shares “at fair market value” the Company transfer four properties to William Kelly in specie, and further that he remit to the Company the sum of €165,000. The relevant parts of the said order read:

“And the Court finding that the four properties situate in Ramelton (Nos. 8, 10, 11 and 12 in Table 6.2 at page 29 of the report of Deloitte & Touche) be transferred by the Company in specie to the first respondent as consideration for the shares of which he is beneficial owner, subject, however, to the first respondent remitting the sum of €165,000 to the Company.

And the Court valuing the beneficial shareholding of the first respondent at €339,000 as at 31st August, 2011 on the basis that giving the first respondent such value is effected by transferring the properties above – mentioned to him in specie…

The Court doth provide

• 1. that the remittal of the sum of €165,000 by [William Kelly] to the company shall take place by 24th August, 2012 and

• 2. That the transfer in specie from the Company to [William Kelly] of the four properties at Ramelton as consideration for [William Kelly's] share shall take place by 24th August, 2012”.

4 The order to remit €165,000 related to legal costs which Laffoy J. held had been improperly taken out of the Company account by giro or bank draft 1 and used by William Kelly to pay his then solicitors Gibson & Associates. An earlier order of 9 February, 2011 had directed William Kelly “reimburse to the company the sums aggregating €180,000 which he withdrew from the company after 14th September, 2009”, but was varied downwards to €165,000 by the order of 31 July, 2012. Neither order made any reference to interest, whether pursuant to the Courts Act, 1981 or otherwise.

5 Also of significance is part of an order of Laffoy J. of 31 August, 2011 (which is recited in the final order of 31 July, 2012) which directed –

“(e) That there be set off against the value of the shareholding of [William Kelly] in the company of all or so much of the sum of [€165,000] taken by [William Kelly] from the company, so that the purchase price to be paid by the company for the said shareholding of [William Kelly] will be the value so determined less the amount of the set off.”

In the order of 9 February, 2011 Laffoy J. had also ordered that the €180,000 was to be held in escrow pending the determination of the proceedings. As no money had been paid over by the time of the final order on 31 July, 2012 the escrow provision lapsed.

6 The order of 31 July, 2012 also ordered that the petitioner Gerard Kelly recover the costs of the proceedings when taxed and ascertained from William Kelly (save the costs of accountants Deloitte & Touche (Mr. O'Flanagan's report and evidence) for valuing the shares of William Kelly, which costs were to be discharged by the company).

7 While initially both the remittal of €165,000 and the property transfers were ordered to take place by 24 August, 2012, there was ‘liberty to apply’ and extensions of time were granted, with a final High Court order of 8 March, 2013 granting a further extension of 21 days for rectification of the Register of Members and the record in the CRO only.

8 It is important to note that William Kelly did not seek any stay on the said orders in the High Court or before this court.

9 In the High Court on the evidence the aggregate valuations of the four properties varied between €640,000 (Property Partners) and €339,000 (CBRE). Laffoy J., in her third judgment delivered on 19 June, 2012 and reported at [2012] IEHC 330, decided as follows:

“14. However, there is a further major imponderable in this matter, which is more likely to impact on the ultimate fairness of the outcome of this mater, that is to say, the property valuation, and, in particular, whether the difference between the CBRE “desktop” valuation, which Mr. O'Flanagan properly had regard to, on the one hand, and the Property Partners valuation, on the other hand, is justifiable. For instance, there are four non-core properties situate in Ramelton...