Re Greenore Trading Company Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Keane
• Judgment Date: 28 March 1980
• Neutral Citation: 1980 WJSC-HC 2367
• Court: High Court
• Date: 28 March 1980

In Re GREENORE TRADING CO.

IN THE MATTER OP GREENORE TRADING COMPANY LIMITED AND IN THB MATTER OF THE COMPANIES ACT 1963

1980 WJSC-HC 2367

No. 3724 P/1979

THE HIGH COURT

1 Judgment of Mr. Justice Keane delivered the 28th day of March, 1980.

2 These proceedings were commenced on the 15th June, 1979, by a petition presented on behalf of Adolph Parge, a shareholder in the company. The petition claimed inter alia:

3 (a) declarations that certain transactions relating to the issue and transfer of shares in the company to Omer Vanlandeghem were invalid;

4 (b) an order requiring Omer Vanlandeghem to purchase the shares of the Petitioner in the company;

5 (c) in the alternative to (b), an order for the winding-up of the Company under the Companies Act, 1963.

6 On the 23rd July, 1979, on a motion for directions, it was ordered that a number of issues be set down for plenary hearing with the Petitioner as the plaintiff and the company and Omer Vanlandeghem as the defendants. The trial of the issues took place before me last term when oral evidence was adduced by both sides.

7 The order of 23rd July, 1979, directs the trial of eighteen issues, but the principal matters in controversy between the parties can be reduced to three, viz:-

8 (1) whether an issue of 10,000 ordinary shares of £1 each at par to Mr Vanlandeghem on the 5th February, 1975, was invalid,

9 (2) whether the transfer of 8,000 ordinary shares of £1 each in the company held by Sean Boyle to Mr Vanlandeghem in March, 1978, was invalid,

10 (3) whether the affairs of the company were conducted or the directors" powers exercised in a manner which was oppressive to the Petitioner or in disregard of his interests as a member.

11 The facts of the case, so far as they are not in controversy, are as follows. The company was incorporated on the 5th May, 1963, under the name of International Estate Agents Limited. The name of the company was changed to Greenore Trading Company Limited on the 3rd August, 1965. The first shareholders and directors of the company were the Petitioner, who resided in Germany, and Mr Sean Boyle, who is an auctioneer. The capital of the company was originally £10,000 divided into 10,000 ordinary shares of £1 each. It was subsequently increased to £20,000 and then to £24,000. The company appears to have commenced life as essentially a property development enterprise, but in 1965 it embarked on what was to prove its main business, namely, the provision of a service at the port of Greenore for exporters of cattle through that port. With this object in view, the company took a lease from the owners of the port, Greenore Ferry Services Limited of a site in the port area on which there were already cattle pens and on which they proposed to erect further cattle pens.

12 In August, 1965, i.e. very shortly after the company had commenced its new business, Mr. Vanlandeghem became a customer of the company. He is a substantial livestock exporter and farmer and his becoming a customer of the company was and is acknowledged by all concerned to have been a significant asset to the company. Shortly after he became a customer, the suggestion was broached that he might acquire a financial interest in the business itself and, as a result, in January 1966 he became a director and shareholder. At that stage the capital of the company was increased to £24,000 consisting of 24,000 ordinary shares of £1 each, which were owned equally by the Petitioner, Mr Boyle, and Mr Vanlandeghem. The Petitioner was the chairman of the company and both Mr Boyle and Mr Vanlandeghem were directors. Mr Boyle was the manager of the company and responsible for its day to day operations. On the 14th January, 1966, a resolution was passed at an extraordinary general meeting of the company which precluded any one shareholder from holding more than 8,000 ordinary shares in his name or in the name of his nominee. This resolution is important in the light of later events.

13 The company's operations proved relatively successful, at least until the year 1973. Mr Vanlandeghem took the view that, as the company's major customer, he should be given preferential treatment so far as rates for the shipment of his cattle were concerned. At a meeting of the directors on the 1st December, 1966, it was resolved that he should be given such preferential treatment for a specifed time; and a further resolution to the same effect was passed on the 28th May, 1972, but subsequently rescinded on the 21st September, 1972.

14 While the Petitioner visited Ireland at fairly regular intervals, he was obviously not as actively involved in the company as time went by as Mr Boyle and Mr Vanlandeghem. Differences between the two latter gentlemen began to occur with growing frequency and ultimately in the years 1975 and 1974 Mr Vanlandeghem withrew his custom from the port entirely, although he remained, of course, a shareholder and director of the company. The company's fortunes had already begun to decline due to the fact that they were not in a position to comply with the regulations which became effective so far as the export of cattle were concerned upon Ireland's accession to the European Economic Community. Mr Vanlandeghem's withdrawal of his custom was a major additional blow and by the year 1975 the company was in serious financial difficulties. An extraordinary general meeting was held on the 20th January, 1975, at which the Petitioner, Mr Boyle and Mr Vanlandeghem were all present. At that meeting the Petitioner and Mr Boyle both made it clear that they were unable to come to the rescue of the company financially. Mr Vanlandeghem enquired whether his co- directors would be willing to transfer their shares to him. The Petitioner said that he could not do so, since his shares were pledged to a bank in Germany. Mr. Boyle said that he was unwilling to transfer his shares to Mr. Vanlandeghem. Mr. Vanlandeghem said that he was prepared to come to the assistance of the company, but on condition that he became a holder of the majority of the ordinary shares. As this was not possible, the suggestion was then made that Mr. Vanlandeghem might take a debenture to secure the sum of £60,000 and undertake to discharge the present liabilities of the company. (The liabilities at that date were estimated to amount to £10,000 but it was anticipated that further monies might be required from time to time to keep the company in business). This appeared to be acceptable to all concerned. At this meeting the Petitioner resigned as a director and Mr. Vanlandeghem was appointed managing director. The meeting was then adjourned in order to enable the debenture to be prepared and executed. The meeting was resumed on the 5th February, 1975, but on this occasion the Petitioner was not present, Mr. John Kieran, solicitor, attending the meeting on his behalf under a power of attorney which had been executed by the Petitioner in 1970. The company having been advised that their interests would be better protected if Mr Vanlandeghem's advance was secured by an allocation of shares to him rather than by the execution of a debenture, 10,000 ordinary shares of £1 each were purportedly allotted to him at the adjourned meeting, and Mr. Vanlandeghem paid a cheque for £10,000 to the company.

15 In the years which followed, the company's trading position improved until the year 1978. In that year its fortunes went into decline again and it ceased trading entirely in August, 1978. A major factor which contributed to this decline in the company's fortunes was the existence of disagreements between the company and its lessors which, at one stage, led to litigation.

16 In 1978, Mr Boyle indicated to Mr Vanlandeghem that he would be willing to leave the company and sell his shares to Mr Vanlandeghem provided he got an acceptable sum. An agreement was reached under which Mr Boyle transferred his shares to Mr. Vanlandeghem and was paid a total sum of £22,500. This was paid by two cheques, one for £8,000 drawn on Mr Vanlandeghem's account and one for £14,500 drawn on the company's account. The explanation given for payment being made in this fashion was that the £14,500 did not form any part of the consideration for the shares, but was in the nature of a severance payment to Mr Boyle on his leaving the company. The Petitioner was not notified of this latter transaction and on learning of it instructed solicitors to protest to the company and Mr Vanlandeghem. Solicitors on his behalf wrote to the company and Mr Vanlandeghem complaining both about this transaction and the manner in which it was alleged the affairs of the company had been conducted by Mr Vanlandeghem in a manner oppressive to the petitioner for a number of years. No reply having been received to these complaints, the present proceedings were then instituted. As I have already noted, the Company ceased trading in August, 1978, and Mr Vanlandeghem wished to use his shareholding in the company for the purpose of putting it into voluntary liquidation. Following an application to the Court, however, Mr Vanlandeghem gave an undertaking that no step would be taken or resolution passed to put the company into liquidation pending the determination by the Court of these proceedings.

17 I shall consider first the general complaint that the affairs of the Company have been conducted and his powers as a director exercised by Mr Vanlandeghem in a manner which is oppressive to the Petitioner and in disregard of his interests as a member of the company. (It was further submitted that the transaction involving the purchase of Mr Boyle's shares also constituted such conduct.) The general complaint is essentially based on two allegations: first, that Mr Vanlandeghem abused his position as a director and shareholder to obtain preferential treatment for himself as a customer of the company and, secondly, that he...