Kennedy (on Behalf of the Estate of Carol O'Riordan) v Ward

• Jurisdiction: Ireland
• Judge: Mr. Justice Allen
• Judgment Date: 11 October 2022
• Neutral Citation: [2022] IECA 221
• Court: Court of Appeal (Ireland)
• Docket Number: Appeal Number: 2022/143

Between

Jean Kennedy

and

Andrew O'Riordan (On Behalf of the Estate of Carol O'Riordan)

Plaintiffs

and

Paul Ward

Defendant

[2022] IECA 221

Barniville P.

Noonan J.

Allen J.

Appeal Number: 2022/143

THE COURT OF APPEAL

CIVIL

NO REDACTION NEEDED

JUDGMENT of Mr. Justice Allen delivered on the 11 ^th day of October, 2022

Introduction

1 . This is an appeal by the defendant from the judgment and order of the High Court (Quinn J.) giving summary judgment to each the plaintiffs for €14,500,000, plus interest, for the price of shares but adjourning to plenary hearing a dispute as to the defendant's entitlement to a transfer of the shares.

2 . The first plaintiff, Mrs. Jean Kennedy, the late Mrs. Carol O'Riordan, and the defendant, Mr. Paul Ward, were siblings who, between them, are the owners of substantially all of the shares in a group of companies referred to in these proceedings as the “Ward Cinema Group”. The second plaintiff, Mr. Andrew O'Riordan, is the legal personal representative of Mrs. O'Riordan.

3 . By an agreement in writing dated 18 ^th April, 2019 entitled “Binding Heads of Terms” (“BHOT”) Mrs. Kennedy and Mrs. O'Riordan agreed to sell, and Mr. Ward agreed to purchase, Mrs. Kennedy's and Mrs. O'Riordan's shareholding in the group for a total consideration of €31.5 million, to be paid by a first instalment of €25 million on or before 31 ^st October, 2019 and the balance in three further instalments on 31 ^st October, 2020, 31 ^st October, 2021 and 31 ^st October, 2022.

4 . The agreement provided that on payment of the first instalment of the agreed consideration, Mr. Ward – whether by himself or his nominees – was to have a transfer of the shares. The plaintiffs insist that Mr. Ward is liable to pay the money but the shares have not been transferred.

5 . The plaintiffs' position as to the entitlement of Mr. Ward to a transfer of the shares has fundamentally shifted since the commencement of the proceedings. In correspondence before the proceedings commenced and up to and including the hearing before the High Court, the plaintiffs' position was that Mr. Ward was not entitled to a transfer of the shares at all. The High Court judge found that it was not clear that Mr. Ward was not entitled to a transfer of the shares but that it was clear that he was obliged to pay for them.

6 . After the judgment of the High Court was delivered, the plaintiffs' position changed. They now acknowledge Mr. Ward's entitlement to a transfer, subject to payment of the agreed consideration in accordance with the terms of the BHOT, or at least in accordance with what they, the plaintiffs, contend were the terms of the BHOT.

7 . There is sharp disagreement as to the parties' respective obligations under the BHOT. That dispute is the subject of a counterclaim by Mr. Ward for specific performance of the BHOT and a variety of declarations. In the meantime, Mr. Ward has been decreed for the price of the shares.

8 . As will become apparent, I have sacrificed strict accuracy for the sake of simplicity but the issue on the appeal, in a nutshell, is whether it is clear that Mr. Ward is bound to pay for the shares before they are transferred. Or, the other way around, the issue is whether the plaintiffs are entitled to insist on payment immediately but to retain the shares until the dispute as to Mr. Ward's entitlement is resolved.

The applicable principles of law

9 . If on nothing else, there is agreement between the parties as to the applicable principles of law and there is no suggestion that the High Court judge did not correctly identify those principles.

10 . The test, as formulated by the Supreme Court in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 I.R. 607 and Harrisrange Ltd. v. Duncan [2003] 4 I.R. 1 is whether the defendant has demonstrated that there is a fair and reasonable probability of his having a real or bona fide defence. Or, as Hardiman J. put it in Aer Rianta:-

“… is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues that are simple and easily determined? Do the defendant's affidavits fail to disclose even an arguable defence?”

11 . Counsel for Mr. Ward emphasised the first of the twelve point summary of the law by McKechnie J. in Harrisrange, which is that the power to grant summary judgment is to be exercised with discernible caution.

The evidence

12 . The Binding Heads of Terms were executed at about midnight on 18 ^th April, 2019 following a long day of mediation. The document is quite short, running to just three pages. About half of it is boilerplate.

13 . The agreement identifies Mr. Ward as the first party and Mrs. O'Riordan and Mrs. Kennedy as the second parties and recites that they were together, directly and indirectly, the shareholders in a number of companies as outlined more particularly in a valuation report dated 26 ^th September, 2017. It recited that the parties were in dispute and had agreed to resolve their differences on the terms “outlined in this Binding Heads of Terms”.

14 . The material provisions of the BHOT were:-

“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;

(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;

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).

1.1.3 The Consideration will be payable 50% to each of the Second Parties or their nominees. …

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 way for the Parties.

1.1.7 The Parties will use their best endeavours to ensure that the sums paid are done in such a way as will circumvent any pre-emption rights in favour of any third parties, to the extent this is possible and that clauses 1.1.1 and 1.1.2 are subject to any pre-emption rights being exercised. The Parties agree that any sums paid to the Second Parties by any third party shareholders under pre-emption rights will reduce the Consideration by equivalent sums. …

1.1.9 The Second Parties will resign and procure the resignation of their nominees from the boards of the Companies upon receipt of the first tranche of the Consideration pursuant to clause 1.1.1(i) of this agreement and in the meantime will not participate or interfere in any way in the operation of the Companies.”

15 . Clause 2 of the BHOT, under the heading “General” comprises eleven sub-clauses, ten of which are boilerplate but one of which is the provision which is more or less central to the plaintiffs' claim to be entitled to summary judgment. It is clause 2.8, which provides:-

“2.8 The Parties acknowledge that in the event that the Consideration is not paid in accordance with the terms of this agreement, or such later date as may be agreed between the Parties, the First Party shall 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.”

16 . What happened after the execution of the agreement was the subject of a protracted exchange of affidavits over a period of about ten months. Nine affidavits were filed on behalf of the plaintiffs: three sworn by Mrs. Kennedy, two by Mr. O'Riordan, two by Ms. Lisa Kinsella, a tax partner in Crowe Ireland, one by Mr Gerry Carron, who was Mrs. O'Riordan's attorney and who signed the BHOT on her behalf, and one by Dr. David Robinson, a consultant physician and geriatrician who had assessed the capacity of Mrs. O'Riordan. Six affidavits were filed on behalf of the defendant: four were sworn by Mr. Ward, one by Mr. Lorcan Ward, his son, and one by Mr. Colm O'Callaghan, a tax partner in PricewaterhouseCoopers.

17 . In early July, 2019 Mrs. Kennedy and Mrs. O'Riordan engaged Crowe Ireland to provide tax advice in relation to the disposal of their shares in The Ward Cinema Group. By letter dated 10 ^thJuly, 2019 Ms. Kinsella identified herself to Mr. Ward as his sisters' tax adviser and asked for a variety of financial information. It is unclear whether or if so when this might have previously been discussed, but Ms. Kinsella in her letter identified a risk – by reference to anti-avoidance provisions that had been introduced by the Finance Act, 2017 – that if the companies' reserves were used to fund completion of the transfers, Mrs. Kennedy and Mrs. O'Riordan might incur a liability to pay income tax, rather than capital gains tax, on the consideration paid to them. Ms. Kinsella twice asserted that the BHOT provided for the acquisition of the shares by Mr. Ward personally.

18 . Mr. Ward had previously consulted PwC and on 25 ^th July, 2019 Ms. Kinsella and Mr. O'Callaghan met to discuss the matter. By e-mail on the following day, Ms. Kinsella asked Mr. O'Callaghan for confirmation that Mr. Ward would purchase her clients' shares from them directly and said that any funding proposals, specifically the use of company funds to make the agreed payments, would only be considered if there was no additional tax cost to her clients.

19 . Following his return from annual leave, Mr. O'Callaghan replied by e-mail dated 20 ^th August, 2019. Having consulted with Mr. Ward's solicitor, Mr. O'Callaghan made three points. First, he said, the BHOT clearly stated that the shares could be purchased by Mr....