High Court of Ireland Decisions

1. While the very considerable number of Affidavits filed on this interlocutory application contain a plethora of fact and innuendo, the essential facts are as follows. The third Defendant ("the Company") is a Company incorporated in the State which manufactures components for intruder alarm systems. It is a prosperous and profitable Company having an annual turnover of £1.6 million which yields a nett profit of £230,000. It has 10 employees.

2. The entire issued Share Capital of the Company is beneficially owned by the Plaintiff and the first Defendant, the Plaintiff owning 49% and the first Defendant owning 51% of it now. Immediately prior to the Board meetings of 18th March, 1997 which give rise to the dispute between the parties, there were three directors of the Company - the Plaintiff, the first Defendant and the second Defendant. The Plaintiff was also an employee of the Company. While there is a dispute as to his proper job description, it is not disputed that he was in receipt of a gross salary of £67,000.

3. On 12th March, 1997, the first Defendant gave notice of a meeting of the Board of Directors of the Company to be held at 2.30 p.m. on 18th March, 1997. The first item on the agenda for the meeting was to be "API Re Alarm Express meeting in England". The only other item to be on the agenda was "Other Business".

4. The reference to "API" was reference to what the Plaintiff contends was a private project of his which involved him in a proposal for a joint venture between an English company, NWT Limited, and API Limited, a company which he intended incorporating, for the design and manufacture of a component for an alarm system. NWT Limited had had an ongoing business relationship with the Company. The thrust of the complaint of the first Defendant, the majority shareholder in the Company, at the Board meeting on 18th March, 1997 was that the discussions between the Plaintiff and the personnel of NWT Limited were covert and that the Plaintiff's intention was to set up API Limited and do business with NWT Limited in direct competition with the Company and its business, which would be damaging to the interests of the Company.

5. The correspondence which emanated from the Plaintiff after 18th March, 1997 and the Affidavits he has sworn on this application do not give a coherent picture of what occurred on 18th March, 1997. However, in terms of the relief which the Plaintiff seeks on this application, it would appear that his contention is that at some time after the 18th March, 1997 he was wrongfully dismissed from his employment with the Company. The Defendants' version of what occurred is that at the meeting on 18th March, 1997, which was summoned by the notice of 12th March, 1997, the Plaintiff was summarily dismissed from his employment with the Company. The Defendants contend that at that meeting it was also resolved to convene an extraordinary general meeting of the Company within not less than 28 days to consider the Plaintiff's position as a Director of the Company. Later on the same day, 18th March, 1997, the Directors of the Company met once again for approximately five minutes. On that occasion, the Plaintiff signed a document headed "Board Minutes" which stated:-

6. Prior to 18th March, 1997, the cheque signatories for the Company's bank accounts per the mandate given by the Company to its bank, the Terenure Branch of the Bank of Ireland, were the Plaintiff and the first Defendant. Following the second meeting on 18th March, 1997, the bank was notified that the cheque signatories would thenceforth be the first Defendant and the second Defendant and Mary Stone.

7. The relief sought by the Plaintiff on this application is as follows:-

8. The reliefs referred to at (c) and (d) above were first claimed in a Notice of Motion which issued on 2nd July, 1997. In an Affidavit sworn on 8th July, 1997 to ground that motion, the Plaintiff averred that he was not dismissed from his employment with the Company at the first Board meeting on 18th March, 1997, that he did not resign as a Director at the second meeting but signed the document referred to above " only as an expression of future intent subject to conditions in relation to the buying out of your deponent's interest in and shares of " the Company.

9. The Affidavits filed on this application are replete with conflicts which can only be resolved at the hearing of the action. For present purposes, suffice it to say that Mr. Brady, on behalf of the Defendants, very properly concedes that there are fair issues to be tried between the parties as to:-

10. Accordingly, the issues which arise for determination on this application are whether damages would be an adequate remedy and whether the balance of convenience lies in favour of granting or refusing the relief sought by the Plaintiff.

11. It is true to say, and I think it is acknowledged on all sides, that the Affidavits filed on this application disclose a total breakdown of trust and confidence between the two shareholders of the Company, the Plaintiff and the first Defendant. In his first Affidavit, which was sworn on 23rd April, 1997, the Plaintiff averred that on 18th March, 1997 he agreed to consider resigning as he no longer wished to be involved with the first Defendant in the running of the Company " in circumstances whereby he was, at every turn, seeking to retract earlier decisions made and suggest that I had been involved in wrongdoing ". I have already quoted the averment from the most recent Affidavit sworn by the Plaintiff as to his state of mind when he signed the document on 18th March, 1997. The breakdown of trust and confidence is evidenced by allegations and counter allegations in the Affidavits. Each of the Plaintiff and the first Defendant contends that the other is guilty of dereliction of duty as regards his role in the Company and of conflicts of interest. While it is common case that the proposed joint venture between API Limited and NWT Limited has not come to fruition, the first Defendant contends that since the purported dismissal of the Plaintiff he has discovered an involvement of the Plaintiff with a company called Sequall Securities Systems Limited, which he alleges is damaging to the interests of the Company because, it is alleged, Sequall Securities Systems Limited is in competition with customers of the Company for retail alarm contracts. The Plaintiff denies this involvement. On the other hand, the Plaintiff alleges that through involvement with a company known as ACT Limited the first Defendant is in competition with the Company and that his objective is to live off Company business to ACT Limited. That ACT Limited is in competition with the Company is denied by the first Defendant.

12. In support of his claim for relief, the Plaintiff relies on three decisions of this Court, namely:-

13. In each of the foregoing cases, this Court was concerned with the position of a plaintiff, who alleged he had been wrongfully dismissed from his employment, pending trial of his action for wrongful dismissal. In each case, the Court ordered that the plaintiff should be paid his salary and the other benefits he had been entitled to under his contract of employment pending the trial of the action, upon his undertaking to carry out such of his duties under that contract as might be required of him, recognising, however, that the defendant might prefer not to give him any duties but to put him on leave of absence.

14. On behalf of the Defendants, it was submitted by Mr. Brady that the Plaintiff's case does not come within the principle enunciated in the Fennelly case and in the subsequent cases in which it was followed. It was submitted that the common thread which runs through all of the those cases is that the plaintiff was totally dependent on his income as an employee of the defendant and would be destitute without such income pending the hearing of the action. The instant case, it was submitted, is distinguishable in that it is common case that the Plaintiff receives the sum of £3,000 per month nett of tax from the Company in respect of his share of royalty payments made by the Company in respect of the use of patents by the Company which are owned by the Plaintiff and the first Defendant jointly. Accordingly, it was submitted, that the Plaintiff is not dependent on his salary as an employee of the Company. The only evidence of hardship on his part arising from non-payment of his salary, it was contended, is an averment contained in an Affidavit sworn by him on 23rd May, 1997 to the effect that he is now left in a position where he is experiencing difficulties both in relation to paying maintenance and child maintenance and also his living expenses.

15. In my view, the entitlement to the type of Order granted in the Fennelly case is not limited to a situation in which the Plaintiff can establish that he will face penury if such an Order is not made. The rationale of the decision is that it is unjust to leave a person who alleges that his dismissal has been wrongful without his salary pending the trial of the action and merely with his prospect of an award of damages at the trial of the action. The prospect of the destitution of the plaintiff pending the trial of his action was certainly a factual consideration in the Fennelly case. However, in the two later cases, which concerned the alleged wrongful dismissal of a managing director and of an operations director and vice-president respectively, there was no consideration of matching the totality of the income of the plaintiff to his outgoings or commitments, nor was there any consideration of the value of his assets or his spending pattern, matters which the Court has been invited to consider in the instant case.

16. In this case, prior to 18th March, 1997, the Plaintiff had his royalty income and he had his gross salary of £67,000. It is reasonable to assume that his financial commitments and outgoings reflected the totality of his income. It seems to me that it would be an unjust situation to leave him without approximately half his nett income pending the trial of the action and only with the prospect of an award of damages at the trial. In short, in my view, damages would not be an adequate remedy in the circumstances.

17. Accordingly, in lieu of the reliefs referred to at (c) and (d) above, I will make an Order directing the Company to pay the Plaintiff's salary from 2nd July, 1997, the date on which the Plaintiff claimed this relief, until the trial of the action and such other benefits as the Plaintiff would be entitled to under his contract of employment, on condition that the Plaintiff gives the following undertakings to the Court:-

18. The question of any arrears of salary and benefits which the Plaintiff claims to be entitled to up to 2nd July, 1997 will be dealt with at the trial of the action.

19. The Defendants seek to resist the restoration of the Plaintiff to a directorship in the Company pending the trial of the action on the basis that there has been a total breakdown in the personal relationship of trust and confidence between the Plaintiff and the other directors and that it would be detrimental to the Company and to the employees if the Court were to force the Plaintiff back on to the Board of the Company. Moreover, it is contended that to make an Order reinstating the Plaintiff as a Director between now and the trial of the action would have the effect of subverting the provisions of Section 182 of the Companies Act, 1963, in accordance with which, subject to compliance with the provisions thereof, the first Defendant as the majority shareholder, could lawfully procure the removal of the Plaintiff as a Director.

20. In determining whether the balance of convenience lies in re-involving the Plaintiff in the management of the Company, it seems to me that there is a broader interest to be considered than merely the interest of the owners of the equity in the Company. The interest of the employees and of the creditors of the Company must also be considered. On the evidence, I do not think it is in the broader interest to re-involve the Plaintiff in the management of the Company at this juncture, having regard to the total breakdown of trust and confidence between the Plaintiff and the other Directors, which the Plaintiff himself acknowledges. On the other hand, I do not think that a refusal to order re-involvement of the Plaintiff in the management of the Company will prejudice the Plaintiff. As long ago as 23rd April, 1997, in his Affidavit sworn on that day, the Plaintiff signalled his intention to seek relief under Section 205 of the Companies Act, 1963, although, despite the lapse of almost three months, he has not issued a Petition claiming such relief. Indeed, as his most recent Affidavit evidences, his objective at the second meeting of 18th March, 1997 was to engineer a situation in which his interest in the Company would be bought out. He has already ensured that all activity of the management of the Company since 18th March, 1997 will be subject to scrutiny in this Court by instituting these proceedings. Indeed, I would comment that it is somewhat disingenuous of the Plaintiff to suggest that his failure to execute the documents required by Forbairt was motivated by a fear that the monies would be misapplied and I can only conclude, on the evidence before the Court, that this is indicative of an obstructive mentality on the part of the Plaintiff.

21. Accordingly, being satisfied that it is not in the broader interest of the Company to re-involve the Plaintiff in the management of the Company, save to the extent that the first and second Defendants see fit to do so in return for his salary, and subject to the Defendants giving an undertaking to continue to furnish to the Plaintiff quarterly management accounts of the Company and such reasonable financial information in relation to the Company as the Plaintiff may require through the Company's Auditors, Messrs. Cronin & Company, I refuse the reliefs referred to at (a) and (b) above.

22. I will give each party liberty to apply and reserve the costs of this application.