Sports Direct International Plc v Sandra Minor and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 14 November 2014
• Neutral Citation: [2014] IEHC 546
• Court: High Court
• Date: 14 November 2014

[2014] IEHC 546

THE HIGH COURT

[No. 6559 P./2014]

Sports Direct International PLC v Minor & Ors

COMMERCIAL

BETWEEN

SPORTS DIRECT INTERNATIONAL PLC

PLAINTIFF

AND

SANDRA MINOR, JOHN O'NEILL, MARK HEATON, HUGH HEATON AND WARRNAMBOOL

DEFENDANTS

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 101

COMPETITION ACT 2002 S4

CAMPUS OIL LTD & ORS v MIN FOR INDUSTRY & ORS (NO 2) 1983 IR 88 1984 ILRM 45

METRO INTERNATIONAL SA & ORS v INDEPENDENT NEWS & MEDIA PLC 2006 1 ILRM 414 2005/38/7859 2005 IEHC 309

B & S LTD v IRISH AUTO TRADER LTD 1995 2 IR 142 1995 2 ILRM 152 1995/1/201

TELENOR INVEST AS v IIU NOMINEES LTD & ESAT TELECOM HOLDINGS LTD UNREP O'SULLIVAN 20.7.1999 1999/23/7666

ANCORDE LTD & BARRY HARTE v HORGAN & ORS UNREP LAFFOY 6.6.2013 2013/3/670 2013 IEHC 265

O'NEILL v PHILLIPS 1999 1 WLR 1092 1999 2 AER 961 1999 BCC 600 1999 2 BCLC 1 1999 96 23 LSG 33 1999 149 NLJ 805

ALLIED IRISH BANK PLC & ORS v DIAMOND & ORS 2012 3 IR 548 2011/3/547 2011 IEHC 505

DUBLIN PORT & DOCKS BOARD v BRITTANIA DREDGING CO LTD 1968 IR 136

IRISH SHELL LTD v JH MCLOUGHLIN (BALBRIGGAN) LTD UNREP CLARKE 4.8.2005 2005/31/6546 2005 IEHC 304

AVOCA CAPITAL HOLDINGS, IN RE UNREP 29.7.2005 2005/3/482 2005 IEHC 302

DOWLING & ORS v COOK & ORS UNREP SUPREME 16.5.2013 2013/14/4005 2013 IESC 25

COMPANIES ACT 1963 S205

Company Law – Commercial Lease – Breach of Agreement –Shareholder agreement – Injunction –Damages – Balance of Convenience – Adequate Remedies – Lease agreement

The facts of this case involved an agreement made between the involved parties concerning a proposal that the company, Sports Direct, enter into a lease in respect of a property. The facts entail an alleged breach of agreement between the plaintiff and defendants that the plaintiff insisted bound the shareholders of the Company. The plaintiff sought injunctive relief stopping the defendants proceeding with procuring the lease without the proper consent, as detailed in a previous agreement. Ultimately it appeared that the defendants” intended proceeding with the proposed lease. The issue came before Costello J. in the High Court

The plaintiff sought a commitment that the defendants would not proceed to procure that the Company would acquire the property without the prior consent in writing of shareholders. The plaintiff said that the parties were required to comply with the provisions of clause 9 of the 2002 Agreement. The defendants argued that the Shareholders Agreement did not apply and that the 2002 Agreement did not apply and argued that there were good business reasons for entering into the proposed lease. Costello J considered whether damages were an adequate remedy for either the plaintiff or defendant and decided that in the circumstance they were not. Costello J stated that damages would not be an adequate remedy for the plaintiff in the event that at the trial of the action an injunction were refused and the plaintiff ultimately succeeded at trial. Furthermore Costello J analyzed the balanced of convenience between to the two parties and the conduct of each party in the circumstances surrounding the lease agreement and shareholder consensus agreement. Costello J was of the opinion that at the very least the defendants conduct justifies this court in concluding that the balance of convenience lies in rejecting the defendants” argument and therefore in accepting the plaintiff”s case. Accordingly Costello J decided to grant the injunction to the plaintiff.

1 1. The plaintiff and the first to the fourth named defendants are shareholders in the fifth named company Warrnambool ("the Company"). The plaintiff alleges that the first to fourth named defendants are in breach of certain provisions set out in an agreement dated the 3 ^rd December, 2002, ("the 2002 Agreement"), which the plaintiff says binds the shareholders in the Company. The plaintiff seeks orders to compel compliance with the 2002 Agreement in the following terms:-

2 2 "1. An interlocutory injunction restraining the defendants or any of them from procuring the fifth named defendant ("the Company") to enter into a Lease in respect of a property at Unit 5A, Distribution Centre, Co. Antrim without the prior consent in writing of the Plaintiff pending the trial of this action.

2 2. Further and if necessary, an Order restraining the defendants and/or each of them from breaching the provisions of Clause 9 of the Agreement dated the 3 ^rd December 2002 pending the trial of this action."

Background

2 2. The predecessor to the Company was a limited liability company called Heatons Limited. By a Share Subscription and Shareholders Agreement dated the 15 ^th December, 1995, ("the Shareholders Agreement") between Hubert Ormsby Heaton, John O'Neill, Sean Flanagan, Mark Heaton, Hugh Heaton, Irene Heaton and Heatons Limited the parties thereto entered into an agreement for the purposes of regulating the subscription of shares in Heatons Limited and the future conduct of the business of Heatons Limited and of regulating the business between the shareholders in Heatons Limited. Mr. O'Neill, Mr. Flanagan and Mr. Mark Heaton were therein described as the "Subscribers" and they acquired certain shares in Heatons Limited. By clause 10.1 of the Shareholders Agreement it was provided that:-

"Subject to the provisions of this Agreement, the Business of the Company shall be managed and controlled by the Board who shall have full management authority and who may exercise all the powers of the Company as are not by the Companies Acts 1963 to 1990 or by the Articles of Association required to be exercised by the Company in general meetings."

3 3. Clause 11 specified restricted transactions as follows:-

2 2 "11.1 For as long as Mr. Heaton personally holds shares in the Company, the Shareholders shall procure that the Company shall not, and the Company shall not, without the prior written consent of Shareholders holding 60% of the Shares in the Company" of any of 20 different matters therein set out.

4 4. In May 2002, Mr. Mike Ashley agreed to purchase Mr. Sean Flanagan's shares in Heatons Limited. At the same time that Mike Ashley entered into the agreement to purchase Mr. Flanagan's shares, an agreement dated the 10 ^th May, 2002, was entered into between John O'Neill, Mark Heaton and Mike Ashley. I set this agreement out in full:

"THIS AGREEMENT dated the 10 ^th day of May 2002 BETWEEN JOHN O'NEILL (hereinafter called "JON") of the First Part MARK HEA TON (hereinafter called "MH") of the Second Part and MIKE ASHLEY (hereinafter called "MA") of the Third Part."

WHEREAS:-

1 1. By virtue of the Shareholders Agreement dated the 15 ^th day of December, 1995 between Hubert Ormshy Heaton of the First Part John O'Neill, Sean Flanagan and Mark Heaton of the Second Part, Hugh Heaton and Irene Heaton of the Third Part and Heatons Limited of the Fourth Part John O 'Neill, Mark Heaton and Sean Flanagan (therein defined as the "Subscribers") applied for and were allotted 26,694 shares in the Company for a consideration of IR£390,000.

2 2. Subsequent to the execution of the hereinbefore Shareholders Agreement the Subscribers agreed that any Shareholders resolution, motion or proposal in relation to the business of the Company would be voted on by each shareholder using all of their shares as a single block, either in favour of or against the resolution, motion or proposal in accordance with the wishes of the majority of the subscribers.

3 3. MA has now agreed to purchase Mr. Flanagan's shares and in this regard agrees to adhere to and operate the Agreement which hereinbefore operated between the Subscribers."

5 5. The agreement was signed by Mark Heaton, John O'Neill and Mike Ashley respectively. This agreement was referred to by the parties as "the Voting Pact Agreement".

The 2002 Agreement

6 6. It was against this background that the Agreement, the subject of this application, was entered into on the 3 ^rd December, 2002, between John O'Neill, Mark Heaton, Hugh Heaton and Hubert Ormsby Heaton, Mike Ashley, Heatons Limited and Sports Soccer Limited. The 2002 Agreement provided, inter alia, that Mike Ashley was to acquire a further 30% of the issued share capital in Heatons Limited, various covenants as more particularly specified below were entered into by the parties to the 2002 Agreement and Sports Soccer Limited entered into an exclusive supplier agreement with Heatons Limited in relation to various sporting goods.

7 7. Clause of 6 of the 2002 Agreement provided:-

"Each of the parties to the Agreement herein hereby covenant with the other that it shall take all necessary actions so as to procure (insofar as it lies within its power or procurement, individually or collectively with the others) full compliance with each of the matters set out in the succeeding paragraphs of this agreement. Each of the parties hereby further covenants in like manner with the other that it shall not act or continue to act in any way which would or might be in breach of this agreement."

8 8. By clause 10 of the 2002 Agreement, Mike Ashley also agreed notwithstanding para.11(v) of the Shareholders Agreement that he would vote and take all necessary steps to ensure that a minimum of 30% of the profits are distributed each year by way of dividends. By virtue of that clause all of the parties to the 2002 Agreement also confirmed adherence to the Shareholders Agreement.

9 9. The crucial clause for the purposes of this application is clause 9. I set it out in full:

"The Shareholders of the Company, including the Purchaser, [Mike Ashley] shall procure and that the Company shall not, and the Company shall not, without the prior written consent of Shareholders holding 60% in respect of Paragraphs (a), (b) and (c) hereof, and 75%o in respect of...