Sheehan v Breccia

• Jurisdiction: Ireland
• Judge: MR. JUSTICE MICHAEL PEART
• Judgment Date: 31 July 2019
• Neutral Citation: [2019] IECA 234
• Court: Court of Appeal (Ireland)
• Docket Number: Record Number: 2017 No. 579
• Date: 31 July 2019

[2019] IECA 234

THE COURT OF APPEAL

Peart J.

Peart J.

Whelan J.

McCarthy J.

Record Number: 2017 No. 579

BETWEEN:

JOSEPH SHEEHAN

PLAINTIFF/RESPONDENT

- AND -

BRECCIA

FIRST DEFENDANT/APPELLANT

- AND -

IRISH AGRICULTURAL DEVELOPMENT COMPANY, BLACKROCK HOSPITAL LIMIITED, GEORGE DUFFY, ROSALEEN DUFFY

AND

TULLYCORBETT LIMITED

SECOND, THIRD, FOURTH, FIFTH AND SIXTH DEFENDANTS

Practice & procedure – Interlocutory injunction – Application to discharge order granted by High Court – Whether grounds for injunction removed by Court of Appeal judgment

Facts: The parties were involved in earlier litigation regarding a shareholder’s agreement. The Court of Appeal in [2017] IECA 74 had ruled that there was no implied term in that agreement that the parties owed each other duties of good faith and fair dealing. The High Court had refused to discharge an interlocutory agreement, and the appellant now sought to challenge that refusal.

Held by Peart J, that the appeal would be allowed. The Court was not satisfied that the property right in the shares in dispute was sufficient override the guiding principles relating to the grant and maintenance of interlocutory injunctions. As the Court of Appeal had earlier resolved the main issue justifying the injunction, the injunction would therefore be discharged.

JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 31ST DAY OF JULY, 2019

1 This is Breccia's appeal against the order of the High Court (Haughton J.) dated 30th November 2017 refusing its application for an order discharging an interlocutory injunction granted previously by the High Court (Noonan J.) on the 22nd December 2014.

2 For that injunction to have been granted the High Court must have been satisfied that a fair issue(s) had been raised by the respondent. The application to set aside the injunction was premised on Breccia's belief that the only plank upon which the injunction application depended for the conclusion that a fair issue was raised (namely that there is a term to be implied in a Shareholders” Agreement entered into by the parties that they owed each other mutual duties of good faith and fair dealing) has been subsequently removed by the judgment of this Court in other proceedings, namely Flynn & Benray Limited v. Breccia [2017] IECA 74, which I will refer to as ‘ Flynn’.

3 In Flynn, this Court decided, inter alia, that ‘the Shareholders” Agreement does not include an implied term that the parties owe each other mutual general duties of good faith and fair dealing’.

4 It was submitted to the High Court that in the light of this finding, there was no longer a basis for maintaining the interlocutory injunction, and that the Court enjoyed a jurisdiction to discharge the injunction in such circumstances, and should exercise it.

5 The respondent on the other hand contends that although the judgment in Flynn has disposed of the good faith and fair dealing issue, this was not the only basis on which the High Court had determined that a fair issue was raised for the purpose of the interlocutory injunction application, and that the trial judge was correct to so find. In that regard the trial judge stated at para. 52 of his judgment:

‘52. It is the position of the applicant that there is no longer a legal basis upon which the respondent is entitled to continue his injunction. There are various grounds advanced by the applicant as to why this is the case. First, it is contended by the applicant that the Flynn proceedings have effectively dealt with all matters raised by the respondent. Although the arguments in relation to the implied term of good faith and fair dealing have effectively fallen away following the Court of Appeal decision in Flynn, it cannot be said that there is no longer any fair issue to be tried in the present proceedings. After careful examination of the statement of claim, it is clear to the Court, that a number of pleaded claims survive. Most notably, the conspiracy issue remains to be determined, as well as claims of misuse of confidential information. The claims for inducement of breach of contract and intentional interference with economic interests are also still alive. It is not appropriate for the court on this application to assess the evidence that might support these claims, or the weight that might be attached to that evidence, or to express any view as to the prospects of success. It is sufficient for the court to conclude on the pleadings and affidavit evidence, as I do, that these claims are not bound to fail.’ [emphasis provided]

6 The trial judge went on at paras. 53-54 to give other reasons for his conclusion that the interlocutory injunction ought not to be lifted. He stated:

‘53. Furthermore, although the conspiracy issue was unsuccessful in the Flynn proceedings, this court gave a clear indication that a prima facie case was not made out primarily because Mr George Duffy was not a party to those proceedings and he was not called to give evidence. At paragraph 385 of that decision, after considering the judgment of Gilligan J. in McCann & Dillon v. Hade [2013] IEHC 652, I stated: ‘In this instance what was in the mind of Dr. Duffy as of 4th April, 2014 is critical to these issues’. By contrast, in these proceedings, Mr Duffy is a defendant to the action and the applicants would be in a position to cross-examine him should he choose to give evidence, or ask the court to draw inferences or give added weight to other evidence if he did not give evidence. The court is not forming any views as to whether a prima facie case of conspiracy is made out, however, it is clear that as Mr Duffy is a defendant in the present case, there is a possibility that the applicant can make out a case of conspiracy at the substantive hearing. [Emphasis provided]

54. Furthermore, the Court cannot agree, potentially at least, that a finding of conspiracy in relation to the Duffy transaction does not in any way taint the transaction the subject of the within proceedings. It is arguable that if the applicant had not, as is alleged, unlawfully frustrated the respondent's attempt to acquire Duffy's loans alongside his own (both being required in order to obtain finance from Talos Capital), the applicant would not have been in a position to purchase the respondent's loans and would not currently find themselves in a situation where his shares are under threat.’

7 Some background needs to be provided in order to put all this into proper context.

8 The injunction which Breccia sought to have discharged was one whereby Breccia was restrained (i) from carrying out any acts for the purpose of making any demand or acting on any demand as threatened in the Letter of Demand dated 18th December 2014; and (ii) from seeking to enforce any security attaching to the respondent's loan facilities and/or purported guarantee or exercising any remedy and, in particular: (a) selling, transferring and/or encumbering the respondent's shareholding in Blackrock Hospital Limited and/or Blackrock Clinic Limited; and (b) appointing a receiver, including a receiver over the shares of the respondent in Blackrock Hospital Limited and/or Blackrock Clinic Limited.

9 To put that injunction into context, it is convenient to set out the general background by reference to the very concise yet perfectly adequate summary contained in the judgment of the trial judge at paras. 2-7 thereof as follows:

‘2. Blackrock Hospital Ltd (‘BHL’) was incorporated in 1982 with BUPA Investments Limited (‘BUPA’), the plaintiff James Sheehan, George Duffy and Maurice Neligan as shareholders. BHL owns the share capital of the Blackrock Clinic Limited (‘BCL’) which was founded in 1986 by the plaintiff, James Sheehan, George Duffy and Maurice Neligan. In 2006, BUPA decided to sell its 56% shareholding to the plaintiff, the first named defendant, Benray (a company owned by John Flynn) and George Duffy. The purchase of these shares was funded by Anglo Irish Bank plc (‘Anglo’) and the loans of the shareholders were cross-guaranteed. The plaintiff, James and Rosemary Sheehan, George Duffy, Breccia and Benray Limited then entered into a Shareholders Agreement dated 28 March, 2006.

3. The plaintiff entered into two facilities with Anglo; one on the 28 March, 2006 in the amount of €11,188,256 and one on 12 November, 2008 and the amount of €6,342,000. These facilities fell due for repayment in December 2010 but payment was not demanded at that time.

4. By special resolution dated 3 October, 2011, Anglo became Irish Bank Resolution Corporation Limited (‘IBRC’). Kieran Wallace and Eamonn Richardson were appointed as Special Liquidators to implement the winding up of IBRC. On 29 May, 2013, IBRC wrote to the plaintiff notifying him that the loan facilities were in default and that IBRC when reserving their rights. On 31 October, 2013, the plaintiff was notified that both the facilities of the plaintive end of the fourth named defendant were to be sold. On 8 November 2013 the plaintiff wrote to IBRC informing them that he wished to redeem his loans.

5. The plaintiff then began a process to buy his loans. He entered into negotiations with Talos Capital Limited (‘Talos’) for the purpose of financing the purchase, he also established two special purpose vehicles, Medfund Limited and JCS Investments Holdings XIV Limited, which were to be used to acquire the loans. Talos offered to finance the acquisition which offer was contingent on Talos acquiring both the plaintiff's loans and security, and the loans and security of the fourth named defendant. It is the plaintiff's case that he then entered into negotiations with the fourth named defendant in relation to the offer from Talos and that on the 3 April, 2014 he met with the fourth named defendant, who had supplied a consent to sale, to confirm the agreement.

6. The plaintiff also claims that during the course of these agreements, the fourth...