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Cite as: [2019] IEHC 928

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THE HIGH COURT

[2019] IEHC 928

[Record No. 2016/7077 P.]

BETWEEN

BLACKROCK MEDICAL PARTNERS LIMITED

PLAINTIFF

AND

MARPOLE LIMITED, BMD INVESTMENTS LIMITED AND PARMA INVESTMENTS LIMITED

DEFENDANTS

JUDGMENT of Ms. Justice Pilkington delivered on the 12th day of December, 2019

1. The Plaintiff seeks three reliefs in the following terms:-

“(A) An order declaring void and of no effect the purported transfer by the second

named defendant to the third named defendant of 10 ordinary shares in the first

named defendant.

(B) An order declaring void and of no effect the purported registration by the first

named defendant of the aforesaid purported transfer in the register of transfers and

of any shareholding in the first named defendant otherwise then in accordance with

the provisions of the SSA executed by the plaintiff and all of the defendants

(amongst others) on the 11th June, 2004”.

2. In essence, this case concerns the validity of a transfer of shares between the second and

third named defendant (‘BMD’ and ‘Parma’ respectively), in the first named defendant.

3. The first named defendant, Marpole Limited (“Marpole”) is the operating company which

owns 100% of Galway Clinic Doughiska Limited which in turn is the operating company

for the Galway Clinic, a private hospital in Galway. From the outset it has submitted that

it should not have been joined as a party to this litigation.

4. All other parties to this litigation are investors and shareholders in Marpole. In the

normal course these parties entered into certain shareholder agreements, a subscription

and shareholder’s agreement dated 11th June, 2004 and the amendment agreement to

that agreement, dated 29th June, 2015 (the “2004 SSA”) and the (“2015 amendment

agreement”) respectively.

5. The 2004 SSA governs the relationship between the parties. Executed on 11th June, 2004

it is between Blackrock Medical Partners Limited (defined within it as “the developer”),

Parma Investments Limited (the third named defendant herein and a vehicle of Mr.

Goodman) (‘Parma’), BMD Investments Limited (the second named defendant and a

company whose shareholding was held by Mr. Brendan McDonald and his spouse, in a

shareholding ratio of 80/20% respectively), Marpole, Galway Clinic Doughiska Limited and

James Sheehan and Dr Joseph Sheehan respectively.

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6. As I understand it, in the course of seeking to develop and establish the Galway Clinic Mr

James and Dr. Joseph Sheehan, for reasons that they perhaps now differ upon, but which

related to the necessity for fresh investment agreed that the plaintiff to these

proceedings, which up to that point was the 100% owner of the project, reduced its

interest to 50% with the new investors comprising the third named defendant, Parma

taking 40% and BMD, the second named defendant, taking 10%. In essence the 2004

SSA is therefore to deal with that new arrangement.

7. Given that this litigation concerns the validity (or purported validity) of two share

transfers it is necessary to set out the background documentation and mechanisms of

those transfers in some detail.

2004 SSA

8. The recitals to the 2004 SSA state that both the plaintiff BMP and Galway Clinic

Doughiska Limited are private limited companies and as a consequence of Marpole

wishing to raise additional capital for business, that the parties have agreed to enter this

agreement to:-

(i) provides for the subscription by the investors (BMP, Parma and BMD) for shares

(ii) provides for investor loans, and

(iii) regulate the conduct of the business of the companies, the boards and their

relationship between the company and its shareholders.

9. Clause 2.1.1 states that Parma would hold 40% of shares, the plaintiff’s 48% (I was told

that the other two shares were also held by the Sheehan brothers bringing their then total

to 50%) and 10% of the shareholding in BMD. Clause 2.1.2 stated that each of the

investors would make advances by way of loan to Marpole, Parma would advance €7.2m,

BMD €1.8m and the developer BMP would contribute €9 million.

10. In respect of those loans it was asserted that they were “subject always to any portion of

the Investors Loan being repayable in accordance with Clause 7.1.4”.

11. Within clause 4 under the sub-heading “Restricted Transactions”, it is stated that:-

“the Companies or either of them shall not do any of the matters listed in schedule

3 without the appropriate consent referred to in schedule 3”.

12. The opening paragraph to schedule 3 headed “Restricted Transactions” is as follows:-

“The investors shall exercise all voting rights and other powers of control available

to them in relation to the Companies so as to ensure (so far as lies within their

power of procurement, individually or collectively with others) that neither the

companies nor any of them will, without the prior written consent of Parma (for so

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long as it or its permitted transferees hold 25% of the shares) and the developer

(for so long as it or its permitted transferees hold 25% of the shares…”.

13. There then follows a number of restricted transactions. Number 11 of the restricted

transactions is:-

“Enter into any contract, transaction, agreement, arrangement or understanding

which would amend the current corporate structure or shareholdings or control of

the Companies or the Group in any way”.

14. Clause 7 (and in particular clause 7.4.1 and 7.4.4) of this agreement are the primary

clause in contention. It is necessary to recite it in some detail. It is headed “Transfers and

Restricted Transfers” and under the heading “Form of Transfer” states:-

“7.1.1.

Any transfer of Shares or an interest in Shares contemplated under this clause 7

shall be deemed to be an obligation to transfer the entire legal and beneficial

interest in such Shares or the entire beneficial interest in such interest and

Shares (as the case may be) free from any lien, charge or other encumbrance of

any nature whatsoever.

7.1.2.

With the consent in writing of all of the investors (or their duly authorised

representatives), any of the provisions of Clause 7 may be waived in whole or in

part in any particular case.

7.1.3.

Each investor shall at their written request of the company board keep the

company informed as to the beneficial ownership and control of such investor

such investor’s shares and interests in shares.

7.1.4.

Subject always to compliance with the provisions of clause 7.2, any investor

who proposes or is required or deemed to transfer Shares or an interest in

Shares (Sale Shares) pursuant to this Clause 7 (a Proposing Transfer or) shall

upon completion of the sale of the Sale Shares to the transferee (the

Transferee):

(1) be repaid by the Company such portion of the Investors Loan (Loan Amount)

as equals the proportion which the number of Sale Shares represents of the

entire Shares in issue immediately following Completion;

(2) procure that it is a term of the sale of the Sale Shares that the Transferee

shall lend the Loan Amount to the Company as a new investor loan on the

same terms and conditions as set out in Clause 2.1.2;

(3) procure that it is a term of the sale of the Sale Shares that the Transferee

shall, subject to consent of Anglo Irish Bank Corporation PLC, … assume all of

the obligations of the Proposed Transferor pursuant to the Anglo Irish Rent

Guarantee or pursuant to any related agreement entered into by such

Proposing Transferor in respect of the matters guaranteed in connection with

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the Transaction and the Proposing Transferor shall be released from those

obligations;

and for the avoidance of doubt unless otherwise agreed in writing by all

Shareholders, no transfer of Shares shall be registered by the company

unless the Transferee complies with 7.1.4(2) and (3) above”.

15. In respect of the portions of Clauses 7.1.4, in short the plaintiff contends that the second

and third named defendants did not comply with its terms in the transfer of BMD’s 10%

shareholding in Marpole.

16. Clause 7.4 headed “Permitted Transfers” states:-

“Notwithstanding the provisions of Clause 7.2:” (a reference to the pre-emption

clauses)

7.4.1 Shares or interests in shares may be transferred by a Shareholder:

(i) Not relevant for present purposes

(1) which is a Corporate Shareholder to an associated company of

the Corporate Shareholder (the Transferee Company) (that is to

say, a holding company or wholly owned subsidiary of the

Corporate Shareholder and any of the other wholly owned

subsidiary of such holding company) PROVIDED ALWAYS that

such transfer is made on such terms as if the original Corporate

Shareholder and the Transferee Company cease to be

associated, the Transferee Company shall be deemed to have

given a Transfer Notice immediately prior to that event in

respect of all Shares or Interests in Shares transferred to it

unless it retransfers the shares to the original Corporate

Shareholder or to another entity in the same group of the

original Corporate Shareholder”.

17. Clause 7.4.4 headed “Shares or any interest in Shares may be Transferred” is again a

contentious clause and states:-

“(1) Between any of the following: Parma, any permitted transferee of Parma, Mr.

Goodman, any member of Mr. Goodman’s immediate family, the trustees of a trust

where the beneficiaries comprise members of Mr. Goodman’s immediate family, Mr.

Brendan McDonald, any member of Brendan McDonald’s immediate family, any

permitted transferee of BMD, and the trustees of a trust where the beneficiaries

comprise members of Brendan McDonald’s immediate family; and/or

(2) between any of the following: the Developer, any Permitted Transferee of the

Developer, Mr. James Sheehan, Mr. Joseph Sheehan, any member of Mr. James

Sheehan’s immediate family, any member of Mr. Joseph Sheehan’s immediate

family, and the trustees of a trust where the beneficiaries comprise members of

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either Mr. James Sheehan’s immediate family or Mr. Joseph Sheehan’s immediate

family;”.

7.4.5 Shares or any interests in Shares may be transferred to a representative of

any shareholder who is an individual.

7.5 No Shares or interest in Shares shall be transferred save as provided in this

Clause 7.

18. It will be noted in the phraseology within Clause 7.4.4(1) that whilst there is a reference

to any permitted transferee of BMD, the entity BMD itself is not referenced at all within

Clause 7.4.4(1). All defendants contend this is clearly an obvious drafting error, the

plaintiff, and Mr Shannon in his evidence, whilst noting the omission, does not accept it is

an error and contends that, if it is an error, it could equally be by the inclusion of the

phrase ‘any permitted transferee of BMD’ rather than the exclusion of ‘BMD’

19. With regard to 7.4.4 and the shares or any interest of shares that may be transferred,

7.4.4 (1) and (2), makes it clear that there is a clear differentiation between what might

be described as the Sheehan block and the Goodman/McDonald block (subject to the

omission of ‘BMD’ which I have referred to above).

20. Finally, Clause 7.6 states:-

“Each Investor agrees to inform the other Investor without delay of any offer for

Shares”.

21. Thereafter, there is the 2015 amendment agreement stated to be between Blackrock

Medical Partners Limited, Parma Investments Limited, BMD Investments limited, Marpole

Limited, Galway Clinic Doughiska Limited, James Sheehan and Dornway Limited.

22. The reasons for this amendment agreement was largely consequent upon an agreement,

arising from litigation, but in any event a new company called Dornway Limited

(“Dornway”) was established, in which Mr. James Sheehan is the 100% beneficial owner.

Dr. Joseph Sheehan acquired 100% ownership (formerly 50%) in the plaintiff Blackrock

Medical Partners.

23. The 2015 amendment agreement effectively provides for such consequential amendments

as are required to the 2004 shareholders agreement to reflect the “inclusion” of Dornway

and the reduction in the plaintiff’s shareholding in Marpole so that each now holds a 25%

shareholding in Marpole.

2015 Amendment to 2004 SSA

24. Clause 3.1.2 amends clause 2.1.2 of the 2004 SSA, with the loans provided by BMP and

Dornway now €4,225,000 respectively (which would appear to total €8.5m and not €9m

figure as previously provided within the 2004 SSA).

25. Clause 3.1.3 states that it replaces Clause 7.4.4(ii) of the 2004 SSA in the following

terms:-

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“Between any of the following: The developer, any permitted transferee of the

developer, Mr. Joseph Sheehan, any member of Mr. Joseph Sheehan’s

immediate family, the trustees of a trust where the beneficiaries comprise

members of Mr. Sheehan’s immediate family;

3.1.4.

A new Clause 7.4.4(3) is added as follows: “Between any of the following;

Dornway, any permitted transferee of Dornway, Mr. James Sheehan, any

member of Mr. James Sheehan’s immediate family, the trustees of a trust where

the beneficiaries comprise members of Mr. James Sheehan’s immediate family”.

26. Counsel for the plaintiff points correctly that Clause 4.4.4(1) of the 2004 SSA was not

amended by the inclusion of BMD.

27. Clause 4.1 headed “Waiver” states as follows:-

“Parma and BMD hereby waive any rights or restrictions (where the rights of pre-

emption or otherwise) which may be contained in or confirmed by the Articles of

Association of the Agreement or otherwise (if any) in connection with the

distribution/transfer of shares by BMP to Dornway and hereby consent to such

distribution/transfer. Parma, BMD and Dornway hereby waive any rights or

restrictions which may be contained in or inferred by the Articles of Association of

the agreement or otherwise in connection with a pledge, mortgage (whether by

way of fixed or floating charge), charge, grant of a lien, or otherwise encumber the

legal or beneficial ownership of the Shares in the Developer or any interest

therein”.

28. The plaintiff contends that the transfer of shareholding from BMD to Parma both in the

transfers of March and September 2016 respectively was not in accordance or in

compliance with 2004 SSA as amended.

The March 2016 Transfer

29. The genesis of, what I will describe as the initial transaction to effect the transfer of the

10% shareholding of BMD to Parma appears to begin with a letter of resignation from

Brendan McDonald as a director of Marpole. It was known by all parties at the time that

Mr. McDonald was in poor health, who wished for this reason to extricate himself from

Marpole. He wished to do so by effecting a transfer of those shares to Parma. This was

effected by the execution of the following documents executed on 14th March 2016:-

(a) the share transfer form from BMD to Parma for the consideration of €5.92 million.

(b) the share purchase agreement between BMD and Parma reflecting the

consideration of €5.92m.

assigned to Parma the loan (and all its rights and remedies in respect of same) for

the consideration of €1.58 million. Clause 4 recited that if Marpole were to repay

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any of the monies pursuant to the loan within the 2004 SSA to BMD that it would

hold them upon trust for Parma. The plaintiff contends this is not in accordance

with clause 7.1.4 as it was a mere assignment of the loan and not a repayment by

Marpole of that investor’s loan, followed by a new loan by the new transferee to the

company in the same terms as the previous loan. The plaintiff also asserts that

these matters took place in March and they only learnt of them immediately prior to

the meeting of the Board of the Galway Clinic in July 2016. Thereafter, the

Revenue Commissioners confirmed receipt of the duty paid on 31st May, 2016.

30. In an email dated 22nd July, 2016 from Declan Sheeran (Parma’s company secretary) to

Mr. Bolger, the chairman of Galway Clinic Doughiska Limited (there does appear to have

been certain correspondence prior to this), he asks that an agenda item be included for

the following board meeting on 27th July, 2016 of the following item:-

“Transfer of shares in Marpole Limited from BMD Investments Limited to Parma

Investments Limited”.

31. On 23 July 2016, Mr. Joseph AM Sheehan (son of Dr Sheehan) writes to Mr McDonald in

what can only be described as vituperative terms. It was in turn forwarded to Mr Bolger

in his capacity as chairman of Galway Clinic Doughiska Limited, who described it as

‘despicable’. His categorisation is in my view entirely correct. Whilst the Plaintiff’s counsel

was very clear that such a letter could never be stood over, in his evidence Dr Sheehan

was more equivocal. The author of the letter was, despite having furnished a witness

statement, not called as a witness.

32. In any event, the meeting of the Board of Galway Clinic Doughiska Limited is set for 27th

July, 2016 and on 26th July, 2016, Brendan McDonald (chairman of BMD Investments

Limited) wrote formally to Mr. Bolger stating that due to his current health problems he

had decided to realise the value of his ten ordinary shares in Marpole Limited held by

BMD. The letter continues:-

“I have, therefore, agreed to transfer these shares to Parma Investments Limited in

accordance with Clause 7.4.4.(1) of the original subscription shareholder’s

agreement dated 11th June, 2004. BMD have further agreed that this transfer be

executed by a share purchase agreement.

BMD has also agreed to assign the loan which is owed to it by Marpole Limited to

Parma Investments Limited in accordance with Clause 7.1.4.(2) of the original

subscription and shareholder’s agreement.

A share transfer form will be filed with the appropriate Irish authorities in due

course. I assume you will also ensure that the company records of Marpole and

Galway Clinic will reflect the above transfer”.

33. The meeting was duly held on the 27th July, 2016. On that occasion, Mr. Eamon Shannon

(acting as an alternative director for Prof Frank O’Sullivan), ES in the note below and

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acting as the solicitor for the plaintiff within this litigation and Dr Joseph Sheehan jnr,

subsequently sought that certain amendments to the minutes of that meeting be

attached. They were subsequently appended to the minutes and in my view, it is more

logical to set them out now:-

“2. ES noted that Clause 7.4.1 of the shareholder’s agreement does not explicitly allow

the proposed transfer.

3. ES noted that what was being proposed in relation to the assignment of the

shareholder’s loan was not in conformance with Clause 7.1.4 of the shareholder’s

agreement.

4. ES reminded the meeting that a similar situation arose last year regarding a

transfer of shares between Blackrock Medical Partners Limited and Dornway and

that the precedent was set whereby an amendment to the shareholder’s agreement

was entered into by the parties…”.

34. In respect of the meeting itself, the majority were in favour of approving the transfer of

the shares while Mr. Shannon and Dr. Joseph Sheehan jnr are recorded as voting against

approving its registration.

35. Thereafter, by letter dated 28th July, 2016, Mr. Shannon, of the firm Shannon and

O’Connor Solicitors, wrote on behalf of the plaintiff herein, to Marpole, BMD and Parma.

Amongst its contents it contained the following:-

“It would appear that the parties to the proposed transfer are seeking to rely on

Clause 7.4.4(1) of the Subscription and Shareholders’ Agreement dated the 11th

June, 2004 and made between… as amended by… It is perfectly clear that the share

transfer as proposed by BMD in its letter of 26th July, 2016 does not constitute a

permitted share transfer within the terms of 7.4.4(1) of the Shareholders’

Agreement…

Accordingly, any purported transfer (and any purported registration of any such

transfer) would constitute a manifest breach of the shareholder’s agreement and an

unlawful act on the part of the company and on behalf of BMD and Parma

Investments Limited…

Our client, accordingly, requires that the Company confirm in writing that it shall

not proceed with the registration of any such purported share transfer. Our client

further requires that each of the proposed parties to the unlawful proposed share

transfer confirm that it shall not proceed therewith and further that it shall not

engage in any transaction in relation to any shareholding otherwise and accordance

with the Shareholders’ Agreement. Failing receipt of such confirmation by close of

business tomorrow, the 29th July, 2016, we are instructed to institute such

proceedings as may be advised to prevent the flagrant breach of the shareholder’s

agreement”.

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36. Marpole issued a letter to Shannon & Co. Solicitors dated 20th July, 2016, addressed ‘To

whom it may concern’ stating:-

“Please be informed that the above mentioned transfer of shares was recorded in

the Company’s Register of Transfers and Register of Members on Wednesday, 27th

last”.

37. As I understand it, no other replies were received and the above entitled proceedings,

thereafter issued shortly afterwards on the 3rd August, 2016.

38. This point will be expanded later but, for reasons of chronology, I also note it here. In or

about 27th July, 2016, Dornway, Mr. James Sheehan’s vehicle, sent a letter to the

Directors of Marpole Limited, referencing the 2004 SSA agreement and pursuant to clause

7.2.1. notifying an intention to sell to Parma 25 ordinary shares at €1.25 each and that

the share price would be €31 million (‘the Dornway shares’).

39. Events then move forward to the September 2016 transfer.

The September 2016 transfer

40. After these proceedings issued, a letter dated 1 September 2016 from Mr Sheeran to Mr

McDonald, sets out the proposed structure for how it was now proposed to deal with the

March, 2016 Parma/BMD transfer. The letter envisages that:-

“- The transfer from BMD to Parma will be reversed. A draft share purchase

agreement giving effect to the transfer back to Marpole.

Thereafter it is proposed that once the shares are back in the ownership of BMD, it

will transfer the shares to a newly incorporated subsidiary and thereafter that

company will then sell the Marpole shares to Parma.”

41. The plaintiff contends that this new proposal (which in broad outline is the terms of the

transfer that ultimately occurred) remains in breach of the 2004 SSA, as amended.

42. It is clear from the documentation that there was significant interaction between the legal

and accounting advisors for BMD and Parma as to how the September 2016 might be

effected, as it appears that there were also tax issues and implications with regard to any

rescission/reversal of the transfer of shares in March, 2016. The uncontroverted evidence

was that the ultimate transaction cost was in the order of €150,000.

43. In an email dated 21st September, 2016, from Brendan McDonald, Ormsby & Rhodes, the

accountants for BMD, states, in part is as follows:-

“I met with Goodbody lawyer and the Parma reps yesterday morning. Following a

number of reasons detailed by the lawyer (not least of which is the fact that we are

facing a very clever, utterly vindictive shareholder who will jump on any excuse to

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hold up the deal) Parma and I agreed to the proposed transfer procedure despite

the complications and higher expense.

The idea is to reverse the March, 2016 transaction and then implement transactions

in line with the exact wording of the original Marpole shareholder agreement. This

will be done as follows:-

1. Parma and BMD will file a transfer agreement where the shares and loan

notes will be transferred back to BMD for 5.92M and 1.28M respectively.

2. BMD will sell the shares and loan note to MIL for 5.92M and 1.28M.

Consideration to be left outstanding on intercompany account.

3. MIL (as a “permitted transferee of BMD”) will sell the shares and loan note to

Parma for the same price.

4. MIL will then use the proceeds to pay BMD”.

44. BMD is a wholly owned subsidiary of McDonald Industries Ltd (MIL). It is accepted by all

that it is a ‘permitted transferee’ within clause 7.4.4 of 2004 SSA, as amended.

45. The documentation which effected this transaction, all dated 23 September 2016,

comprises:-

(a) an agreement between Parma (transferor) and BMD (transferee) where Recital B

and C state as follows:-

“(B) A share purchase agreement was entered on 14th March, 2016 whereby the

Transferor purported to acquire the Shares of the Company from the

Transferee for the Consideration (the “Share Purchase Agreement”).

have agreed to enter into this agreement whereby the Transferor will

disclaim in favour of the Transferee, any interest in Shares acquired under

the Share Purchase Agreement, such that the Parties are in the same position

as they had been prior to the entry into by them of the Share Purchase

Agreement”.

Within the same document under the heading “Share Purchase Agreement”, it states:-

“The Transferor (Parma) hereby agrees that it has no title or interest in the Shares

and to the extent that any such title or interest transferred under the Share

Purchase Agreement it is hereby conveyed back to the Transferee”.

Thereafter, the heading “Loan Assignment Agreement” states:-

“The parties hereby agree that the Loan Assignment Agreement is rescinded and

that the Transferee continues to be the lender in respect of the loan as if the Loan

Assignment Agreement had never been entered into”.

(b) There is a stop transfer form from Parma back to BMD.

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It recites that BMD as owner of the shares is upon completion, selling to MIL as the

holding company of BMD coming within the definition of ‘permitted transferee of

BMD’ in accordance with the shareholders agreement. At completion it is further

agreed that the purchaser shall deliver the loan assignment agreement.

(d) a loan assignment agreement between BMD Investments and MIL.

(e) Thereafter, a share transfer form from BMD to MIL; and

(f) A share purchase agreement between MIL and Parma. Within the terms of that

share purchase agreement, there is at Clause 4.5.2 the following:-

“In the event that there is a request from the Company (Marpole) that the

Purchaser makes a new loan into the Company equal to the amount of the

loan (to be on the same terms as the Loan), the Parties agree that they will

take such action as may be necessary to terminate the Loan Assignment

Agreement such that, in its place:

(1) The Purchaser advances an amount equal to the Loan to the Company;

(2) The Company repays the Loan to the Vendor and…

(3) Any amounts paid by the Purchaser to the Vendor pursuant to the Loan

Assignment Agreement shall be repaid to the purchaser

Provided always that if any one of the aforementioned items in

(1) to (3) does not occur, there is no obligation on the Parties in

respect of the other matters listed therein and the Loan

Assignment Agreement shall continue in existence in accordance

with its terms”.

(g) Counsel for the plaintiff points out that the above entitled clause states that such

steps will only be taken if required as opposed to what is contended to be an

explicit term or requirement of clause 7.1.4 of the 2004 SSA.

46. There is then a Loan Assignment Agreement between MIL and Parma where MIL assigns

the Loan to Parma.

47. Finally, also on 23rd September, 2016, there is a letter from BMD, MIL and Parma

essentially summarising the process and the inter-partes agreements between them.

48. The certificate issues from the Revenue on 26th September, 2016.

49. The Deed of Adherence between MIL and Marpole is also dated 23rd September, 2016,

essentially confirming its adherence to the 2004 SSA and thereafter notice pursuant to s.

262 of the Companies Act, 2014 to Marpole by Brendan McDonald notifying the disposal

of the shares to MIL and thereafter Parma.

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50. On 27th September, 2016, in an email from Brendan McDonald to David Marsh (of BMD

accountants Ormsby Rhodes), there is confirmation that all of the requisite documentation

was executed on Friday, 23rd September, and states:-

“The steps involved will be announced at the Galway Clinic/Marpole board meeting

tomorrow, 28th September, and will be voted through by a majority of the board.

The share register will then be brought up to date by KPMG tomorrow afternoon…”.

51. In a letter from A & L Goodbody, Parma’s solicitor, essentially sets out the the position in

anticipation of the forthcoming board meeting.

52. In any event, the minutes of the meeting of Galway Clinic on Wednesday, September,

2016 record, following a brief explanation of the steps taken, followed by a motion to the

Directors to pass the transfer, was passed four to one, with Dr. Joseph Sheehan, director,

voting against.

53. The plaintiff consistently makes the following complaints with regard to the share transfer

process undertaken by BMD:-

(a) The original March, 2016 transfer was not valid as it was not a permitted transfer

within Clause 7.4.4 (there being no reference to BMD within that clause).

(b) Both the transactions of March and September 2016 were invalid because they

purported to assign the loans or novate the loans rather than Marpole repay the

loan and the transferee advance a new loan pursuant to the clear terms of Clause

7.1.4.

plaintiff which was never sought. This was asserted to be in contradistinction to the

manner in which the original transfer of shareholdings in the plaintiff and Dornway

Limited proceeded.

54. It was made clear by Counsel for the Plaintiff that it was seeking the Court’s adjudication

upon the validity of both transfers or purported transfers, that of March 2016 and

thereafter September 2016. All defendants maintain or submit that any issue as to the

validity of March 2016 transfer or purported transfer is moot.

55. Shortly prior to this hearing, there was an exchange of correspondence between the

plaintiff ‘s solicitors and those acting for BMD and Parma respectively on the issue or

question as to the circumstances in which the plaintiff might consent to the September

2016 transaction. This issue was in turn also raised within the cross examination of Dr

Sheehan and in submissions by the plaintiff’s and the second and third named defendant’s

counsel.

56. In my view I should initially determine whether this court, in the events that have

happened, should consider the validity of the March 2016 transfer or whether any of the

reliefs sought as to its validity are now moot.

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The March 2016 Transfer – Is that issue now moot?

57. The Plaintiff contends, as against Marpole, that it should not have registered the board

resolution on 27 June 2016, at least until it had instituted its own enquiries in light of the

queries raised by two of the Board members.

58. In respect of Parma and BMD, as set out above the complaints are essentially as follows;

(a) The absence of the entity BMD as a permitted transferee with clause 7.4.4 renders

the transaction invalid

(b) The method of assignment of the shareholding (clause 7.1.4) as opposed to the

requirement that Marpole repay the existing investor loan with the ‘new’ investor

then making provision of a new investor loan to the company.

shareholder, but also advanced by his counsel, a failure to acknowledge or make

clear that the March 2016 transfer did not proceed or was unwound because it was

in fact an invalid transfer, necessities this court adjudicating upon the terms of that

transfer.

(d) No proper or timely notice was given as required by clause 7.6 of 2004 SSA .

59. A suggestion was advanced by the plaintiff’s counsel, that, in other proceedings an

adjudication upon the March 2016 transfer may be of significance. From the

correspondence opened it is clear that there are apparently three sets of proceedings

issued by the plaintiff relating to what they contend to be breaches of the 2004 SSA (as

amended). As I further understand it, the agreement between the parties was that the

two other cases would proceed together but this case would proceed separately primarily,

as I understand it, on the basis of the ongoing ill health of Mr. Brendan McDonald and his

wish that all issues with regard to BMD’s shareholding be resolved at the earliest

opportunity. The other proceedings have as an issue, an allegation by Dr Sheehan,

pursuant to which he seeks relief pursuant to s. 212 of the Companies Act 2014 (‘the

oppression proceedings’), in respect of the conduct of the shareholders to the 2004 SSA.

60. The reliefs to these proceedings, in the events that have happened (the withdrawal of any

claim for damages and of injunctive reliefs), are now limited and entirely focused in

seeking to challenge the validity of the March and September 2016 transfers.

61. Upon execution of the documentation between BMD and Parma dated 14 March 2016, set

out in detail above, in my view it is clear that, as a matter of law, thereafter Parma held

the 10% shareholding formerly held by BMD, in Marpole. The correspondence issued by

the plaintiff pursuant to its challenge to the validity of March 2016 transfer, which

culminated in the issue of these proceedings in early August 2016, make this clear.

62. Thereafter in my view it is necessary to consider the effect of the September 2016

transaction.

Page 14 ⇓

63. Upon the execution of the documentation dated 23 September 2016 again as a matter of

law, the share transfer was reversed to the effect that the 10% shareholding in Marpole

was transferred or reverted to BMD. Thereafter the legal effect of those documents, all

executed on 23rd September 2016, was to effect a share transfer in BMD to Parma, via

MIL. Again the validity of that transfer is challenged, not by any subsequent amendment

to the endorsement of claim but, as set out above, in restricting the reliefs sought to

those within paragraphs (A) to (C) of the claim. It is accepted that MIL is a proper

proposed transferee, within the context of the September 2016 transfer as required by

the terms of the 2004 SSA as amended.

64. Are the reliefs sought as to the validity of the March 2016 transfer now moot or is this

court’s adjudication now required?

65. I appreciate that there has been an agreement that certain proceedings did not ultimately

proceed together but I am puzzled by any suggestion or purported suggestion that this

Court would be required to adjudicate upon matters, not relevant to its determination

upon any issues within these proceedings, but in respect of issues that might be raised

elsewhere, particularly within the oppression proceedings. In my view that forms no

basis for seeking an adjudication upon the validity of the March 2016 transfer and I

decline to do so in respect of that ground.

66. In the Supreme Court decision of Irwin v. Deasy [2010] IESC, Murray C.J. considered the

doctrine of mootness initially from the decision of Hardiman J. in G v. Collins [2005] 1

ILRM which in turn cited O’Brien v. The Personal Injuries Assessment Board (Supreme

Court unreported 16th November, 2006) to the effect that:-

“proceedings may be said to be moot where there is no longer any legal dispute

between the parties”.

Murray C.J. continued:-

“The mootness doctrine is applied by the courts to restrain parties from seeking

advisory opinions on abstract, hypothetical or academic questions of the law by

requiring the existence of a live controversy between the parties to the case in

order for the issue to be justiciable”.

67. The court, again citing Hardiman J.’s judgment above who in turn quoted from a Supreme

Court of Canada decision of Borowski v. Canada [1989] 1 SCR, to the following effect:-

“An appeal is moot when a decision will not have the effect of resolving some

controversy affecting or potentially affecting the rights of the parties. Such a live

controversy must be present not only when the action or proceeding is commenced

but also when the court is called upon to reach a decision. The general policy is

enforced in moot cases unless the court exercises its discretion to depart from it”.

68. Murray C.J. continues:-

Page 15 ⇓

“The general practice of this Court is to decline, in principle, to decide moot cases.

In exceptional circumstances where one or both parties has a material interest in a

decision on a point of law of exceptional public importance, the court may in the

interests of the due and proper administration of justice determine such a question.

However, the discretion to hear an appeal where there is no longer a live

controversy between the parties should be exercised with caution, and academic or

hypothetical appeals should not be heard. Exceptions may only arise where there is

a question of exceptional public importance at issue and there are special reasons

in the public interest for hearing the appeal”.

69. In my view, there is nothing within the circumstances surrounding the execution of the

March, 2016 transfer that constitutes a point of law of exceptional public importance

necessary to be determined in the interests of the due and proper administration of

justice.

70. As well as citing Irwin v. Deasy above, the first named defendant also relies on the

decision of Denham C.J. in the case of Lofinmakin v. Minister for Justice [2013] 4 IR

where Denham CJ. delivering the majority judgment stated:-

“As the deportation order has been revoked, there is no basis upon which to

proceed. Furthermore, any decision by this Court would be based on a hypothesis,

and would be an advisory opinion. It has long been the jurisprudence of this Court

that it will not give advisory opinions, except in exceptional circumstances, such as

under Article 26 of the Constitution, or as identified in the case law of the court.

Thus, while the parties had a real dispute when the proceedings were commenced,

this is no longer the case”.

71. The plaintiff contends and also points out that the registration of the March, 2016

transaction by the first named defendant and their continued refusal to in any sense

“admit” that such a transaction was registered in error, or that the other defendants do

not accept was a mistake or error, remain issues to which this court can have regard.

72. In my view, all requisite and necessary steps have been taken to unwind the March, 2016

transaction. I can see nothing within the terms of that transaction that remain. That is

abundantly clear from the fact that the documentation grounding the September, 2016

transaction began with a transfer of the 10 shares in the first named defendant from

Parma to BMD. Thereafter there was the appropriate amendment to the register of

companies. I can see no issue that arises on the facts of this case within these

proceedings in respect of the May, 2016 transaction that requires my adjudication. I note

from the quotation within Irwin v. Deasy above, that courts can restrain parties from

seeking advisory opinions on abstract, hypothetical or academic questions of law. In my

view, this would be, by analogy to seek my opinion on what has now become, in my view,

an academic or hypothetical question of law, in the events that have happened.

Page 16 ⇓

73. The first two reliefs sought by this Plaintiff (see paragraph 1) within its endorsement of

claim seek reliefs to the effect that the purported transfer (unspecified but as issued prior

to the September 2016 transfer, arguably only relates to the earlier transfer) and its

registration is void and of no legal effect. That would in my view require a ruling in

respect of a transaction which no longer has any legal import. To seek declaratory relief

that this transfer is void and of no legal effect and in respect of a registration which has

been reversed appears nonsensical. In my view there is now no issue requiring this

court’s adjudication in respect of the specific reliefs sought in respect of the March 2016

transfer. In my view any issue seeking the court’s adjudication upon the validity of the

March 2016 transfer or its entry onto the register of companies is moot.

The September 2016 Transfer – the Issue of Consent

74. An issue that arose within the hearing of this case was the extent to which the plaintiff

had or has in fact consented to this transfer. Of particular relevance is the

correspondence between the respective firms of solicitors (the plaintiff’s and Parma’s)

prior to the commencement of this hearing, dated 11th October and 15th October, 2018.

75. The plaintiff’s solicitors write on 11th October. They initially note that there are

apparently three sets of proceedings issued by the plaintiff relating to what they contend

to be breaches of the 2004 SSA (as amended). As set out above, there was an agreement

that this matter proceed separately. The letter also references comments by Twomey J. in

his judgment in Sheehan v Talos Capital Ltd [2018] IEHC 361 (‘Talos’) where the learned

Judge stated that in respect of that litigation and indeed other litigation concerning

Galway Clinic and Blackrock Hospital that:-

“While this Court has regard to the rights of access to the court, it must also be

cognisant to the fact that if even a relatively small number of other litigants used

court resources to resolve their private disputes to this extent, the legal system

would grind to a halt. Such a scenario would have a serious negative impact on all

Court users”.

76. The plaintiff’s solicitors set out the following proposition:-

“Our clients would expressly consent to the transfer of the BMD (Investments)

Limited shares in Marpole Limited to Parma Investments Limited, such consent

being given by our client without prejudice to its position in respect of the invalidity

of the transfer mechanisms used between vendor and purchaser and such consent

being accepted by your clients without prejudice to its position that the transfers

were entirely valid.

The parties would expressly retain their respective entitlements to agitate their

positions in respect of the validity of the transfer mechanisms used between

purchaser and vendor in the course of the oppressions proceedings”.

Page 17 ⇓

77. The reply from the solicitors for the second and third named defendants is dated 15th

October. Insofar as the consent issue was concerned, the proposal is framed as follows:-

(a) That the plaintiff would consent to the transfer of BMD’s shares to Parma.

(b) That that implicitly recognises the necessity that there would also be consent to the

assignment of the investor loans from BMD to Parma.

proceedings, specifically:-

(i) orders declaring the transfer void;

(ii) injunctions restraining Mr. McDonald from selling his shares; or

(iii) damages.

(d) That the separate s. 212 proceedings would be maintained and the further

suggestion that the costs of these proceedings be reserved to the judge dealing

with the s. 212 oppression proceedings.

78. At the hearing of this matter, the issue became more nuanced and potentially more

confusing. As I understood the submission by counsel for the plaintiff, the plaintiff’s

position, was that if the court found in favour of the plaintiff within these proceedings and

if the defendant were then to ask for its consent to the September 2016 to transaction to

Parma, that that consent would be immediately proffered.

79. That position was also raised in the cross-examination of Dr. Sheehan who appeared to

suggest that consent was forthcoming but that other reliefs within the endorsement of

claim remained. Within his witness statement (which he adopted in its entirety) he

asserts that in the event of the plaintiff being requested by any of the defendants to

consent to the proposed transactions, that are consistent with the requirements of the

SSA, then the plaintiff shall provide that consent.

80. Of course, if a court were to find that the plaintiff had in fact consented to the September

transaction, that would be to prosecute this litigation upon a very narrow plinth. It would

also suggest that the objection raised is a technical one at best and certainly one of form

over substance.

81. Whilst I note that the claim for interlocutory reliefs and damages were not proceeded with

by the Plaintiff, in my view given that the nature of the consent being furnished on behalf

of the Plaintiff is unresolved, I must now consider the validity of the September, 2016

transaction.

82. On the issue of shareholders rights and their potential infringement, the plaintiff places

great reliance upon the case of Sport Direct v. Minor & ors [2014] IEHC 546 (‘Sports

Direct’). Accordingly, it is necessary to consider the case in some detail. On the facts of

the case, the plaintiff and the first to fourth named defendants were all shareholders in

the fifth named defendant’s company. It was the plaintiff’s case that they (the first to

Page 18 ⇓

fourth named defendants) were in breach of certain provisions within a shareholder

agreement dated 3rd December, 2002, which the plaintiff contends were binding upon

them.

83. It was common case that the plaintiff was the owner of 50% shares in the company and a

nominee director on its board. The difficulty concerned a proposal that the company enter

into a lease of a property in Co. Antrim. The plaintiff contended that the shareholder

agreement required the consent of shareholders holding 60% of the shares and that this

percentage had not been reached in effecting or seeking to affect the decision at issue.

The defendants argued that the shareholder’s agreement did not apply and, to the extent

that it did, it was implicit that any such consent would not be unreasonably withheld.

There was also the suggestion that within other proceedings, described as the competition

proceedings, involving the same parties, that the terms of the 2002 agreement had been

sought to be upheld by the party now arguing as to its enforceability.

84. The Plaintiff sought interlocutory reliefs. In adopting the Campus Oil criteria the

defendant accepted, in the opinion of the court correctly, that there was such a serious

issue to be tried in respect of whether the 2002 shareholder agreement applied on the

facts of that case. Thereafter, the court went on to consider whether damages were an

adequate remedy for either party. The court quoted from the decision of Dublin Port and

Docks Board v. Britannia Dredging Company Limited [1968] IR where the Supreme Court

accepted that where parties have agreed to a negative covenant clause that a court, at

least until the trial of the action, “will prima facie enforce the covenant even though it

may be possible to measure the loss that would be attributable to its non-performance in

monetary terms. Thus, enforcement of a negative covenant may be another type of case

where the courts lean in favour of enforcement by injunction rather than compensation”.

85. In Sports Direct the court then stated:-

“The plaintiff in this application is not concerned about the possible losses that

might arise in respect of this particular proposed lease. The case was clearly

advanced on the basis that the affairs of the company and the relationships

between the shareholders had been governed by the 2002 agreement”.

The court continued:-

“The plaintiff is a 50% shareholder in the company but has only one nominee

director on the board of the company. This means that in the ordinary way the

affairs of the company were conducted by reference to the wishes of the other 50%

shareholders. The plaintiff argues that the 2002 agreement is essential to the

relations between the parties. If the defendants believe that they could determine

the affairs of the company without reference to the 2002 agreement where

applicable, this seriously undermines the position of the plaintiff who had entered

into the purchase of the 50% stake in the company on the basis inter alia, of the

2002 agreement. It is argued that clearly this damage cannot be either adequately

Page 19 ⇓

assessed or adequately compensated in damages within the meaning set out

above”.

86. The court then quoted Laffoy J. in Ancorde Limited and Harte v. Horgan [2013] IEHC as

follows:-

“By way of general observation, I think it is important to emphasise that, as

regards both the shareholder issue and the directorship issue, essentially the only

remedy which would be adequate for the successful party is the protection of his or

her ownership of the shares and the rights and privileges attaching to them. It is

for that reason that I find that damages would not be an adequate remedy for the

claimants on each application for interlocutory injunctive relief”.

87. Thereafter, the court continued:-

“It seems to me that the decision of the plaintiff’s nominee director and the plaintiff

not to explain why the plaintiff would not consent to the proposed lease does not

engage the equitable considerations referred to by Lord Hoffmann [a reference to a

quotation form him in O’Neill v Phillips [1999] 1 WLR]. On the contrary, when one

considers what the defendants agreed in the 2002 agreement and reaffirmed in

2007. It follows, therefore, that the exercise by the plaintiff of its power not to

consent in writing to the proposed lease would not be contrary to what the parties

have actually agreed. Rather it is entirely consistent both with what they agreed

and the clear purpose of the agreement entered into at the time”.

88. On that basis, the court was satisfied that damages would not be an adequate remedy for

the plaintiff and thereafter, the court considered the balance of convenience and where it

lay on the facts of the case. In considering that issue, the court looked at the nature of

the rights sought to be protected and stated:-

“…it is a right of veto of the shareholder pursuant to a shareholder’s agreement.

Secondly, it is a right in the nature of a negative covenant…. The enforcement of a

negative covenant is one where the courts lean in favour of enforcement by

injunction”.

On the facts of the case, the court granted an injunction in limited terms essentially

requiring or restraining the defendants from entering into the said lease “without the prior

consent in writing of the plaintiff pending the trial of this action”.

89. The plaintiff also relies upon the judgment of Clarke J. in Metro International SA v.

Independent News and Media PLC [2006] 1 ILRM (“Metro”) (also quoted within Sports

Direct) where Clarke J. stated:-

“There are, however, on the other hand, cases where the courts have traditionally

not been prepared to award damages even though there is a sense in which any

relevant loss could be calculated in monetary terms. Thus in many cases where a

plaintiff alleges an infringement of his property rights the court will intervene by

Page 20 ⇓

injunction where those property rights have been established rather than

compensate the plaintiff for the loss of those property rights… Thus the mere fact

that a property right (or indeed a diminution in such a right) can be valued in

monetary terms does not of itself mean that damages for an infringement of that

property right can necessarily be said to be an adequate remedy”.

90. This case, and indeed the references quoted from Britannia Dredging above, are advanced

by the plaintiff in support of its proposition that it is not a case of analysing the ultimate

net outcome of what occurred but rather of ensuring that there is strict contractual

adherence by all parties to the agreement. If a negative covenant has been contracted for

then that is the covenant that must be complied with.

91. In that regard, the defendant advances the proposition that the net effect is that there is

no difference and that the intentions of the parties with regard to clause 7.1.4 when they

entered into the agreement has been met, in that the capitalisation of the company by

reference to the shareholder’s loans has been maintained. It was also emphasised that

both in respect of Britannia Dredging and Sports Direct that the enforceability or

otherwise of a negative covenant was dealt with expressly and in the context of

considering the balance of convenience in the grant of interim relief and not as a stricture

or mandate to a court in making final orders in any action. I agree.

92. Not only was the court in Sports Direct considering the grant of interlocutory relief only, it

was doing so in the context of both parties agreeing that there was a serious question to

be tried. On its facts it also involves the potential additional acquisition by the company

which in my view is different from the transfer of shares amongst existing shareholders.

93. On the facts of this case no interlocutory relief(s) are now sought; the Plaintiff contended

that the specific declaratory reliefs sought within the endorsement of claim are sufficient

as the defendants could undoubtedly be relied upon to abide by their terms. I note that

Marpole makes an almost identical argument against its joinder to the proceedings ,on

the basis that it would of course abide by any order of this court in respect of the nature

of the declaratory reliefs sought.

94. Counsel for Marpole cites an extract from Courtney, The Law of Companies (4th ed.) at

para. 9.075, as follows:-

“The primary provision of a pre-emption provision is to control the admission of

members to a private company and to obstruct the unregulated admission of

outsiders to the circle of members”.

The relevance of this passage to the September 2016 is readily apparent

95. The September 2016 transfer is of course linked to the issue or degree to which this

plaintiff has already consented to its terms. It is clear that there has been an attempt by

the plaintiff to narrow the issues within this case, in part arising from this case proceeding

Page 21 ⇓

alone, but also within the confines of the case itself and it is to be commended for doing

so.

96. In whatever terms the consent is articulated it now appears that it is, at best, the

methodology underpinning the end result of the transfer that is at issue. Dr Sheehan

appears to contend that if the method is correct, thereafter consent, if sought (or perhaps

not even sought but volunteered) will be forthcoming. The letter from his solicitors of 11

October 2018 appears to adopt a slightly different position. In any event, in carefully

considering the comments of O’Donnell J in Law Society v MIBI [2017] IESC (cited at

paragraph 103 below) in my view they also highlight the unremarkable proposition that

some degree of common sense must be brought to bear, even in commercial

transactions. I appreciate in that case his conclusions were in respect of the construction

of contractual terms, here it is the degree to which the methodology of effecting a share

transfer, not impugned by Marpole who argued that it is better protected by a loan

assignment as opposed to a repayment of the loans (presumably sequentially to BMD and

thereafter MIL) to achieve the share transfer, is an appropriate and valid interpretation of

its obligations pursuant to the 2004 SSA as amended..

97. Were I to make the declaratory reliefs in respect of the September 2016 transfer as

sought by the plaintiff, that would then presumably require another re-winding of that

transaction (presumably at the expense of the second and third named defendants), to

thereafter begin again to effect the share transfer to Parma, to achieve an outcome to

which the plaintiff has agreed it will consent. That is of course to accept that the plaintiff

does not again take issue with any new transfer of the type envisaged.

98. As adverted to above, when dealing with the chronology of events, Mr Sheehan through

Dormway offered his shareholding in Marpole in the terms of his letter referred to at

paragraph 38 above.

99. The minutiae of that transaction, ultimately to Parma, although Dr Sheehan did seek to

acquire some or all of these shares, does not concern this court. However, what is

noteworthy is that that transaction was ultimately effected by assignment, that is in the

same manner as the September 2016 transaction. It has not been challenged by the

plaintiff, a fact confirmed by Dr. Sheehan in his evidence.

Is BMD a permitted transferee?

100. It may well be, consequent upon my ruling that any reliefs sought in respect of the May

2016 transfer are now moot, that this issue no longer requires adjudication. However, as

it had been raised in respect of the 2004 SSA, as amended, as a more generalised

proposition, for the avoidance of doubt I also deal with it here.

101. In respect of the difficulties or potential difficulties which have arisen in the omission of

BMD or the inclusion of the phrase “permitted transferee of BMD”, Mr Shannon suggested

in his evidence that it was unclear as to the precise nature of the omission and suggested

it could have been either of the options above. All defendants contend that BMD ought to

Page 22 ⇓

have been included in the list of permitted transferees and the omission is a clear and

obvious drafting error

102. All defendants rely upon the judgment of Lord Hoffmann in Investors Compensation

Scheme Limited v. West Bromwich Building Society [1998] 1 All ER and the decision of

the Supreme Court (O’Donnell J) in Law Society v. MIBI [2017] IESC (‘MIBI’).

103. O’Donnell J, delivering the judgment of the court, confirmed the operative principles for

construing a contract are those set out by Hoffman J in the case cited above. O’Donnell

J. noted that this authority has been cited with approval in cases before the Irish courts.

The defendants to this case rely in particular upon his fourth principle in the construction

of contracts as follows:-

“(4) The meaning which a document (or any other utterance) would convey to a

reasonable man is not the same thing as the meaning or its words. The meaning of

words is a matter of dictionaries and grammars; the meaning of the document is

what the parties using those words against the relevant background would

reasonably have been understood to mean…”

The Court continued:-

‘Legal agreements are not poetry intended to have nuances and layers of meaning

which reveal themselves only on repeated and perhaps contestable readings.

Agreements are intended to express in a clear and functional manner what the

parties have agreed upon in respect of their relationship, and the agreements often

do so in a manner which gives rise to no dispute. But language, and the business

of communication is complex, particularly when addressed to the future, which may

throw up issues not anticipated or precisely considered at the time the agreement

was made. It is not merely therefore a question of analysing the words used, but

rather it is the function of the court to try and understand from all the available

information, including the words used, what it is the parties agreed, or what it is a

reasonable person would consider they had agreed. In that regard the Court must

consider all of the factors, and the weight to be attributed to each….The reasonable

person who is the guide to the interpretation of the agreement is expected not

merely to possess linguistic skills but must also have, or acquire, a sympathetic

understanding of the commercial contest in which the agreement was meant to

operate, and perhaps even an understanding of the many ways in which even

written, formal and legal communication falls short of the standard clarity and

precision set by the early editions of Fowler’s Modern English Usage”

104. In my view applying the matters considered by O’Donnell J, and in considering the 2004

SSA as amended as a whole and the fact that, in my view, no-one has satisfactorily

explained why, alone amongst the shareholders, BMD is excluded, I accept that the

exclusion of the third named defendant (BMD) from Clause 7.4.4 of the 2004

shareholders agreement as amended, is a drafting error. It is clear from the entire tenor

of the agreement, that it reflects the manner in which all parties envisaged that the

Page 23 ⇓

transfers would take place between the various shareholders. That was not in any sense

departed from when Dornway was included as a shareholder within the amendments

incorporated with the 2015 Shareholder’s agreement (again without the amendment

necessary to include of BMD). All shareholders in essence have the same entitlement to

transfer shares within the respective permitted transferee categories and in my view the

exclusion of the third named defendant from that categorisation is simply an oversight or

omission.

Conclusion

105. In respect of the March 2016 transfer, the declaratory reliefs seek an order of the court

that the relevant transfer (and its subsequent registration) is “void and has no legal

effect”. Shortly after the issue of these proceedings that transfer was reversed. In short,

in my view the matters upon which declaratory reliefs are sought are no longer applicable

to the March 2016 transfer and any reliefs sought against all defendants, are moot.

106. To the extent that it is required I accept that the exclusion of the second named

defendant (BMD) from Clause 7.4.4 of the 2004 shareholders agreement as amended, is

an inadvertent omission and/or a drafting error.

107. In respect of the September 2016 share transfer:

(a) It is not a precondition or condition precedent of the 2004 SSA as amended that

consent must be sought within the categories of permitted transfers. That the

agreement between the plaintiff and Dornway was the subject of such consent does

not make it a prerequisite in any other share transfers. Clause 7 is clear in its use

of the word ‘may’.

(b) Clause 2 of the 2004 SSA as amended is clearly stated to be subject at all times to

clause 7.1 4, which is the operative clause in respect of any analysis of this

transaction. Likewise, invoking Schedule 3 does not in my view assist this plaintiff

as it relates to the acts of the company not its shareholders. In short, the

operative clause is 7.1.4 of the 2004 SSA, as amended.

(b) Whilst the statement of claim does plead the September 2016 transfer, which

occurred after the issue of these proceedings, there was no consequential

amendment to any of the reliefs sought. What did happen over time was that the

other proceedings relating to the 2004 Shareholders Agreement were agreed to be

dealt with elsewhere and this litigation to be dealt with independently of the others.

Within the pleadings it appears that the plaintiff seeks to impugn the September

2016 transfer in the same manner as it did the transaction in March 2016.

which the plaintiff had consented or was prepared to consent to the terms of the

September 2016 transfer became of importance.

(d) Certainly the nature and extent of that consent is not entirely clear cut; in my view

there are nuanced differences between the nature of the consent offered within the

Page 24 ⇓

correspondence on behalf of the plaintiff, in the opening of this case, the evidence

of Dr. Sheehan and within the written submissions. The preponderance of the

plaintiff’s case would appear to be to the effect if there was some form of

agreement or recognition that the September 2016 transfer would be executed in

accordance with the terms the plaintiff contends properly reflects the 2004

Shareholders Agreement as amended, then the consent of the plaintiff would be

forthcoming.

108. I have noted the submissions advanced on behalf of the first named defendant. It has

opened correspondence showing that it very clearly, at an early stage, sought to be

removed or not joined as a party to these proceedings. The only response from the

solicitors on behalf of the plaintiff was confirmation that default judgment would be

sought if it did not enter an appearance. It is difficult to see what cause of action lies

against the first named defendant. In respect of the March 2016 transfer I have already

set out my views that any adjudication upon that transfer is moot and in my view that

includes any issues raised by the plaintiff surrounding the efficacy of the plaintiff’s

registration of that share transfer. It is difficult to discern to what extent any argument

surrounding the efficacy of the share transfer arising from the September 2016 now

arises where it is common case that MIL is a permitted transferee within Clause 7.4.4 of

the 2004 SSA.

109. It is noteworthy and in my view of particular significance that in submissions to this Court

the first named defendant contends that, as a matter of reality a number of the provisions

of the 2004 SSA as amended, inure for its benefit and it does not lie with the plaintiff to

seek to litigate any alleged breach of its terms. I would not go so far as to suggest that

this plaintiff lacks locus standi, but the position adopted by Marpole in maintaining that its

interest have been properly protected at all times throughout this process is one to which

I have had regard. It further contends that the assignment of the loan (which is the

manner in which the September 2016 transfer was effected) in fact afforded a “cleaner”

and more timely protection of the company’s interest rather than the more laboured

methodology set out above.

110. I can see nothing within the September 2016 which requires the declaratory reliefs

sought by this plaintiff. In my view the documentation and steps taken by the second

and third named defendants (which have been set out in some detail above) accord with

the tenor of the 2004 SSA as amended. I reiterate that no issue has been taken by the

first named defendant in respect of the steps that had been taken. Quite the contrary.

111. Dr. Sheehan, in his evidence, stated that he was concerned about the status of his

company as a minority shareholder. Given what is clearly the significant enmity that

exists between the respective shareholders of the plaintiff and Parma, Dr. Sheehan

apprehended a significant “shift” in the shareholding and consequential voting rights

within this company arising from the 10% transfer of shares to the third named

defendant, to the plaintiff’s detriment

Page 25 ⇓

112. The plaintiff seeks to argue the efficacy of the September 2016 transfer upon the

narrowest and if I might say most pedantic of grounds namely, that there has been, upon

a deeply literal interpretation upon Clause 7.4.1 and 7.4.4 of the 2004 Shareholders

Agreement (as amended), a failure to adhere strictly to its terms rendering it null and

void. I am not prepared, and nor do I consider it appropriate, to make such an order.

113. Even if there has not been a strict absolutely literal adherence to the Shareholders

Agreement (and I am far from satisfied that that is the case), then the assignment of the

shareholding (and the comfort that the first named defendant takes from that procedure

in the context of the company remaining fully protected in respect of any loan that it

might call upon) renders it a transfer that in my view accords with the terms of the 2004

Shareholders Agreement (as amended). The entire structure of the Shareholders

Agreement must be considered as a totality and it is clear that between inter-shareholder

transfers (if I may describe them as such) that the share price and indeed loans that

inured for the benefit of the company (in respect of the latter) and for the protection of

remaining shareholders (in respect of the former), that in my view the terms of the

September 2016 transfer reflect that interpretation of this Agreement.

114. The suggestion that consent would be readily forthcoming if, to achieve precisely the

same result, another perhaps even more convoluted reversal and execution of additional

documentation to satisfy the plaintiff were now to be effected, is in my view very difficult

to understand.

115. In short, for the reasons set out above, any reliefs sought pursuant to the March 2016

transfer are now moot, the omission of BMD as a permitted transferee is an inadvertent

omission or drafting error and the terms of the September 2016 transfer, has been

effected in accordance with the terms of the 2004 SSA as amended.

116. Accordingly, insofar as the plaintiff seeks reliefs pursuant to paragraphs A, B, and C

within its endorsement of claim, in respect of A and B, I decline to make the declarations

sought.

117. With regard to paragraph C, I do not understand the nature of the declaratory reliefs

sought. In my view it is too broadly drawn and in any event the matters at issue within

this litigation (as opposed as perhaps when these matters were initially drafted) are dealt

with in the reliefs of A and B above. The reference to 11 June 2004 within its terms can

only relate to the March 2016 transfer which I have already dealt with. For the avoidance

of doubt, I decline to grant any declaration in accordance with para. C also.

118. I will therefore now hear the parties as to any additional orders that may be required

including the question of costs.

Result: The validity of certain share transfers, within the shareholders agreement, including the issue the issue of Mootness.