Kelly v Kelly and Another

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 31 July 2012
• Neutral Citation: [2012] IEHC 335
• Court: High Court
• Date: 31 July 2012

[2012] IEHC 335

THE HIGH COURT

[No. 402 COS/2008]

Kelly v Kelly & Charles Kelly Ltd

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(F) OF THE COMPANIES ACT 1963

BETWEEN

EDWARD GERARD KELLY

PETITIONER

AND

WILLIAM KELLY AND CHARLES KELLY LIMITED

RESPONDENTS

ACC BANK PLC v JOHNSTON T/A BRIAN JOHNSTON & CO SOLICITORS UNREP CLARKE 24.10.2011 2011/2/349 2011 IEHC 500

VEOLIA WATER UK PLC & ORS v FINGAL CO COUNCIL (NO 2) 2007 2 IR 81 2006/57/12085 2006 IEHC 240

MENNOLLY HOMES LTD v APPEAL CMRS & REVENUE CMRS UNREP CHARLETON 9.3.2010 2010/34/8432 2010 IEHC 56

KAVANAGH v GOVT OF IRELAND & ORS UNREP SMYTH 21.11.2007 2007/31/6446 2007 IEHC 389

MCALEENAN v AIG (EUROPE) LTD UNREP FINLAY GEOGHEGAN 16.7.2010 2010/30/7665 2010 IEHC 279

COMPANIES ACT 1963 S205

COMPANIES ACT 1963 S205(3)

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

COURTNEY THE LAW OF PRIVATE COMPANIES 2ED 2002 PARA 19.052

ROACHE v NEWS GROUP NEWSPAPERS LTD & ORS 1998 EMLR 161

KELLY v KELLY & CHARLES KELLY LTD UNREP LAFFOY 12.2.2010 2010/25/6203 2010 IEHC 38

PRACTICE AND PROCEDURE

Costs

Winding up - Liability for costs - Whether company bore any liability for costs - Whether petitioner should have mitigated costs - Whether costs should follow event - Whether petitioner materially added to costs of proceedings - Whether late amendment to proceedings increased costs - ACC Bank Plc v Johnston [2011] IEHC 500, (Unrep, Clarke J, 24/10/2011); Veolia Water UK Plc v Fingal County Council (No 2) [2006] IEHC 240, [2007] 2 IR 81; Mennolly Homes Ltd v Appeal Commissions [2010] IEHC 56, (Unrep, Charleton J, 9/3/2010); Kavanagh v Ireland [2007] IEHC 389, (Unrep, Smyth J, 21/1/2007) and McAleenan v AIG (Europe) Ltd [2010] IEHC 279, (Unrep, Finlay Geoghegan J, 16/7/2010); Roache v Newsgroup Newspapers Ltd (1992) CAT 1120 considered - Companies Act 1963 (No 33), s 205 - Rules of the Superior Courts 1986 (SI 15/1986), O 99, r 1 - Costs awarded to petitioner (2008/402COS - Laffoy J - 31/7/2012) [2012] IEHC 335

Re Charles Kelly Ltd

Held by Laffoy J in ordering the first respondent to pay the bulk of the costs: The separate legal entity which was the company would not usually play an active part in litigation under section 205 and thus it would incur no liability for costs. The settlement offer came very late in the overall process and at a time when all of the issues in the substantive proceedings had been decided. It had been established that the petitioner had to come to court in order to bring an end to the oppression involved. The costs involved in determining the relative shareholdings of the parties were primarily attributable to the stance adopted by the first respondent and he should be liable for costs of same. The fact that an amendment to the petition had been sought when the matter first came before the court did not increase the costs of the proceedings. An ancillary order would be made that a number of properties which were not core to the company”s business should be transferred in specie to the first respondent as consideration for the shares of which he was beneficial owner.

The purpose of the judgment

1 1. The purpose of this judgment is two-fold. First, I will deal with liability for costs of the proceedings, having had the benefit of written submissions from the legal advisers of both the petitioner and the first respondent, and having heard oral submissions from both on 17 ^th July, 2012. Secondly, I will address the form of order to be made on the substantive aspect of the proceedings, having regard to the current position.

Costs: the law and its application

2 2. The most recent judgment on the costs of complex litigation to which the Court's attention has been drawn is the judgment of the High Court (Clarke J.) in ACC Bank Plc v. Johnston [2011] IEHC 500. In that judgment (at para. 2.1) Clarke J. alluded to the fact that he had occasion to consider the general principles applicable to the award of costs in complex litigation in Veolia Water U.K. Plc v. Fingal County Council (No. 2) [2007] 2 I.R. 81 and that his judgment had been followed in a number of cases subsequently, citing the judgment of the High Court (Charleton J.) in Mennolly Homes Ltd. v. Appeal Commissions [2010] IEHC 56; the judgment of the High Court (Smyth J.) in Kavanagh v. Ireland & Ors. [2007] IEHC 389; and the judgment of the High Court (Finlay Geoghegan J.) in McAleenan v. AIG (Europe) Ltd. [2010] IEHC 279. He then outlined a number of matters which are clear from those judgments.

3 3. Clarke J. (at para. 2.2) identified what he considered to be the overriding principle stating:

"First, the overriding principle is that costs follow the event. That is so not least because the Rules of the Superior Courts (O. 99, r. 1(3)) say so. There can, of course, be cases where deciding precisely what the 'event' was can give rise to its own difficulties. Indeed, Veolia is one such case. Order 99, r. 1(4) speaks of the costs of every issue of fact or law following the event. It is, however, in that context, important to make one significant distinction. There is a very great difference between the different elements that go to make up a cause of action, on the one hand, and a series of entirely separate causes of action, potentially dependent on different facts, on the other hand."

4 4. These proceedings were unquestionably in the former, rather than the latter, category. The proceedings were brought by the petitioner against the first respondent seeking against him the statutory remedy provided for in s. 205 of the Companies Act 1963 (the Act of 1963). In pursuing that remedy, the different elements which made up the cause of action were that the petitioner had to establish that he was a member of Charles Kelly Limited (the Company) and that the powers of the directors of the Company were being exercised in a manner oppressive to him, and that, with a view to bringing to an end the matters complained of, the Court should make an order of the type envisaged in s. 205(3). Although the Company was a party, as respondent, to the proceedings, the Company took no active part in the proceedings. The dispute was between the petitioner and the first respondent, they being, as was established in the first module of the proceedings, equal shareholders in the Company.

5 5. As I recorded in my judgment on the second module of the proceedings delivered on 31 ^st August, 2011 ( [2011] IEHC 349) at para. 1.6, prior to the commencement of the second module, when the solicitors who had been on record for the petitioner in the first module were given liberty to come off record, I had pointed out that the legal position is correctly stated in Courtney on The Law of Private Companies (2 ^nd Ed.) at para. 19.052 where it is stated:

"Disputes under … s. 205 are typically between the members inter se or the members and the directors. The separate legal entity which is the company will usually not play an active part in the litigation .... In the particular context of disputes involving the exclusion of quasi-partners from the company's management it would be wrong for the company's controllers to utilise the company's resources in connection with the proceedings."

In my judgment on the second module, I addressed what I considered to be the wrongful withdrawal by the first respondent of the sum of €180,000 from the Company to discharge legal fees due to his former solicitors, directing that so much of the money withdrawn as had not been paid back to the Company pursuant to the direction I gave on 9 ^th February, 2011 be set off against the value of his shareholding in the Company. I draw attention to that fact, to make clear, for the avoidance of doubt, that the issue of liability for costs falls to be determined between the petitioner, on the one hand, and the first respondent, on the other hand. No liability for the costs of these proceedings falls on the Company, save as is provided for in paragraph 14 below.

6 6. In elaborating on the "overriding principle" in ACC Bank Plc v Johnston, Clarke J. pointed to the various means by which a party to litigation can narrow the scope of the...