Martialone Ltd & the Companies Acts 1963-2006; Hennessy (petitioner) v Griffin & Others

• Jurisdiction: Ireland
• Court: High Court
• Judge: Ms. Justice Laffoy
• Judgment Date: 23 December 2009
• Neutral Citation: [2009] IEHC 570
• Date: 23 December 2009

[2009] IEHC 570

THE HIGH COURT

[No. 47 COS/2007]

Hennessy v Griffin & Ors

IN THE MATTER OF MARTIALONE 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

MIKE HENNESSY

PETITIONER

AND

PATRICK GRIFFIN, PATRICK KEANE, ENTERPRISE 2000 FUND LIMITED, CAMPUS COMPANIES CUSTOLDIAL LIMITED AND MARTIALONE LIMITED

RESPONDENTS

COMPANIES ACT 1963 S205

COMPANIES ACT 1963 S213(F)

RSC O.19 r28

VIA NET WORKS (IRL) LTD (FORMERLY MEDIANET (IRL) LTD), IN RE 2002 2 IR 47 2002/27/7100

COMPANIES ACT 1963 S205(1)

NEW AD ADVERTISING CO LTD, IN RE UNREP SMYTH 18.12.2007 2007/44/9303 2007 IEHC 436

LEGAL COSTS NEGOTIATORS LTD, IN RE 1999 2 BCLC 171 1999 BCC 547

FOSS v HARBOTTLE 1843 2 HARE 461 67 ER 189

BRENFIELD SQUASH RACQUETS CLUB LTD, IN RE 1996 2 BCLC 184

SUN FAT CHAN v OSSEOUS LTD 1992 1 IR 425 1991/10/2412

COMPANIES ACT 1963 S205(3)

HORGAN v MURRAY & MILTON 1997 3 IR 23

COMPANIES ACT 1963 S119

COMPANY LAW

Shareholders

Oppression - Petition - Minority shareholder - Application for shareholding to be sold at fair price - Alternative claim for winding up of company - Application to dismiss proceedings - Vexatious - No prospect of success - Abuse of process - Whether cause of action disclosed - Claim that transfer of shareholding result of sustained pressure - Whether attempt to dilute shareholding of petitioner - Offer of shares in irregular manner - Irregularities in issue of shares - Absence of information in connection with provision of shares - Refusal to call extraordinary general meeting - Failure to answer questions about issue of shares - Failure to answer questions regarding appointment of directors - Exclusion from affairs of company - Absence of evidence of insolvency - Absence of quasi-partnership plea or deadlock - Necessity for plenary hearing - Questions of law and fact - Remedies - Broad discretion - Offers to acquire shares of petitioner - Remedy offered by potential oppressor - Factual disputes - Whether issue to be tried regarding oppression - Re Via Net Works (Ireland) Limited [2002] 2 IR 47; Jodifern v Fitzgerald [2000] 3 IR 321; Re New Ad Advertising Company Limited [2007] IEHC 436 (Unrep, Smyth J, 18/12/2007); Re Legal Costs Negotiators Limited [1999] BCLC 171; Re Brenfield Squash Racquets Club Limited [1996] 2 BCLC 184; Sun Fat Chan v Osseus Limited [1992] 1 IR 425 and Horgan v Murray [1997] 3 IR 23 considered - Companies Act 1963 (No 33), ss 205 and s 213 - Rules of the Superior Courts 1986 (SI 15/1986), O 19, r 28 - Claim dismissed on limited basis (2007/47COS - Laffoy J - 23/12/2009) [2009] IEHC 570

Hennessy v Griffin

Facts: The petitioner was the owner of 20.12% of the issued share capital of the company at issue and invoked s. 205 Companies Act 1963 and asserted that the affairs of the Company were being conducted in a manner oppressive to him. He sought an order inter alia for the respondents to sell their share holding to him or an order appointing an agent to sell the entire issued share capital with the net proceeds to be distributed in accordance with the directions of the Court. The first and second respondent sought an order pursuant to Order 19 Rule, 28, Rules of the Superior Courts, striking out the proceedings as vexatious. The petitioner complained inter alia as a to various irregularities, including the failure to hold an EGM, the lack of a prospectus, that he had not been informed in advance of an offer and that he was denied access to the share register.

Held by Laffoy J. that the allegations did not amount to oppression or disregard of the interests of the plaintiff so as to entitle him to relief. The claim of the plaintiff would be dismissed. The reliance on an alleged contravention of the Shareholders Agreement did not stand up. The proposed share transfer in 2005 never took place and in totality the allegation was hypothetical. The proper plaintiff for a wrong on the company was the company itself. The plaintiff withdrew a request for an EGM. A factual conflict as to the resignation of the petition as voluntary or not could not be resolved at this point. The failure to furnish certain information was not oppression or a disregard of the interests of the plaintiff. None of the matters complained of were matters which could amount to oppression.

Reporter: E.F.

1 Ms. Justice Laffoy delivered on the 23rd December, 2009.

The proceedings

2 These proceedings were initiated by a petition dated 1 ^st February, 2007, which was presented by the petitioner on 6 ^th February, 2007. The petitioner is the owner of 20.12% of the issued share capital of Martialone Limited (the Company), which was incorporated on 13 ^th August, 1998 and is involved in the business of supplying and maintaining whirlpool and hydrotherapy systems and related products. The petitioner invokes s. 205 of the Companies Act 1963 (the Act of 1963) and asserts that the affairs of the Company are being conducted by the respondents in a manner which is oppressive to him and in disregard of his interests as a member of the Company. He seeks, inter alia, an order that the respondents sell their share holding in the Company to him at a fair and reasonable price to be determined by the Court. In the alternative, he seeks an order appointing an agent to sell the entire issued share capital in the Company with the net proceeds of sale to be distributed in accordance with the directions of the Court. He also invokes s. 213(f) of the Act of 1963 seeking, if necessary, an order that the Company be wound up on the grounds that it is just and equitable to do so.

3 The petitioner was the first managing director of the Company. He resigned from that position in 2001. He remained a director of the Company until he resigned from that office in October 2003.

4 The status of each of the respondents in relation to the Company is as follows:-

5 (1) The first respondent is the owner of 10.35% of the issued share capital of the Company. He is a former director and chairman of the board of the Company, having resigned as a director in 2005.

6 (2) The second respondent is the current managing director of the Company, having been appointed to that position on the retirement of the petitioner in 2001. He is the owner of 14.64% of the issued share capital of the Company.

7 (3) The third respondent is a Business Expansion Scheme (BES) investor in the Company and holds 15.63% of the issued share capital of the Company.

8 (4) The fourth respondent is also a BES investor in the Company and owns 23.74% of the issued share capital of the Company.

9 (5) The fifth respondent is the Company.

10 There are five other members of the Company who, between them, own 15.52% of the issued share capital of the Company, who are not parties to the proceedings.

11 A very considerable body of affidavit evidence was filed in support of and in answer to the petition, which is replete with factual conflicts. Pursuant to the petitioner's motion for directions, the Court ordered that pleadings be delivered. The plaintiff's points of claim were delivered on 6 ^th September, 2007. The pleadings have been closed.

This application

12 On this application the first respondent and the second respondent seek an order pursuant to Order 19, Rule 28 of the Rules of the Superior Courts 1986 (the Rules), or under the inherent jurisdiction of the Court, striking out the proceedings against them on the grounds that they are vexatious, have no prospect of success and are an abuse of the process of the Court. When the application was listed for hearing, there was also listed for hearing a similar application by the third named respondent. That application was compromised, but the Court was not apprised of the terms of the compromise. The Court made an order by consent striking out the motion of the third named respondent with no order as to costs and also striking out the proceedings against the third named respondent with no order as to costs.

13 The current position, accordingly, is that members of the Company, who between them own 31.17% of the issued share capital of the Company, are not before the Court.

14 The fourth respondent, which had previously intimated an intention to bring a motion to strike out the proceedings against it, had not done so by the date of the hearing. However, counsel for the fourth respondent made it clear that the fourth respondent wished to reserve its position in relation to bringing such a motion.

General approach to the application

15 I am satisfied that the jurisdiction of the Court to dismiss proceedings pursuant to Order 19, Rule 28, or in exercise of its inherent jurisdiction, is applicable to a s. 205 petition. On a Supreme Court appeal in Re Via Net Works (Ireland) Limited [2002] 2 I.R. 47, Keane C.J. stated (at p. 55):-

"It was not contended on behalf of the respondents in this case that the jurisdiction of the High Court to dismiss an action pursuant to Order 19, Rule 28 on the ground that the pleadings disclose no reasonable cause of action or one which is frivolous or vexatious or to strike such proceedings as an abuse of process in the exercise of its inherent jurisdiction, is inapplicable in the case of such petitions. I think that they were correct in adopting that approach, since it appears to be the clear implication of the judgments of this court in Horgan v. Murray (No. 1) [1997] 3 I.R. 23 that the jurisdiction is applicable in case of such petitions, although it is one that should in those cases as in all other cases, be exercised sparingly and, on the facts of that particular case, was unsuccessfully invoked".

16 Earlier in his judgment, Keane C.J. had outlined the proper approach to an application such as this where relevant facts are in...