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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Dowling & ors v Cook & ors [2013] IESC 25 (16 May 2013)
URL: http://www.bailii.org/ie/cases/IESC/2013/S25.html
Cite as: [2013] IESC 25
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Judgment Title: Dowling & ors v Cook & ors Neutral Citation: [2013] IESC 25 Supreme Court Record Number: 126/13 High Court Record Number: 2013 36 COS Date of Delivery: 16/05/2013 Court: Supreme Court Composition of Court: Hardiman J., Clarke J., MacMenamin J. Judgment by: Hardiman J. Status of Judgment: Approved
Outcome: Dismiss | ||||||||||||||||
THE SUPREME COURT Hardiman J. 126/2013 Clarke J. MacMenamin J. DOWLING & ORS v. COOK & ORS JUDGMENT of Mr. Justice Hardiman delivered the 16th day of May, 2013. This is the appeal of the petitioners against the judgment and order of the High Court (Mr. Justice Gilligan) delivered the 27th March, 2013 whereby he refused the petitioners the relief which they sought. The relief sought was as follows, according to the High Court Order: (1) An order by way of an interlocutory prohibitary injunction restraining the respondents or any of them whether by themselves or by their servants or agents or plenipotentiaries from undertaking any action to terminate Piotr Skoczylas Directorship at Permanent TSB Group Holdings PLC until the adjudication upon the within the proceedings and in particular the adjudication upon reliefs 11 and 12 sought in the Petition dated the 25th day of January 2013 has been concluded. (2) Further and without prejudice to the foregoing an order pursuant to Article 267 of the Treaty on the Functioning of the European Union that the questions raised in the Schedule hereof be referred to the European Court of Justice for preliminary ruling pursuant to Article 267 of the Treaty on the Functioning of the European Union, if the Honourable Court is uncertain regarding the interpretation of the respective provisions of European Union Law and if the Court considers that the relevant matters raised by the petitioners to enable the Court to give judgment. For the purpose of this appeal hearing, it was conceded that the appellants had shown a serious issue to be tried, and therefore met the first of the Campus Oil tests. On the hearing of this appeal, the real focus was on the third test, relating to the Balance of Convenience in granting or withholding interlocutory relief. It became clear that the petitioners’ claim was urgent because the Annual General Meeting of the Company is due to take place on the 22nd May and the petitioners apprehend that Mr. Skoczylas, the fifth-named petitioner, will be voted off the Board on that occasion. This seems likely, though the Respondents suggest that it is an open question. Having regard to this time constraint the Court has decided to give a short judgment confined to the interlocutory aspects of the case. Background. The background facts in this case are clear enough, although not uncontroversial. Mr. Skoczylas was elected to the Board of the Company on the 4th April, 2012. The other Director defendants who were already members of the Board were reappointed in that capacity on the 22nd May, 2012. The Company is the Holding Company for the entity conducting business of ILP Bank, a notoriously troubled Corporation. Mr. Skoczylas makes various claims in relation to what he said was a determined campaign by the other Directors and those to whom they are responsible to ensure that he was in no real sense allowed to discharge the functions of a director of the Holding Company. Moreover, he claims that he was not appointed a director of the Bank, whereas all the Directors of the Holding Company were so appointed and that he was therefore excluded from the induction process made available to such Directors. He says it was clearly envisaged by the Scheme of Arrangement which led to the adoption of the present corporate structure of the Holding Company and the Bank that Directors of the Holding Company would be made Directors of the Bank. The respondents, on the other hand, say that that situation was only envisaged “for a single moment in time”, the moment immediately after the Bank’s new structure came into being. Mr. Skoczylas, who was supported in this regard by the other petitioners, says he was given no proper information, attended only three full meetings of the Board, and was excluded, physically on occasion, from the relevant premises. He claims, in general, that his election as Director was resented by those in charge of the Company who did their best to undermine his position. These and sundry other complaints are the subject of the petition pursuant to s.205 of the Companies Act which he and the other petitioners have brought and which awaits hearing in the High Court. Article 87 of the Companies Memorandum and Articles is in the common form. It provides for the retirement of Directors at each Annual General Meeting starting with the Director who is longest serving from his most recent appointment. The High Court judge held that Mr. Skoczylas:
The respondents claim that Mr. Skoczylas’s action in putting himself forward for election has made the present proceedings moot. The Court cannot endorse this approach and indeed it smacks of a “Catch 22”. Once the Company had been successful in the High Court Mr. Skoczylas had to either put himself forward for re-election or acquiesce in his departure from the Board. His action in going forward for re-election was one forced upon him and the correspondence makes it quite clear that he did not acknowledge that he was, in point of law, obliged to retire. It is, however, quite clear, to say the least of it, that there is a strong case to be made from the point of view that Mr. Skoczylas was obliged to retire as a Director, and this case indeed found favour with the learned High Court judge and is expounded in his judgment. Mr. Skoczylas is manifestly entitled to appeal from this judgment and the question is whether interlocutory relief should be accorded him pending the appeal. In support of this application for interlocutory relief the plaintiff relies very largely on two cases, McGilligan v. O’Grady & Ors. [1999] 1 IR 346 and Avoca Capital Holdings and The Companies Act [2005] IHEC 302. It will be noted that Mr. Skoczylas conducted his case personally and did so with conspicuous ability, advancing an elaborate scholarly argument in favour of the positions he put forward. Indeed, he received the unique compliment of having his argument gratefully adopted by counsel for some of the other petitioners who advanced no additional argument. Mr. Skoczylas submitted that the essence of the O’Grady case was epitomised in the final paragraph of the short concurring judgment of Mr. Justice Barron in that case. Mr. Justice Barron said:
Section 205 was enacted primarily in order to remedy that defect in Company Law. Consequently, the fact that, in such a case as the present, the shareholders are perfectly entitled as a matter of law - s.205 apart - to remove a director even where that is in breach of a contract between him and them is not a material fact in considering whether that action, either taken in isolation or as part of a general course of conduct intended to exclude a particular body of shareholders from participation in the Company, is a ground for relief under the Section.” I am by no means sure that that distinction be sufficient to allow one to distinguish McGilligan from the present case in point of law. The fact is that the actions sought to be restrained in both cases are prima facie lawful actions, that is to say, the passage of a motion under s.182 and the act of voting against Mr. Sckoczylas’s re-election as a director in the present case. What McGilligan establishes is that even a lawful action may be restrained due to the effect in law of s.205. In the McGilligan case, however, the plaintiff had been elected a director of the Company by reason of an agreement between the parties interested in the Company, which was a Business Expansion Scheme funded Company. The plaintiff was to be appointed a director in order to represent the interests of investors. Persons interested in the Company had, accordingly, contracted to have and to maintain on the relevant Board or Boards a representative of a particular interest and this arrangement was being undermined by the s.182 motion. Similarly, in the Avoca case, the Company “essentially operated as a partnership between the members” and the conduct of the members was governed by a shareholders’ agreement. It thus appears that in each of these cases the relevant petitioner had what one might call an external title, deriving from the agreements between those interested in the Company, apart from the standing in Company Law. This feature is absent from the present case. The Court is further of the view that the relief sought, essentially preventing the major shareholder from voting his shares at the pending AGM is relief of a very radical kind and may, indeed, be essentially mandatory in its effect. The Court does not need to resolve that question because we are satisfied that, on the basis of the distinction set out above between the present case and the authorities relied upon, it is not appropriate to grant relief. Mr. Skoczylas also claims that his treatment amounts to a breach of directly effective European Law, set out in some detail in the summary of his argument which he handed in on the morning of the hearing. In this connection it important to note the learned trial judge’s finding that there are indeed issues to be tried as to whether there is a breach of directly effective European Law. The Court must also acknowledge that, as a matter of European Law, a National rule cannot be used to deprive a party of interim relief where to do so would be to deprive that party of an effective remedy in respect of the relevant European Law issues. It appears to the Court, as it appears in relation to the domestic law issues, that the jurisdiction which the Court enjoys under s.205 is broad enough to allow the Court to put in place any appropriate remedy that may be necessary to provide a remedy for any breach of European Law which may be made out. Thus, there does not appear to be any remedy which might be given at this stage that could not also be given after the trial so that the only issue that arises is one of a delayed rather than a refused remedy. It is also worth pointing out that the Court was informed that the ordinary shareholders in the Company have until Monday next to grant proxies in respect of their votes to the Chairman of the Company. It is a significant consideration that, if relief were granted in the form which the petitioners seek against the Chairman of the Company, it would or might amount to an order which would have the effect of disenfranchising such shareholders who, quite voluntarily, would have given their proxy to him on the basis that he could exercise it as he wishes. Thus, though the form of order would be against the Chairman and Directors, the effect of it would be felt by such Directors as would give the Chairman their proxies: it is not possible to say how many such shareholders there are but it would seem very probable that there will be some such. I may also say that I am not satisfied that the granting of relief is appropriate having regard to the balance of convenience. It is a grave matter for a company to have on its Board a person whom the Directors do not desire to have there and who may (or of course may not) be acting in a manner antagonistic to the interest of the Company. The Court is left to strike a balance between the respective convenience of having a person on the Board who may not be entitled to be there for a significant period of time, and, on the other hand, the exclusion of a person entitled to be on the Board if, as appears likely, (despite the protestations of counsel for the respondents and the Minister), he is not re-elected to the Board. In those circumstances, however, the Court believes that its powers under a s.205 application, if the petitioners are successful, are very wide and will enable it to take every possible step to compensate the petitioners for the wrong which will have been done to them if they are successful with their petition. The Court will end with a reflection of what it said at the start. The petitioners have plainly shown a very serious issue to be tried being the issues raised in the s.205 Petition and it is manifestly necessary in the interest of the Company that its conduct during the probable period of exclusion of Mr. Skoczylas following the refusal of relief reflects the possibility that he will be successful in these proceedings. The Court will refuse the application for interlocutory relief. | ||||||||||||||||