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Cite as: [1999] IESC 39

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O'Doherty v. West Limerick Resources Ltd. [1999] IESC 39 (14th May, 1999)

Lynch J.

Barron J.

269/96

THE SUPREME COURT

BETWEEN

PATRICK O’DOHERTY

Plaintiff/Appellant

and

WEST LIMERICK RESOURCES LIMITED

Defendant/Respondent

JUDGMENT delivered on the 14th day of May 1999 by LYNCH J. [ BARRON J. CONCURRING]

1. This is an appeal from a judgment and order of the High Court (Smyth J.) of the 29th July 1996 whereby the plaintiff/appellant’s claim for a declaration and injunctions was refused.

(2)

2. By a plenary summons issued on the 19th March 1996 the appellant claimed:

(1) An injunction restraining the defendant/respondent company from holding elections or in any other way filling or appointing officers to the board of directors of the respondent company.

(2) An injunction directing the respondent company to permit the appellant to attend meetings of the said board of directors.

(3) A declaration that the appellant was validly elected to the said board of directors on the 8th of November 1995.

3. The appellant issued and served a notice of motion returnable for the 20th of March 1996 claiming the same relief on an interlocutory basis.

4. That motion came before the High Court (Geoghegan J.) on the 20th of March 1996 whereupon the appellant undertook pending the full hearing of the matter not to seek to act as a director of the respondent company:

(3)

the respondent company undertook not to appoint a director in place of the appellant until further order: the motion was adjourned for full hearing such hearing to be treated as the hearing of the action: liberty was given to the parties to adduce oral evidence if they so wished: and it was ordered that points of claim and defence be delivered between the parties.

5. In fact no oral evidence was adduced by either party on the hearing of the said motion. The motion was accordingly heard on the 29th of July 1996 on an affidavit of the appellant sworn on the 15th of March 1996 and an affidavit of Sean Liston, chairman of the respondent company, sworn on the 19th of March 1996 and the documents exhibited in the said two affidavits. As there was no oral evidence and the matter was decided on affidavit evidence alone it follows that this Court is in as good a position as was the learned trial judge to determine the facts of the case but in saying

(4)

that I am not indicating any disagreement with the facts as found by the learned trial judge.

THE FACTUAL BACKGROUND

6. The people of West Limerick were active in seeking to improve the areas in which they lived and worked and thus their own quality of life. They sought to do this through an unincorporated association which they formed in about 1991 known as The West Limerick Resource Development Project. The respondent company was incorporated on the 10th of September 1993 and took over the activities and assets of the previous unincorporated association. The respondent company is a company limited by guarantee. Its Articles of Association provide for a board of directors of not less than seven nor more than twenty two members. Membership is unlimited as to numbers.

(5)

7. At the time of the matters giving rise to these proceedings there were some 35 community groups who had formed themselves into a communities committee of the respondent company. These communities were divided into four districts and each district was entitled to nominate two persons to be directors of the respondent company. The district to which the appellant belonged and which is the subject matter of this litigation is the Rathkeale district.

8. The Communities Committee held their Annual General Meeting on the 8th of November 1995 pursuant to a notice of such meeting dated and sent out on the 17th of October 1995. That notice was served on all appropriate bodies of the Rathkeale district save for two namely, the Knockfierna Heritage and Folklore Society and the Irish Palatine Association. The omission to serve these two bodies was not accidental. It was a deliberate but bona fide mistaken view taken by Mr. Liston on the

(6)

basis that these two bodies did not represent geographical areas. This mistake was corrected but resulted in very short notice such that these two bodies were late to propose candidates for nomination to the board of the respondent company and to prepare themselves properly for the meeting. At the Communities Committee Annual General Meeting on the 8th of November 1995 at which the said two bodies were represented even though on very short notice the appellant was elected as nominee by the Rathkeale district to be a director of the respondent company along with a Mr. McEnery, the continuing director in that year.

9. Objection was thereafter made to the election and nomination of the appellant by the Knockfierna Society and the Palatine Association. Eventually, the respondent company decided to re-run the election and nomination of a candidate as Director of the respondent company for the Rathkeale district. The appellant was duly proposed as a candidate but

(7)

the board of the respondent company refused to accept this proposal alleging that the appellant was disqualified by the provisions of Article 41(g) of the Articles of Association. The appellant denied that he was so disqualified and further contended that his election and nomination on the 8th of November 1995 were valid notwithstanding the defective notice to the Knockfierna Society and the Palatine Association. The appellant relied on Article 17 of the Articles of Association regarding notice of general meetings which concludes

“The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting”.

CONCLUSIONS

10. First, as regards the appellant’s contention that his election and nomination was valid having regard to the concluding words of Article 17

(8)

which I have just quoted I am satisfied that that contention must fail. The omission to give notice was not accidental: it was deliberate - a bona fide mistaken view, but nevertheless deliberate. See Keane on Company Law, 2nd edition paragraph 27.11, footnote 4 and the case there referred to Musslewhite v. Musslewhite and Co. [1962] Ch. 964. Moreover even in the case of an accidental omission what clause 17 does is that it entitles the respondent company and its board of directors to let the proceedings and decisions taken at the meeting stand but it does not bind them so to do. If, for example, through a computer fault notices were sent out only to forty or fifty or sixty per cent of the members obviously the board would be entitled on subsequently discovering the accidental failure to give notice to sixty or fifty or forty per cent of the members to regard the meeting as null and void. The board could then reconvene by a properly and adequately served notice such general meeting and put once again all the resolutions

(9)

which had been put before the defective meeting. This the board decided to do in this particular case in relation to the election and nomination of a person to be director representing the Rathkeale district and in my view the board were clearly entitled and correct to do so.

11. One of the problems in this case arises through confusion between the Annual General Meeting of the Communities Committee of the respondent company and the Annual General Meeting of the respondent company itself. The appellant throughout his affidavit and his points of claim refers to the meeting of the 8th of November 1995 as the Annual General Meeting of the respondent company. It was not such. It was the Annual General Meeting of the Communities Committee. But again confusion arises because it seems that the persons elected and nominated as directors of the respondent company for the four districts at the Communities Committee Annual General Meeting are more or less

(10)

automatically accepted as such by the respondent company. In any event the Annual General Meeting of the respondent company was held on the 16th of November 1995 and at that meeting it was decided unanimously (and in my view correctly so decided) that the election for the Rathkeale district should be re-run.

12. The election and nomination of the appellant by the Communities Committee was therefore not ratified or accepted by the respondent company at its Annual General Meeting held on the 16th November 1995 nor at any other general meeting or director’s meeting of the respondent company. The fact that Mr. Liston congratulated and welcomed the appellant on his nomination by the Communities Committee as a director for the Rathkeale District cannot bind the respondent company which at its Annual General Meeting a few days later specifically declined to accept or ratify the appellant as a director. It is the respondent company and not

(11)

the Communities Committee which is the ultimately effective body to elect directors. See Articles 18 and 44 of the Articles of Association.

13. The appellant was duly proposed as a candidate for such re-run election. The board of the respondent company refused to accept the appellant’s candidature relying on Article 41(g) of the Articles of Association which reads as follows:

“The office of director shall be vacated if the director:

(g) is convicted of an indictable offence unless the directors otherwise determine:”

14. The board of the respondent company were wrong. First, the election was by the Communities Committee, not the respondent company, and the Articles of Association would not apply at all. Secondly, Article 41(g) applies only to a person who is a director and when such director is convicted of an indictable offence. The convictions of the appellant relied

(12)

upon by the board predated his candidature and his claimed election and nomination and do not therefore operate to disqualify him from being a candidate or from being elected and nominated as a director. These convictions were recorded in Limerick District Court on the 9th of December 1992 and affirmed by Limerick Circuit Court on the 20th of April 1993 and were three convictions for fraud as follows:

(1) That the appellant feloniously obtained £1,000 on the 8th of April 1992 from one Michael O’Brien by falsely pretending that the board of Shannon Development had approved an application by the appellant for grant aid in the amount of £18,000.

(2) That the appellant feloniously obtained £8,000 on the 9th of April 1992 from the said Michael O’Brien by the same false pretences.

(3) That the appellant feloniously obtained £2,000 on the 21st of April 1992 from the said Michael O’Brien by the same false pretences.

(13)

15. While these convictions did not disqualify the appellant from being a candidate and if successful from being a director of the respondent company they did impose an ethical obligation on him to disclose these convictions when putting himself forward as a candidate. The convictions and also the date of commission of the respective offences were quite recent and not in the dim and distant past. They were unknown to the board of the respondent company and apparently, so far as one can gather, to the electorate in general and were only discovered shortly before the intended re-running of the election. The offences were treated as minor offences and were accordingly tried summarily in the District Court and on appeal therefrom in the Circuit Court and perhaps the appellant might have some explanation for the offences and in particular as to whether Mr. O’Brien was ever repaid his £11,000. No such disclosure or explanation was made by the appellant however nor was any explanation proffered to this Court

(14)

nor apparently to the High Court. The fact that the respondent company is administering substantial public funds running to some millions of pounds from the State and the European Union made the ethical obligation of disclosure all the greater.

16. We were informed by counsel for the respondent company that since the date of the judgment and order of the High Court of the 29th of July 1996 the respondent company has altered its rules and counsel submitted that the whole matter is now moot. However, there is no evidence of the altered rules but the passage of time certainly leans against any declaration that the appellant is a director of the respondent company nominated by the Rathkeale district, the present incumbent (assuming the vacancy has been filled in the meantime) not being a party to these proceedings.

(15)

17. What the appellant is seeking in these proceedings is equitable relief by way of injunctions and a declaration. The learned trial judge, in the course of his judgment, referred to the equitable maxim

“he who comes into equity must come with clean hands”.

18. I think that the learned trial judge was correct in his reliance on that maxim as one of the grounds for refusing the appellant’s claim in these proceedings. I, too, would rely on the maxim together with the other observations which I have made above and I would dismiss this appeal.