O'Sullivan v Conroy Gold and Natural Resources Plc, [2017] IEHC 543 (2017)

Docket Number:2017 281 COS
 
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THE HIGH COURT2017 No. 281 COS

BETWEEN

PATRICK O’SULLIVANPLAINTIFF– AND –

CONROY GOLD AND NATURAL RESOURCES PLCDEFENDANT

JUDGMENT of Mr Justice Max Barrett delivered on 26th September, 2017.

TABLE OF CONTENTS(Numbers in square brackets are paragraph numbers)

  1. Background [1]

    (i) The Dispute Arising. [1]

    (ii) Article 85. [2].

    (iii) Legal Standing of Company Articles. [7].

    (iv) Section 144. [13]

    (v) A ‘Trick of the Loop’? [16]

  2. Summary Chronology of Events [20]

  3. The Days Previous to the EGM [61]

  4. The Day of the EGM [63]

  5. The ‘Newstalk’ Interview [65]

  6. Reliefs Now Sought [67]

  7. Some Conclusions [68]

    (i) No giving of notices, nor particulars or information required to be contained in same. [69]

    (ii) E-mails of May, 2017 and meeting of June, 2017 do not satisfy notice requirements. [71]

    (iii) Allenby and IBI. [73]

    (iv) Questionnaires not delivered to Conroy Gold. [74]

    (v) Non-consent to Disclosure. [78]

    (vi) Deficiency in Questionnaires. [80]

  8. Failure to Comply with Article 85/Section 144 [82]

  9. Waiver and Estoppel [87]

    (i) Waiver. [87]

    (ii) Estoppel. [90]

    1. Application of Doran. [90]

    2. Changing One’s Position to One’s Detriment. [94]

  10. Director Duties [95]

    (i) General. [95]

    (ii) A Director Occupies a Fiduciary Position. [96]

    (iii) Section 228 of the Act of 2014. [97]

    (iv) Duty to Ensure Shareholders do what is Contractually Agreed? [100]

    (v) Improper Motive? [102]

    1. The Evidence. [102]

    2. Gwyer and Eclairs. [104]

    (vi) Oppression. [109]

  11. Operation of Conroy Gold [110]

  12. Conclusion [111]

  13. Background

    (i) The Dispute Arising.1. Mr O’Sullivan is a circa. 28 per cent shareholder in Conroy Gold, a public limited company incorporated in Ireland, chaired by Prof. Richard Conroy and quoted on the London Stock Exchange’s AIM market (formerly the Alternative Investment Market) and the Irish Stock Exchange’s Enterprise Securities Market (‘ESM’). On 30th May, 2017, Mr O’Sullivan served notice, pursuant to s.146 of the Companies Act 2014, of his intention to propose nine ordinary resolutions at a general meeting of the company. Those resolutions related to the removal of six serving company directors and the appointment of three company directors, Messrs O’Sullivan, Heddle and Johnson. On 8th June, 2017, Mr O’Sullivan requisitioned the directors, pursuant to s.178 of the Companies Act 2014, to convene an extraordinary general meeting (‘EGM’) of Conroy Gold. That EGM convened at the Davenport Hotel in Dublin on 4th August, 2017. At the EGM, the chairman submitted the resolutions in their entirety to a vote of the assembled company members. The unanimous recommendation of the board of directors of the company was that each of the resolutions should be rejected by the members. After a show of hands, a formal poll was requested. It is now known that all of the resolutions were approved by a majority vote. There is no dispute arising concerning the validity of the six resolutions which effected the despatch of six of the then sitting directors. There is a dispute concerning the validity of the three resolutions whereby Mr O’Sullivan sought to have himself and Messrs Heddle and Johnson appointed to the Board. That dispute centres on Art.85 of the articles of association of Conroy Gold and certain related provision in s.144 of the Act of 2014.

    (ii) Article 85.2. Article 85 sits within a part of the articles of association of Conroy Gold that is entitled “PART XIII – APPOINTMENT, RETIREMENT AND DISQUALIFICATION OF DIRECTORS” and which provides as follows:

    “85. Eligibility for Appointment

    No person other than a Director retiring by rotation or retiring pursuant to Article 82(b) hereof shall be appointed a Director at any general meeting unless [A] he is recommended by the Directors or [B] not less than seven nor more than forty two days before the date appointed for the meeting notice executed by a member qualified to vote at the meeting has been given to the Company of the intention to propose that person for appointment stating the particulars which would, if he were so appointed, be required to be included in the Company’s register of Directors together with a notice executed by that person of his willingness to be appointed.”

    1. Provisions akin to Art.85 are not uncommon in the articles of association of a public company in Ireland. Nowadays, the primary purpose of such an article is to enable a company to comply with the requirements of the Act of 2014 relevant to the appointment of directors, including ss. 144, 149, 151 and 223, and to ensure, for example, that none of the restrictions on who may be appointed a director are breached by would-be directors, e.g., the limitation on the number of directorships permissible under s.142 of the Act of 2014. Notable provisions in this context include:

      (1) s.144(1) which provides that “Any purported appointment of a director without that director’s consent shall be void”;

      (2) s.144(4) which provides, inter alia, as follows:

      “[N]ot less than 3 nor more than 21 days before the day appointed for the meeting there shall have been left at the company’s registered office – (a) notice in writing signed by a member of the company duly qualified to attend and vote at the meeting for which such notice is given, of his or her intention to propose the person concerned for such election; and (b) notice in writing signed by the person concerned of his or her willingness to be so elected”;

      (3) s.149 which requires, at ss.(1), that “A company shall keep a register…of its directors…”, the contents of that register being amplified upon in later subsections;

      (4) s.149(8) which provides, inter alia, as follows

      “The company shall, within the period of 14 days after the date of the happening of–(a) any change among its directors…; or (b) any change in any of the particulars contained in the register, send to the Registrar a notification in the prescribed form of the change and of the date on which it occurred.”

      (Per s.223(3) of the Act of 2014: “The consent in respect of a director to accompany…(b) a statement under section 149(8), shall include a statement by the director (immediately above his or her signature on the consent) in the following terms: ‘I acknowledge that, as a director, I have legal duties and obligations imposed by the Companies Act, other statutes and at common law’”);

      and

      (5) s.151 which prescribes various particulars to be shown on all business letters of a company, including, per s.151(1), “in legible characters in relation to every director of the company the following particulars: (a) his or her present forename, or the initials thereof, and present surname; (b) any former forename and surnames of him or her; and (c) his or her nationality, if not Irish.”

    2. Returning to the text of Art.85, as quoted above, item [A] is not relevant to the within application. Turning to item [B], its requirements are simply stated and clear: if it is proposed to appoint a director who is not recommended by the Board (a ‘Non-Recommended Person’; and each of Messrs O’Sullivan, Heddle and Johnson was a Non-Recommended Person), the following applies:

      (1) notice executed by a member qualified to vote at the relevant general meeting must be given to the company;

      (2) that notice must state the intention to propose the Non-Recommended Person for appointment as director;

      (3) that notice must state the particulars which would, if the Non-Recommended Person were appointed as director, be required to be included in the Company’s register of directors;

      (4) the notice referred to in (1)-(3) must be accompanied by a notice executed by the Non-Recommended Person of his willingness to be appointed.

    3. Although Art.85 can be read as contemplating that a single formal notice would be served, the court is satisfied that more than one formal notice could be served, including a complete and curative notice in the event of a previous notice being realised to have been somehow deficient, provided all is done within the requisite timeframe and with some degree of formality. This assumes some significance in the within case because Mr O’Sullivan points to (1) his s.146 notice to propose resolutions, and (2) his s.178 notice requisitioning an EGM, as serving also the purpose of being a notice to the company of a willingness on his part to serve as a director if appointed. That is not the express purpose of s.146 or s.178 notices which, in any event, were served outside the 42-day timeframe prescribed by Art.85. Moreover, the court does not accept that it would in any event be appropriate retrospectively to endow on those notices a purpose that they were not intended to serve when served. For the court to conclude otherwise would require Conroy Gold, and any company similarly placed, to consider every document it received before an EGM and ask itself would some future court in a fit of indulgence be prepared to view that particular document in such a way that it might retrospectively be deemed to satisfy the requirements of Art. 85/s.144, even though it had not been served with the intention of satisfying such requirements. That would place companies in a notably invidious position, defeating the very certainty that, e.g., Art.85 seeks to achieve.

    4. The service of any of the above notices requires to be done with a degree of formality. Why so? It is easiest to explain by way of example. Thus if one looks to the notice referred to at point (4) above, s.144(1) of the Act of 2014 provides that “Any purported appointment of a director without that director’s consent shall be void.” Absent a degree of formality in the process, there is an increased risk that a director may later seek to avoid her or his obligations as director on the basis that no informed consent to act was ever given. So, for example, in the, admittedly somewhat extreme, circumstances of Re Cem Connections Ltd [2000] BCC 917 (see also Kavanagh v. Kelly [2005] IEHC 421), Mr Registrar Rawson, sitting in the Companies Court, declined to disqualify...

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