Mastertrade (Exports) Ltd and Others v Phelan and anor
| Jurisdiction | Ireland |
| Judge | Mr Justice Roderick Murphy |
| Judgment Date | 04 December 2001 |
| Neutral Citation | [2001] IEHC 171 |
| Court | High Court |
| Date | 04 December 2001 |
[2001] IEHC 171
THE HIGH COURT
BETWEEN
AND
Citations:
PHELAN V GOODMAN UNREP MURPHY 11.9.2001
CUMMINGS V STEWART 1911 1 IR 236
COMPANIES ACT 1908
CAVERN SYSTEMS V CLONTARF RESIDENTS 1984 ILRM 24
EURO DIAM V BATHURST 1990 1 QB 1
CHITTY ON CONTRACT 28ED VOL 1 PARA 17–005
SHERRY V HADDOCK 1980 QB 647(H)
BROWN JACKSON V VERSEY 1957 2 QB 621
SCOTT V BROWNE 1892 2 QB 724
ALLIED IRISH COAL SUPPLIES V POWELL DUFFRYN INTERNATIONAL FUELS 1998 2 IR 521
MCCABE V HARDING INVESTMENTS 1984 ILRM 105
O'NEILL V RYAN 1993 ILRM 557
BARRY V BUCKLEY 1981 IR 306
TASSAN DIN V BANCO AMBROSANO 1991 1 IR 570
MURPHY V DONOGHUE 1996 1 IR 123
LAC MINERALS V CHEVRON MINERAL CORPORATION 1995 1 ILRM 161
SUN FAT CHAN V OSSEOUS 1992 1 IR 425
COMPANIES ACT 1963 S311(A)
COMPANIES ACT 1961 S311(C)
Synopsis:
PRACTICE AND PROCEDURE
Motion to strike out
Abuse of process - Jurisdiction of courts - Shareholding agreement - Company law - Litigation - Fraud - Beef industry - Whether court should lift corporate veil - Whether proceedings should be struck out (1998/10882P - Murphy J - 4/12/01)
Mastertrade (Exports) Ltd v Phelan
Facts: The parties were involved in court proceedings whereby the first named defendant, who had been involved in the beef industry, alleged that a fellow shareholder (Mr. Taher) had sold his shares in certain companies to Laurence Goodman, who was also involved in beef industry, in contravention of a joint venture agreement (between the first named defendant and Mr. Taher). As a result the first named defendant commenced proceedings against Mr. Taher and Mr. Goodman. In return those companies instituted proceedings against the first named defendant and a company controlled by him. In a previous ruling on a preliminary issue Mr. Justice Murphy (11/09/2001) had found that Mr. Taher in selling his shares to Mr. Goodman was in breach of the joint venture agreement. The first named defendant brought the present motion seeking to have the proceedings against him struck out for abuse of process or seeking an order to try the plaintiffs' right to maintain the present proceedings. The first named defendant alleged that Mr. Goodman had abused the process of the court in concealing his ownership of the shares from the court. It was also alleged that the plaintiff companies were acquired by Mr. Goodman by improper and unlawful activities. It was urged that this wrongdoing by Mr. Goodman constituted fraud and was a factor the court must consider in lifting the corporate veil. The plaintiffs contended that nowhere had the first named defendant in his submission made out a substantive defence to the present proceedings. The first named defendant was simply asserting that because of an alleged wrongdoing by a shareholder in the plaintiff companies that the claims should be halted.
Held by Mr. Justice Murphy in refusing to strike out the present proceedings. The jurisdiction of the court to strike out only arose in extreme circumstances. Plaintiffs were entitled to have their actions heard unless there were compelling circumstances which justify a strikeout in limine on the basis of undisputed and incontrovertible facts. The jurisdiction of the court to dismiss proceedings as an abuse of process arose only where the proceedings themselves constituted such an abuse. The plaintiff had not been in breach of any agreement nor were in any way tainted with illegality, deceit or fraud. They were the proper plaintiffs in relation to the allegations that they make in these proceedings. To visit the alleged illegality, conspiracy and/or fraud of Mr Goodman on the companies was not supported by the authorities. The companies were not, at least for some period in which the misappropriations were claimed, in any way linked to Mr Goodman. Alleged wrongdoings required evidence as to intention. Neither the admissions nor the documentary evidence opened in this lengthy trial could lead to a finding, at this stage, of wrongdoing either of Mr Goodman nor, indeed, of Mr Phelan. There was no evidence that the formation or restoration to the register of the plaintiff companies was used as an engine for the destruction of legal obligations or the overthrow of legitimate or enforceable claims. In the circumstances the application by the first named defendant to have the proceedings struck must be refused.
1.1 The twelve plaintiff companies, referred to as Master Meat Group by the parties though legally separate, traded in meat in the 1980's.
1.2 The first named defendant was the controlling shareholder. On the 15th of October 1986 he sold 50% of his interest in the group to Mr Zacharia El Taher. Within six months Mr El Taher, unknown to Mr Phelan and in breach of the joint venture agreement of the 10th of October 1986 (as so found by this Court on the 11th of September 2001), sold his interest to Mr Laurence Goodman.
1.3 The group underwent certain difficulties in 1988 when bank borrowings reached £20m. Negotiations between agents (normally acting for Mr El Taher but in reality acting on behalf of Mr Goodman) and Mr Phelan resulted in the latter invoking certain deadlock provisions contained in the joint venture agreement of the 10th of October 1986, following the issue and service, but not the hearing of injunctive proceedings against Mr. Phelan. Mr Phelan nominated a price of £2.5m for the group. As provided for in the agreement, this was countered by a counteroffer of £2.75m which was deemed binding on the parties and was subject to an agreement of September, 1988.
1.4 Mr Phelan commenced proceedings against Mr Goodman and Mr El Taher, following that agreement; later against the companies and the companies, in turn, commenced the present action against Mr Phelan and Master Cut Foods Limited, (the second named defendant herein) which was controlled by Mr Phelan.
1.5 It was agreed between the parties and so ordered by O'Donovan J., on the 27th of July 2000, that these actions be heard together. Furthermore it was agreed that documents, as discovered, would be deemed to prove themselves.
1.6 The hearing of the action commenced in May 2001. It was agreed that certain issues should be tried as preliminary issues before the Court. In order to facilitate this, it was agreed between the parties and by the Court that each of the cases would be opened to the Court and that submissions would be made in relation to the issues which the Court deemed appropriate.
1.7 After thirty-six days hearing over the period from May to July 2001 the first case was opened extensively and a summary of the present case, dealing with fifteen alleged misappropriations (out of a total of thirty-two claimed) where made in relation to the documents and accounts discovered, most of which had already been opened to the Court.
1.8 By judgment dated the 11th of September 2001 the Court determined certain preliminary issues.
1.9 When the hearing recommenced in October 2001 the present action was opened fully to the Court. The remaining allegations of misappropriation, seventeen in all, were dealt with in the context of supporting documentation.
1.10 A motion to strike out the companies" claim, was formally moved on the 1st of November 2001, the forty-fifth day of the hearing.
That motion, head over four days from 1st November to 7th November sought the following orders:-
(1) An order for the trial of an issue as to the entitlement of the plaintiff to maintain the above entitled proceedings having regard to the wrongdoing alleged and/or found against Laurence Goodman.
(2) An order staying and/or striking out these proceedings for abuse of process.
(3) Further and other reliefs.
(4) Costs.
The application was grounded upon the affidavit of Paschal Phelan of 16th October 2001. A replying affidavit of Anita Kerrigan, solicitor for the respondents, was sworn on the 26th October, 2001. A further affidavit of Mr. Phelan was sworn on the same date.
Mr Phelan referred to the following which are detailed in paragraph 3 of his affidavit as follows:-
(a) that Laurence Goodman procured Zacharia El Taher to enter into a sale in April 1987 which sale was in breach of the contract between Mr Paschal Phelan and Mr El Taher. If follows, in the light of the admissions made by Mr Goodman, that he wrongful induced such sale;
(b) the fact of such sale having occurred was actually concealed by Mr Goodman who procured a situation where Mr Phelan was tricked and deceived into exercising the deadlock provisions in the October 1986 agreement with Mr El Taher;
(c) Mr Goodman misled organs of the State in a calculated and deliberate fashion in order to maintain his otherwise unlawful ownership of the Master Meat Group of companies;
(d) Mr Goodman abused the process of the Court in relation to the 1988 injunction proceedings issued to prevent Mr Phelan from relying on his agreement with Mr El Taher, by not disclosing to, and concealing from the Court, the fact of the beneficial ownership of the shares which he had acquired beneficially from Mr El Taher;
(e) Mr Goodman throughout the entirety of the proceedings, until the amended defence incorporating a letter of September 2000, knowingly and deliberately concealed from the Court,...
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