Sutton v Salumi Grazing Ltd T/A Salumi Grazing and Others

• Jurisdiction: Ireland
• Judge: Mr Justice Oisín Quinn
• Judgment Date: 30 January 2025
• Neutral Citation: [2025] IEHC 49
• Court: High Court
• Docket Number: Record No: 2024/11 IA

In the Matter of An Intended Derivative Action on the Application of Sidney John Sutton

Between:

Sidney John Sutton

Applicant

and

Salumi Grazing Limited T/A Salumi Grazing, Mark Leavey, Karen Leavey, Cohesion Infheistíochtaí Limited, Eoin Goulding, James Michael McQuaid T/A McQuaid Accountants, Michelle Perkins

and

The Governor and Company of the Bank of Ireland

Respondents

[2025] IEHC 49

Record No: 2024/11 IA

THE HIGH COURT

Application for permission tobring a derivative action - tranfer of business - removal of access to bank account

Facts: Mr Sutton, the applicant, sought leave of the court pursuant to Order 15, rule 39 of the Rules of the Superior Courts to bring a derivative action against the named respondents on behalf of Salumi Grazing Limited. 50% of the company is owned by Mr Sutton as one of the directors of Salumi, and the second named respondent, Mr Leavey, owns the other half of the company.

It was contended by Mr Sutton, that while he was imprisoned between 16 October 2020 and 23 April 2021 for a conviction has since been overturned, Mr Leavey wrongly transferred the business to Karmar Foods Limited ("Karmar") which is controlled by Mr Leavey, and the third respondent, his wife. It is further contended that Mr Goulding, the fifth respondent unlawfully facilitated the terminating of the exsisting and granting of a new license. Additionally, it was alleged that the sixth and seventh respondents ("McQuaid Accountants") erroneously facilitated a number of alleged unlawful company filings and amendments to Salumi's Constitution. Lastly, Mr Sutton alleged that the eight respondent ("the Bank") unlawfully altered the banking mandates of Salumi in removing Mr Sutton and giving Mr Leavey sole control of the bank accounts. Mr Sutton sought permission of the court to bring a derivative action on behald of Salumi on account of the alleged aforementioned wrongs for damages and loss that the company suffered. In the submissions by Mr Sutton against the Leaveys, he conteded that there was a fraud on Salumi by the appropriation of the company accounts in November 2020 and then in the transfer of the whole business. It is further asserted that Cohesion and Mr Goulding colluded with the Leavey's surrounding the termination and granting of the licenses.

Cohesion and Mr Goulding submitted multiple agruments as to why the court should refuse the application. Cohesion advanced the argument that they were not an insider or a "wrongdoer" within the meaning of the jurisprudence. Additionally, they stated Mr Sutton was not a 'minority' and Mr Leavey did not have control. Furthermore, they argued that if Cohesion was a "wrongdoer" it would not have benefitted as the new license was granted to a new company. They argued that that the court should refuse the application on the following grounds; (i) there was a gross delay been May 2021 and January 2024 which resulted in the License period expiring and the property being sold; (ii) the derivative action was not prudent and did not serve the interests of the company, and ultimately was being pursued for personal ulterior motives; (iii) the company had ceased trading and had no assests; (iv) there was no evidence of Mr Sutton making any efforts to lead the company to pursue the claim; (v) as a lay person could not represent a company, Mr Sutton should be refused leave to bring a derivative action of behalf of the company.

The Bank submitted that no claim of Salumi's had a reasonable prospect of success as; (i) as a matter of law the company could not maintain a data protection claim; (ii) the removal of Mr Sutton as a shareholder had nothing to do with the bank; (iii) monies drawn from the company account since 17 November 2020 clearly benefited the company.

Judge ... held that Mr Sutton had identified a claim of the type of contemplated by the jurisprudence that had reasonable prospects of success againsst My Leavey as company director, but not in relation to the comapnies accounts, nor was there any reasonable prospect of success against Mrs Leavey.There was also no prospect of success in the case against the bank. It was further held that there was also a reasonable change of success of Salumi against Cohesion, as well as a plausable prospect of success for damages against Mr Leavey and Cohesion. The judge limited Mr Leavey's actions to; (i) a claim in damages for breach of fiduciary duty to the alleged wrongful appropriation of business goodwill and assets of Salumi in May 2021; (ii) a claim in damages for conspiracy in the allegation that Mr. Leavey and Cohesion colluded together to achieve this de facto traasfer of the business of Salumi to an entity controlled by Mr. Leavey; (iii) damages for wrongful retention of the deposity and fixtures and fitting of Salumi

Judge to hear parties for precise form of the order and for costs

JUDGMENT of Mr Justice Oisín Quinn delivered on 30 ^th January 2025

I. Introduction

1 The applicant (“Mr. Sutton”) seeks the leave of the court pursuant to Order 15, rule 39 of the Rules of the Superior Courts to bring a derivative action against the respondents on behalf of the company, Salumi Grazing Limited (“Salumi”).

2 Salumi, which was founded on 25 August 2020, ran a small business selling charcuterie and cheese boards along with a selection of wines from a premises in Terenure, Dublin during the covid pandemic. The fourth respondent (“Cohesion”) owned the premises and had entered into a license for the use of the premises (the “License”), which may in reality have been a lease, with Salumi for 3 years commencing on the 18 September 2020.

3 Mr. Sutton owns 50% of the shares in Salumi and is one of two directors of Salumi. The second respondent (“Mr. Leavey”) owns the other 50% of the shares and is the other director of Salumi. Mr. Sutton's background is in accounting and Mr. Leavey's background is in hospitality. There appears to be no shareholders agreement, or arrangement for a ‘casting vote’, or other particular constitutional provision of Salumi to provide a mechanism for dealing with a deadlock between the two owners.

4 Mr. Sutton claims, inter alia, that while he was in prison between 16 October 2020 and 23 April 2021 on foot of an increased sentence handed down by the Court of Appeal following a conviction for alleged assault by him of his former partner which has since been overturned (a re-trial has been directed) that Mr. Leavey essentially wrongly appropriated the business of Salumi and transferred it to another company Karmar Foods Limited (“Karmar”) controlled by him and his wife, the third respondent.

5 Mr. Sutton claims that Cohesion and its director the fifth respondent (“Mr. Goulding”) unlawfully facilitated this by, inter alia, summarily (and unlawfully according to Mr. Sutton) terminating the License with Salumi on 15 May 2021 and immediately granting a new license on the same terms to Mr. Leavey's new company Karmar which then continued the business in the same premises using, Mr. Sutton claims, Salumi's fixtures and fittings, goodwill and assets.

6 Mr. Sutton complains that the sixth and seventh named respondents (“McQuaid Accountants”) wrongly facilitated a series of allegedly unlawful company filings and amendments to Salumi's Constitution during the time when he was in prison which removed Mr. Sutton from his positions and shareholding in Salumi and replaced him with the Leaveys.

7 He contends that the eighth respondent (“the Bank”) unlawfully changed the banking mandates of Salumi on 17 November 2020 while he was in prison, removing him, and giving sole control of Salumi's bank accounts to Mr. Leavey. He claims all debits from the company accounts thereafter (during a period in which Salumi was trading) were fraudulent.

8 As Salumi is controlled equally between Mr. Sutton and Mr. Leavey and as the relationship between them has completely broken down, Mr. Sutton seeks the permission of the court to bring a derivative action on behalf of Salumi in respect of these alleged wrongs for the loss and damage which he claims the company has suffered.

II. Background

(a) Procedural history

9 Mr. Sutton represented himself in this and several related proceedings. The application was made by an Originating Notice of Motion issued following an ex parte application on 24 January 2024. The application ultimately involved multiple affidavits and exhibits running to more than four thousand pages and it came on for hearing before me over three days from Tuesday 14 January to Thursday 16 January 2025.

10 There was no appearance at the hearing or, apparently, on any previous occasion when the matter was before the court in the chancery list by or on behalf of Salumi or the Leaveys. Mr. Sutton produced an affidavit sworn on the 10 January 2025 indicating on its face, service on those respondents by email almost a year earlier. There was an ex parte order made on 24 January 2024 giving Mr Sutton liberty to serve those respondents in that fashion. This affidavit of 10 January 2025 also indicated that the papers had been sent by registered post to what Mr. Sutton believes is the Leaveys home address on the Friday 10 January 2025. I was not satisfied as to the adequacy of the service by registered post (as the papers would likely only have arrived on the morning of the hearing, being two working days later) but as Mr. Sutton had, on the face of his affidavit, sent the papers to the Leaveys by email in accordance with the order of the High Court made on 24 January 2024, I determined that there was service in accordance with an order of the court, as can be provided under the rules governing these applications; see Order 15, rule 39(6).

11 Cohesion and Mr. Goulding, McQuaid Accountants and the Bank were all legally represented. These three groups of respondents all filed helpful written submissions, as did Mr. Sutton.

(b) Related proceedings

12 Aside...