Sheehan v Flynn

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Twomey
• Judgment Date: 13 April 2018
• Neutral Citation: [2018] IEHC 188
• Docket Number: [2014 No. 10816 P]
• Date: 13 April 2018

[2018] IEHC 188

THE HIGH COURT

COMMERCIAL

Twomey J.

[2014 No. 10816 P]

BETWEEN:

JOSEPH SHEEHAN

PLAINTIFF

-AND-

JOHN FLYNN, BENRAY LIMITED, BRECCIA, IRISH AGRICULTURAL DEVELOPMENT COMPANY, BLACKROCK HOSPITAL LIMITED, GEORGE DUFFY, ROSALEEN DUFFY, TULLYCORBETT LIMITED

DEFENDANTS

Practice & Procedure – Unitary hearing – O. 63A, r. 5 of the Rules of the Superior Courts – Modular trial – Special or unusual circumstances – Public interest.

Facts: The third defendant sought an order pursuant to o. 63A, r. 5 of the Rules of the Superior Courts to direct that the remaining issues in the proceedings be heard by way of a modular trial. The third defendant submitted that he had an ownership interest in the company and a modular trial would be the most cost-efficient manner to run the trial. The plaintiff contended that he wanted to put off the hearing of the change of control claim to the end of the proceedings because it would harm the repayment claim of the plaintiff.

Mr. Justice Twomey granted an order that the remainder of the hearing should be dealt with in specific modules. The Court divided the present hearing into three modules. The Court held that by adopting the module form of hearing, there would be cost savings as well as resource savings and it would also be easier for a different judge to hear the subsequent parts of the dispute. The Court observed that there were two special circumstances in the case, the first was that there had been an extensive use of scarce court resources by the parties in the litigation of their dispute, which was an issue of public interest, and the second was that there was a successful request for the recusal of the judge previously hearing the dispute. The Court also suggested the parties to try to resolve the litigation between them by way of mediation.

JUDGMENT of Mr. Justice Twomey delivered on the 13th April, 2018

Summary – a modular or unitary hearing?

1 This judgment relates to whether the remaining issues in a very long running dispute between the parties in this case should be heard in modules or in a unitary hearing. It is before this Court by way of motion by the third named defendant, Breccia, pursuant to Order 63A, rule 5 of the Rules of the Superior Courts seeking an order from this Court to direct that the remaining issues in the proceedings be heard by way of modular trial. Order 63A, rule 5 entitles the Court to give such directions regarding the conduct of the proceedings as appears convenient for the determination of the proceedings in a manner which is " just, expeditious and likely to minimise the costs of those proceedings". The plaintiff resists Breccia's application as he wishes to have a unitary trial, while the other defendants support Breccia's application.

2 In reaching its decision on whether to have a modular or a unitary trial, this Court relies on the " special or unusual circumstances" of this case and in particular the fact that this long running and bitter private dispute has already expended a considerable amount of scarce court resources and is likely to have used up a full half year of court time by the time it is finished. The dispute has resulted in seven judgments of the High Court and the Court of Appeal with two further judgments of the Court of Appeal awaited and one hearing pending in the Court of Appeal, as well as the application by one of the parties for the recusal of one High Court judge.

3 This Court concludes that, inter alia, in light of the amount of resources (of this Court and the Court of Appeal) which have been expended to date by these parties, the public interest in seeking to use scarce court resources as efficiently as possible supports the finding that the remainder of this dispute should be dealt with in the specific modules and in the manner set out in this judgment.

The dispute in very general terms

4 The dispute between the parties concerns a shareholding in a company, Blackrock Hospital Limited ('BHL'), which owns Blackrock Hospital in Dublin. In very broad terms the main dispute appears to be between the plaintiff, Dr. Joseph Sheehan ('Dr. Sheehan'), who is a consultant surgeon who resides in America and who owns 28% of the shares and Breccia (which is controlled by a trust established by the family of Mr. Laurence Goodman, the 'Goodman Family Trust') which also own 28% of the shares in BHL. However, in or around December 2014, Breccia acquired the loan from Anglo Irish Bank which had been taken out by Dr. Sheehan to acquire his 28% of the shares as well the related charge over those shares. In addition, Breccia acquired the loan and a charge over the shares taken out by another shareholder (Mr. John Flynn/Benray Limited) to acquire his/its 9% shareholding in BHL. In essence therefore Breccia claims to have an ownership interest in 2/3 of the shares in the hospital. The fourth, fifth and sixth named defendants are Dr. Duffy, his wife Mrs. Rosaleen Duffy and Tullycorbett Limited, which is controlled by Dr. Duffy. These three defendants will be referred to collectively as "the Duffys". The Duffys own some 20% of the shares in BHL. There is a shareholders' agreement dated 28th March, 2006, governing the shareholding in BHL (the 'Shareholders' Agreement') to which, inter alia, Dr. Sheehan and Breccia are parties and this is the backdrop to a dispute which has four aspects.

The four aspects of the dispute to be heard

5 The remaining issues between the parties can be divided up into the following four discrete areas:

(i) Conspiracy claim

6 The first aspect of the dispute to be heard, whether in a modular or unitary trial, concerns the fact that Dr. Sheehan alleges a conspiracy on the part of all the defendants to damage his economic interests (the 'Conspiracy Claim'). All parties are likely to be involved in this aspect of the case, although as noted below, BHL does not believe it is implicated in this aspect of the case. BHL has described this part of the proceedings as an " amorphous" claim. BHL also submitted that an " allegation of conspiracy is as tall as it gets" and that it is a very unusual tort and that there are considerable difficulties in proving a conspiracy. For this reason, BHL believes that this aspect of the trial could take several weeks to hear.

(ii) Repayment claim

7 Breccia is counterclaiming from Dr. Sheehan for some €22 million it alleges it is owed under the loan agreements and related guarantee which it acquired in or around December 2014 (the 'Repayment Claim'). It seems that Dr. Sheehan and Breccia are the only parties implicated in this aspect of the case. It appears to be common case amongst Dr. Sheehan and Breccia that the question of whether Breccia is owed money will depend on the success of the Conspiracy Claim and so the Repayment Claim and the Conspiracy Claim should be heard together. While not making a definitive judgment on the point, it seems that there would be no reason for the Duffys or BHL to attend this part of the case.

(iii) Change of control claim

8 The third aspect to the dispute is that Dr. Sheehan is claiming that there was a change in control in the ownership in Breccia in 2009 and under the terms of the Shareholders' Agreement governing the ownership of the hospital, any such change of control triggered an obligation upon Breccia to offer its shares around to all the shareholders, which it failed to do. If this claim is correct, Dr. Sheehan submits that it would mean that this Court would be concerned not only with the claim that Breccia is entitled to recover payment from Dr. Sheehan on his loan – the Repayment Claim - and possibly that Breccia is entitled to a transfer from Dr. Sheehan of his shares (if Dr. Sheehan failed to repay his loan), but also that this Court would be concerned with a claim that Dr. Sheehan was entitled to a transfer from Breccia of its shares, and further that this would mean that Breccia was not entitled to acquire Dr. Sheehan's shares in the first place (the 'Change of Control Claim'). It seems that Dr. Sheehan and Breccia are the only parties implicated in this aspect of the case and again, while not making a definitive judgment on the point, it seems that there would be no reason for the Duffys or BHL to attend this part of the case.

(iv) Dividend claim

9 The fourth aspect of the dispute is the claim by Dr. Sheehan that BHL was not entitled, as a matter of law, to refuse to pay Dr. Sheehan a dividend of some €4.1 million in respect of his shares in BHL (the 'Dividend Claim'). This aspect of the dispute involves Breccia, Dr. Sheehan and BHL and it seems clear that there would be no reason for the Duffys to attend this part of the case. However, in addition to this net legal issue, it is alleged by Dr. Sheehan that the refusal to pay the dividend was part of the overall conspiracy between the defendants to harm Dr. Sheehan's economic interests and, as previously noted, the allegation of conspiracy is made against all the defendants and thus concerns all of them.

The parties' stated wishes regarding the format of the trial

10 Breccia wishes to have the trial dealt with in two modules. In the first module it wants the Conspiracy Claim and the Dividend Claim dealt with together. Then it wants the second module to deal with the Change of Control Claim and the Repayment Claim. Breccia submits that as it has an ownership interest in 2/3 of BHL, it has an interest in the matter not being dealt with as an unitary trial, since it claims that BHL (in which it has an economic interest as a 2/3 "shareholder") would incur more costs in a unitary trial than if it was dealt with in modules, since BHL would be required to attend the whole trial if it was a unitary trial. In essence therefore, if one was to notionally pierce the corporate veil of BHL in the manner of Breccia's submission, but if one took it a step further and looked not just behind BHL but also behind Breccia, the...