Moore v Xnet Information Systems Ltd

JurisdictionIreland
JudgeO'Sullivan J.
Judgment Date08 February 2002
Neutral Citation[2002] IEHC 6
Docket Number[2001 No. 18271 P]
CourtHigh Court
Date08 February 2002

[2002] IEHC 6

THE HIGH COURT

No. 18271P/2001
MOORE v. XNET INFORMATION SYSTEMS LTD & ORS

BETWEEN

KEVIN MOORE
PLAINTIFF

AND

XNET INFORMATION SYSTEMS LIMITED, AIDAN HIGGINS, HOWARD
ROBERTS AND NICHOLAS KOUMARIANOS
DEFENDANTS

Citations:

REDUNDANCY PAYMENTS ACTS 1967–1979

REDUNDANCY PAYMENTS REGULATIONS 1984 -1994

FENNELLY V ASSICURAZIONI GENERALI SPA 1985 3 ILT 73

HILL V CA PARSONS LTD 1972 CH 305

HARE V KELLY 1997 ELR 125

SHORTT V DATA PACKAGING LTD 1994 ELR 251

BOLAND V PHOENIX SHANNON PLC 1997 ELR 113

PHELAN V BIC (IRL) 1997 ELR 208

LONERGAN V SALTER-TOWNSHEND 2000 ELR 15

PARSONS V IARNROD EIREANN UNREP SUPREME 24.4.1999 1997/11/3548

PHILPOTT V O'GILVY 2000 3 IR 206

HICKEY V EASTERN HEALTH BOARD 1991 1 IR 208

GLOVER V BLN 1993 IR 388

RIDGE V BALDWIN 1964 AC 40

Synopsis:

EMPLOYMENT

Termination of employment

Injunction - Balance of convenience - Company - Payment of salary - Re-instatement - Whether plaintiff's salary should be paid pending trial of action (2001/18271 P - O'Sullivan J - 8/2/02)

Moore v Xnet Information Systems Ltd - [2002] 4 IR 362 - [2002] 2 ILRM 278

Facts: The plaintiff was a co-founder of the first defendant (a technology company) along with the second defendant. The plaintiff sought injunctions preventing the defendants from taking any further steps to terminate his employment, sought re-instatement and payment of his salary pending the trial of the action. Neither the plaintiff nor the second defendant had a written agreement with the first defendant. The plaintiff contended that an arguable case had been made out that his purported dismissal was invalid. It was also contended that his various interests in the company as director, shareholder and guarantor precluded him from being regarded as merely an employee of the company. On behalf of the defendants it was contended that the plaintiff's position had been terminated by reason of redundancy and that there was an effort to reduce costs. It was submitted that the financial position of the company was extremely tight and it would be onerous if the first defendant had to pay the plaintiff's salary pending the trial of the action.

Held by Mr. Justice O'Sullivan in granting the following orders. It was apparent that the company was once again on the road to expansion. The balance of convenience favoured the granting of an order directing that the plaintiff's salary be paid pending the trial of the action subject to a number of undertakings. Relations had broken down the plaintiff and the defendants. The balance of convenience did not favour the re-instatement of the plaintiff as commercial director pending the hearing of the case. The plaintiff was entitled to all information and data relevant to his status as director and shareholder of the company.

1

O'Sullivan J. delivered the 8th of February, 2002

2

The plaintiff seeks interlocutory injunctions restraining the defendants from taking any further steps to terminate his employment, re-instating him pending the trial of this action, directing them to pay his salary and emoluments until the trial of the action, restraining them from taking any steps removing him as a director of the first defendant or from removing him from his position as commercial director with the first defendant, directing the defendants to provide the plaintiff with unrestricted access to his place of work and to the books, records and information (including electronic) of the first defendant, restraining them from holding a meeting affecting the plaintiff's position as director and shareholder (47.75% or 42.75%) of the first defendant, restraining the defendant from excluding the plaintiff from all board meetings of the first defendant and further orders until the hearing of the action relating to the bank mandates of the defendants.

Background
3

The first defendant company was co-founded by the plaintiff and the second defendant in 1995. They hold an equal amount of shares in the company (being either 47.75% or 42.75%). The plaintiff and the second defendants were boyhood friends and have remained close personal friends until their recent falling out. While at school together they discussed the possibility of going into business and after third level education remained in contact and were best men at each other's weddings.

4

In 1995 the Internet was coming into vogue as a means of communication and both felt the growth potential was enormous and that they could exploit it. They agreed to set up business together and despite early setbacks did so providing a "data storage" service. They agreed at the outset that the business would be conducted on 50/50 basis as regards risk, rewards and decision making elements. They acquired the first defendant and it was agreed that each would have a 50% shareholding in the first defendant. Each held one of the two issued shares in the company. They both became directors of the company and the plaintiff was its secretary. The first defendant commenced business in early 1996. The plaintiff lent it £20,000 and for the first six months the plaintiff and the first defendant effectively lived off this loan. Both were involved in sales. The plaintiff took responsibility for the accounts and the second defendant concentrated on the sales.

5

The company's philosophy was to expand aggressively by re-investing profits. It encountered a difficult patch from May to September 2001 but is now at the bottom of a downward curve and is anticipating a return to profitability and expansion.

6

The first defendant employed its first member of staff in November, 1997 when the plaintiff and the first defendant began to divide their responsibilities. The plaintiff took responsibility for supporting customers and for accounts, the second defendant for personnel and overall responsibility for sales. Neither had the title of "Managing Director": both were directors of the company. In January, 1999 the third defendant was employed as technical consultant. In 1998/9 it was decided that the second defendant would be the "public face" of the company and that he would be entitled to call himself "Managing Director". The plaintiff was to be called "Operations Director" which was subsequently changed to "Commercial Director". Mr. Roberts on appointment was designated "Technical Director". He eventually took over the day-to-day running of the company. The fourth defendant was brought into the company as an non-executive director in March 2000. He had been a former managing director of Cable and Wireless Ireland Limited and it was thought that he would enhance the profile of the company. The plaintiff and the second defendant agreed around this time that they would transfer some of the small amount of shareholding (no more than 10%) to staff members. Ultimately 10% would be divided among staff, 10% amongst other directors of the company, the plaintiff and the second defendant holding 40% each. Mr. Roberts came to hold 3% (1.5% from each of the plaintiff and the second defendant) of the shares under this arrangement. It was agreed that the fourth defendant would hold 2.5% of the shares in the company.

7

Some twelve months ago the plaintiff and the first defendant acquired a premises of 6,200 sq.ft in Bray, County Wicklow, each holding a half interest. Sums were borrowed and each went guarantor for repayments. An annual rent is payable to the plaintiff and the second defendant. These were personal borrowings by the plaintiff and the second defendant. A further sum was lent to the company by way of development loan. The plaintiff and the second defendant shared in this transaction on an equal basis. The transaction was completed in May, 2001. The plaintiff was married in the same month.

Plaintiff's dismissal
8

In his affidavit, the plaintiff describes how his influence and functions in the company were gradually reduced by the second, third and fourth defendants during the past twelve months. The fourth defendant had advised the plaintiff and the second defendant to delegate every possible task to others so that they could keep themselves free to manage and plan for the company. A great deal of the plaintiff's time was taken up with ensuring that the company would not collapse as a result of cash flow difficulties when he returned from his honeymoon in June, 2001. He had to deal with the Revenue Commissioners and did so. In hindsight he sees that a trend had developed whereby he was excluded by the second and third defendants from certain aspects of the running of the company. Since September the sales in the company began to pick up, it opened a branch office in Belfast in October and took a ten year lease. He and the second defendant took a 50/50 shareholding in a new Northern Ireland business for this purpose. Ultimately this new company was not used.

9

In his affidavit the plaintiff says that on Friday, the 7th of December, 2001 there was a meeting between the second and third defendants and the plaintiff. The second defendant sat down, took a deep breath and then said in an angry tone "this is your last day in Xnet, you're out". The second defendant was trying to fire the plaintiff from the company. He told him that the board had resolved that he must go because of "gross incompetence". He then made certain offers, told him he had legal advice, that he was only entitled to £7,000, there were discussions which the second defendant claimed were "without prejudice". It emerged that the second defendant and the other defendants had been planning this for some time according to the plaintiff. The second defendant referred to the plaintiff's brilliant strategic insights but his failures and inability to execute. It was the first time that any one had suggested to the plaintiff that he was "grossly incompetent". The plaintiff was subsequently informed by the third defendant that the second defendant spoke for the...

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