Park Magic Mobile Solutions Ltd v Companies Act

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 09 May 2017
• Neutral Citation: [2017] IEHC 287
• Court: High Court
• Docket Number: [2016 No. 2 COS]
• Date: 09 May 2017

IN THE MATTER PARK MAGIC MOBILE SOLUTIONS LIMITED

AND IN THE MATTER OF THE COMPANIES ACT 2014

AND IN THE MATTER OF SECTION 173 OF THE COMPANIES ACT 2014

ON THE APPLICATION OF FERGAL BRADLEY, FIDELMA RUSSO

AND (BY ORDER) SARA JANE HOLMES WOODHEAD

BETWEEN

FERGAL BRADLEY, FIDELMA RUSSO

AND (BY ORDER)

SARA JANE HOLMES WOODHEAD

APPLICANTS

AND

PARK MAGIC MOBILE SOLUTIONS LIMITED

RESPONDENT

[2017] IEHC 287

Baker J.

[2016 No. 2 COS]

THE HIGH COURT

Company – S. 173 of the Companies Act 2014 – Error in register of companies – Rectification of register – Addition of name of members

Facts: The applicants sought a declaration that they were the shareholders in the respondent company. The applicants also sought consequential orders to the effect that the company should take steps to rectify the share register to show their respective shareholdings in the respondent company. The applicants contended that they had entered into an agreement with another company for the purchase of their shares for value but that sale of shares did not take place; however, the share register of the respondent company was amended to reflect that other company as the owner of the relevant shares. The respondent company argued that the mechanism provided by s.173 of the Companies Act 2014 was not appropriate to resolve the conflict between the parties.

Ms. Justice Baker refused to grant the desired relief to the applicant. The Court held that it was evident from the documentary evidence that the registration of the other company as shareholders was not done without sufficient cause. The Court found that all the instruments in writing signed by that other company were handed over to the applicants and the Board of the respondent company approved of the said transactions. The Court held that the applicants had not made that other company as the party to the proceedings without which it was not possible to resolve the present conflict on affidavit evidence. The Court held that under s. 173, the Court was competent to resolve questions of legal and beneficial ownership but not the dispute of facts.

JUDGMENT of Ms. Justice Baker delivered on the 9th day of May, 2017.

1 The applicants seek a declaration that they were at all material times shareholders in the respondent company, Park Magic Mobile Solutions Limited (‘the Company’), a limited liability company incorporated in the State on 8th March, 2005, with registered offices at Riverfront, Howley's Quay, Cork. The applicants also seek consequential orders that the Company take all steps to rectify the share register to show their respective shareholdings and otherwise rectify the register.

2 The originating motion also sought a direction that all decisions made at an Extraordinary General Meeting of the Company on 15th June, 2012, be declared invalid or set aside, but it is accepted that such order may not be made on the motion.

The statutory context

3 A company is obliged by law to keep a register of its members, on which is entered the names and addresses of those members, the number and type of shares held by each, and the date on which the person was entered in the register as a member and on which any person ceased to be a member: section 169(1).

4 A company is required to keep the register up to date, and to enter the relevant amendments within 28 days after the date a member’ ‘ceased to be a member’: section 169(4).

5 The primary relief sought is pursuant to s. 173 of the Companies Act 2014 (‘the Act’), subs. (1) of which provides as follows:

‘(1) If—

(a) the name of any person is, without sufficient cause, entered in the register of members or omitted from it, in contravention of subsections (1) and (3) of section 169, or

(b) default is made in entering on the register, within the period fixed by subsection (4) of section 169, the fact of any person's having ceased to be a member,

the person aggrieved, or any member of the company, or the company, may apply to the court for rectification of the register.’

Relevant facts

6 Fergal Bradley, the first applicant, was, until the matters to which this application relates, a shareholder in the Company holding a mixture of ‘A’ shares, ‘B’ cumulative preference shares and ‘A’ preference shares.

7 The second applicant, Fidelma Russo, held ‘A’ ordinary shares and ‘A’ preference shares.

8 The third applicant is the executrix in the estate of her deceased husband, David Fitzgerald, who held ‘A’ ordinary shares and ‘A’ preference shares. She was substituted as applicant by my order of 29th November, 2016.

9 The application the subject matter of this judgment relates to agreements entered into on 2nd September, 2011 and 22nd November, 2011 in the form of a share purchase agreement with E-Code Innovation Limited (‘E-Code’) for the transfer by the first and second applicants and by David Fitzgerald of their entire shareholding in the Company for a combined purchase price of €1,350,000.

10 The transaction for the sale of the shares did not complete and the consideration was not paid.

11 The share register of the Company was amended to reflect E-Code as the owner of the relevant shares agreed to be sold by the agreements made in September and November, 2011. The applicants claim that the amendment to the register was done in error and without sufficient cause, and seek rectification of the register.

12 E-Code is not registered as owner of the shares in the Companies Registration Office (‘CRO’) and has not executed the necessary documents to complete registration in the State Register.

13 E-Code has confirmed in writing that it does not consider that it has any interest in the shareholding of the Company, and it does not ‘consider itself’ to be a shareholder in the Company.

14 The Company denies that any error is contained in the register of a type capable of rectification under s. 173 of the Act.

The law

15 It is convenient to examine the legal principles behind the operation of s. 173 before dealing with the factual basis of the application.

16 Section 173 of the Act provides for the rectification of the share register where errors have arisen. An application to effect such rectification may be made to the court by any aggrieved person, members of the company, or by the company itself.

17 Laffoy J. considered the provisions of s. 122 of the Act of 1963 in Re Olde Court Holiday Hostel Limited: Trehy v. Murtagh & Ors. [2006] IEHC 424, where she said:

‘In broad terms, the jurisdiction to rectify is a discretionary remedy, which empowers the court to rectify particulars which have been entered in the Register “without sufficient cause”.’

18 Laffoy J. approved the resume of the law in the then current edition of Courtney's The Law of Private Companies [2nd Ed] at para. 15.023 et seq. The third edition of Courtney's text now contains the relevant statement of the law, and is dealt with in chapter 8, paras. 8.022ff.

19 Laffoy J. directed the rectification of the register in respect of one entry, but not the other because she regarded the affidavit evidence as conflicting and unclear.

20 Laffoy J. also considered the jurisdiction in Banfi Limited v. Moran & Ors. [2006] IEHC 257 where her focus was the power of directors to refuse registration.

21 Because the jurisdiction engaged by the court under the relevant provisions of the Act of 2014, are broadly similar to those under the provisions of s. 122 of the Act of 1963, I consider the judgments of Laffoy J. to be authoritative.

22 The court's jurisdiction is wide, and it may determine questions of title in the course of an application under section 173. At para. 9.066 of the third edition of his text Courtney states in broad terms that ‘the court may decide any question of title’ on an application under the then relevant provisions of section 122(1). The Court of Appeal of England and Wales in Re Hoicrest Ltd. [2000] 1 W.L.R 414 considered the nature of the jurisdiction and emphasised the wide powers of the court under the English equivalent of s. 173, by which a court may:

‘… decide any question in relation to the title of a person who is a party to the application to have his named entered in or omitted from the register…and generally may decide any question necessary or expedient to be decided for rectification of the register.’

23 Mummery L.J. noted a limitation in that summary proceedings may not always be suitable for the determination of disputes of fact. That observation was also made by Laffoy J. in Banfi Limited v. Moran & Ors.

24 The power to determine questions of title seems to me to include the power to determine the question of whether the legal title has transferred, or if appropriate, where the beneficial interest lies.

The agreements to sell

25 I turn first to deal with the agreements to sell the shares and the extent to which it can be said that the agreements did not have the effect for which the applicants contend, and that the shares have not been transferred.

26 Three agreements were made, on 2nd September, 2011, and two made on 22nd November, 2011, by which the applicants agreed to sell their shareholding in the Company to E-Code. Whether these agreements, and the events that happened consequent upon the making of the agreements, amount to an agreement to transfer shares which remains executory and whether it had the effect that the shareholding was transferred as a matter of law is the first question to be determined.

27 By agreement made in writing on 2nd September, 2011, between E-Code of the one part and Fergal Bradley of the other part, there was recited an agreement on the part of E-Code to purchase from Mr. Bradley all of his shares in the Company as set out in the Schedule. Agreements in identical form were made in writing on 22nd November, 2011, between E-Code of the one part and Fidelma...