Pasrm Ltd v Companies Acts

• Jurisdiction: Ireland
• Judge: Mr Justice Mark Sanfey
• Judgment Date: 22 March 2023
• Neutral Citation: [2023] IEHC 149
• Court: High Court
• Docket Number: [Record No. 2020/341COS]

In the Matter of Pasrm Limited

and

In the Matter of Section 212 of the Companies Acts, 2014

and

In the Matter of the Companies Acts, 1963–2014

Between

Neal Cyr

Applicant

and

Planitas Airline Systems Limited, Luke Mooney, Philip Connell, Brendan Delaney and Pasrm Limited

Respondents

[2023] IEHC 149

[Record No. 2020/341COS]

THE HIGH COURT

Security for costs – Shareholding – Purchase – Respondents seeking an order directing the applicant to provide security for the respondents’ costs of the proceedings – Whether the respondents were entirely without hope of recovering at least part of any costs which may be ordered in their favour

Facts: The applicant, Mr Cyr, in the substantive proceedings, sought numerous orders pursuant to s. 212 of the Companies Act 2014. The primary relief sought by him was, in effect, for an order requiring the respondents, Planitas Airline Systems Ltd, Mr Mooney, Mr Connell, Mr Delaney and PASRM Ltd (the company), to purchase his shareholding in the company at a price to be fixed by the High Court. The proceedings were initiated by an originating notice of motion issued on 21 October 2020. The respondents applied to the court for an order pursuant to O. 29, r. 1 of the Rules of the Superior Courts and/or pursuant to the inherent jurisdiction of the court directing the applicant to provide security for the respondents’ costs of the proceedings. The notice of motion issued by the respondents also sought “as necessary, an order fixing the amount of security for costs and stipulating the time within which such security is to be provided by the applicant”. The respondents’ motion for security for costs issued on 21 December 2020.

Held by Sanfey J that the applicant was ordinarily resident outside the jurisdiction, and not in the European Union or a Lugano Convention country. Sanfey J was also satisfied that the respondents had established a prima facie defence. However, Sanfey J held that the jurisdiction under O. 29 applications confers a wide discretion on the court to take into account any special circumstances which affect the justice of the matter. Sanfey J held that it was not likely that the applicant would have the financial resources to satisfy fully or at all any order for costs made against him, unless his fortunes had improved very considerably since February 2021. The court therefore balanced the injustice which would be suffered by the applicant if security were awarded against him with the result that he was unable to proceed with the litigation, and the potential injustice which would be suffered by the respondents in the event that they defend the matter successfully but are unable to recover costs due to the plaintiff’s impecuniosity, or the difficulty generally of executing an award of costs in the United States of America. Sanfey J did not get the sense from the numerous and lengthy affidavits sworn by the applicant that he was the sort of “unscrupulous” applicant to which Clarke J referred in Farrell v Bank of Ireland [2013] 2 ILRM 183. Sanfey J found that a genuine sense of grievance at how he considered he was treated emanated from those affidavits; whether that sense would be held to be justified could only be determined at trial, and it was clear that the respondents would strongly defend the action. However, Sanfey J considered that, in all the circumstances, the greater injustice would be to make an order the effect of which would be to prevent the applicant from proceeding with the matter and to have his grievances determined in a full trial. Sanfey J did not consider that, if successful in the action, the respondents were entirely without hope of recovering at least part of any costs which may be ordered in their favour; it may be that, as the applicant suggested, there was worth in the intellectual property in the PasRM software or the applicant’s shares in the company, and that some order could be made involving those elements in a costs order in favour of the respondents, if such were made.

Sanfey J held that, in all the circumstances, and in the exercise of his discretion, he should not accede to the respondents’ application, which would be dismissed.

Application refused.

JUDGMENT of Mr Justice Mark Sanfey delivered on the 22 ^nd day of March 2023 .

Introduction

1 . This judgment concerns an application by the respondents for an order pursuant to O.29, r.1 of the Rules of the Superior Courts and/or pursuant to the inherent jurisdiction of the court directing the applicant to provide security for the respondents' costs of the proceedings. The notice of motion issued by the respondents also seeks “…as necessary, an order fixing the amount of security for costs and stipulating the time within which such security is to be provided by the applicant…”.

2 . In the substantive proceedings, the applicant seeks numerous orders pursuant to s.212 of the Companies Act 2014. The primary relief sought by him is, in effect, for an order requiring the respondents to purchase his shareholding in PASRM Limited (‘the company’) at a price to be fixed by the court. The proceedings were initiated by an originating notice of motion issued on 21 October 2020. Between then and February 2021, there was a comprehensive exchange of affidavits between the applicant and the respondents, in which the respondents contested the allegations of the applicant fully, and set out their position in detail.

3 . In this regard, the final affidavit sworn on behalf of the respondents by the second named respondent, Mr Luke Mooney, in relation to the substantive matter, was sworn on 21 January 2021, and a reply to this affidavit was sworn by the applicant (‘the applicant’ or ‘Mr Cyr’) on 9 February 2021. The respondents' motion for security for costs issued on 21 December 2020, grounded on Mr Mooney's affidavit of that date.

4 . The application for security for costs was therefore initiated during the initial exchange of affidavits between the parties in the substantive matter. There was no indication to this Court either in submissions or in the papers that an application pursuant to O.75, r.4(1) of the Rules of the Superior Courts has been made to the court for directions as to the substantive proceedings, and in particular as to whether a plenary hearing requires to be directed pursuant to O.75, r.4(3) and, if so, what directions as to pleadings or settling of issues may be necessary. It appears that further developments in the substantive proceedings await the resolution of the present application, particularly as the respondents, if successful, seek a stay on the substantive proceedings until security is furnished.

5 . The security for costs motion itself involved an extensive exchange of affidavits and a two-day hearing, involving oral submissions by senior counsel on both sides, and very comprehensive written submissions.

The substantive proceedings

6 . While the affidavits in the proceedings go into very considerable detail as regards the respective contentions of the parties, I propose to summarise the issues as concisely as possible in as far as they are relevant to the present application.

7 . The plaintiff, in swearing his grounding affidavit of 12 October 2020, describes himself as a “Company Director of 8759 Redwing Avenue, Littleton, Colorado 80126, USA…”. He avers that he is a shareholder and director of the company “…having been one of the original subscribers to the Company's Constitution…”. He avers that the company itself was incorporated in Ireland on 8 September 2017, and has a registered address in Lucan, County Dublin. The company has one hundred fully paid up issued shares, of which twenty-five are registered in the name of Mr Cyr, and seventy-five in the name of the fourth respondent, Brendan Delaney. Mr Cyr avers as to his belief that Mr Delaney holds his shares as nominee or trustee for the first respondent; the second named respondent (‘Mr Mooney’) refers to this issue at paras. 177 to 180 of his replying affidavit on behalf of the respondents of 21 December 2020, and avers that the transfer of the shares to Mr Delaney was done with the applicant's agreement.

8 . The applicant avers that he is one of the three directors of the company, the second and third respondents being the other two directors. Mr Cyr avers that the second and third respondents are each shareholders of the first respondent (‘Planitas’), and that the fourth respondent Mr Delaney, is the Secretary of Planitas. At para. 177 of his replying affidavit, Mr Mooney avers that Mr Delaney “is a reputable professional company secretary of over 40 years experience in Dublin”.

9 . At paras. 12 to 27 of his grounding affidavit, the applicant sets out his account of the “background to the company's formation”. It should be said at the outset that the respondents take serious issue with many aspects of Mr Cyr's perspective as expressed in these paragraphs. However, I propose to summarise the applicant's contentions briefly before addressing the areas of disagreement between the parties.

10 . Mr Cyr avers that he had worked in the aviation industry in the United States for a number of years, and set about designing a software programme with the objective of addressing the issue of collation and processing of data in relation to “revenues and set prices for specific flight routes”. He states that, without forecasts in relation to such matters, “…directors of airline companies may find it difficult to know which routes are profitable and where there is room for improvement”.

11 . He avers that he had devised the technical details of the software by 2016, but did not have the resources to finance its development, and thus required third party funding in order to convert the concept into a saleable product. At this time he came into contact with Mr Mooney, who was a director of Planitas, a company which produced and marketed aviation software....