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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> O'Neill v. Ryan & Ors [1989] IEHC 3; [1990] ILRM 140 (24 November 1989) URL: http://www.bailii.org/ie/cases/IEHC/1989/3.html Cite as: [1989] IEHC 3, [1990] ILRM 140 |
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No. 8774P
BETWEEN:
PLAINTIFF
DEFENDANTS
JUDGMENT of Lynch J. delivered on the 24th day of November 1989
Introduction and the Facts
This is a motion brought by the last four defendants that the plaintiff's action as against the said defendants be dismissed or stayed under the inherent jurisdiction of the court and under 0. 19 r. 28 of the Rules of the Superior Courts on the grounds that the plenary summons and statement of claim disclose no reasonable cause of action against the said defendants and that such action (if any) as is disclosed by the pleadings is not maintainable at the suit of the plaintiff personally and is bound to fail.
On such a motion it seems to me that the proper approach is to study carefully the statement of claim in order to see exactly what is alleged and what is claimed therein and to assume that all allegations made therein will be established. Then, having made that assumption, I must decide whether or not the statement of claim discloses any reasonable cause of action vested in the plaintiff against the last four defendants claim for damages and other relief for breach of contract and wrongful dismissal of the plaintiff from his office as chief executive of the second defendant. That claim is made only against the first and second defendants: the other defendants, being the last four defendants (the moving parties in this motion) are not concerned with it at all.
The statement of claim makes claims against the last four defendants singly, collectively, and collectively with the first defendant for alleged breaches of Articles 85 and 86 of the Treaty establishing the European Economic Community (the Treaty) and for alleged conspiracy causing damage to the plaintiff. It is these claims which are the subject of the last four defendants' motion to dismiss or stay and the terms of the statement of claim in relation to them must therefore be considered in detail.
No allegation of any wrongdoing is made against any of the last four defendants in the first 16 paragraphs of the statement of claim. Those paragraphs contain descriptions of all the parties to the action and also, in the case of the plaintiff, an averment that he is the owner of 7.2% of the issued share capital of the second defendant and was chief executive of the second defendant until 6 September 1988. Those paragraphs also contain allegations in relation to the plaintiff's claim against the first and second defendants for damages for breach of contract and wrongful dismissal.
Paragraph 17 of the statement of claim is as follows:
As a consequence of the success of the second named defendant's business arid the introduction of serious competition for the first time on air routes between Ireland and the United Kingdom, the third named defendant adopted anti-competitive practices and policies which infringed the rules on competition of the European Economic Community and in particular Articles 85 and 86 of the EEC Treaty. The plaintiff pleads that the third named defendant holds a dominant position in the air services market between Ireland and the United Kingdom and has and continues to adopt illegal and unlawful policies in confronting the competition presented by the second named defendant. The following are pleaded, inter alia, as particulars.
(a) Abusing a dominant position within the common market (or in a substantial part thereof) and affecting trade between member states by directly and indirectly imposing unfair selling prices contrary to Article 86(2)(a) of the EEC Treaty. Predatory pricing policies were adopted by the third named defendant on routes where there was competition with the second named defendant.
(b) Abusing a dominant position within the common market or in a substantial part thereof and affecting trade between member states by directly and indirectly imposing unfair trading conditions contrary to Article 86(2)(a) of the EEC Treaty. Without any market requirement, the third named defendant provided excess capacity on routes directly competing with the second named defendant including routes which the third named defendant had earlier declared to be uneconomic and where the third named defendant had requested government subsidies as a condition for the operation of these routes.
(c) Abusing a dominant position within the common market or a substantial part thereof and affecting trade between member states by limiting production and markets to the prejudice of consumers contrary to Article 86(2)(h) of the EEC Treaty. The third named defendant maintained much higher prices on routes where there was no competition from the second named defendant. On routes where there was such competition from the second named defendant, the third named defendant adopted predatory pricing policies including the selling of seats at uneconomic prices.
(d) Abusing a dominant position within the common market or a substantial part thereof and affecting trade between member states by taking selective actions against the second named defendant in breach of Article 86 of the EEC Treaty. The third named defendant offered certain 'free' gifts as consumer fidelity incentives on routes which compete with those of the second named defendant including free hotel accommodation and free car hire.
It is quite clear that the allegations in paragraph 17 of the statement of claim are of wrongs committed by the third defendant against the second defendant.
Paragraph 18 of the statement of claim is as follows:
The plaintiff further pleads that as a consequence of advices and meetings between the first, fifth and sixth named defendants their respective servants or agents advices that were unlawful and prohibited by the competition rules of the European Economic Community were furnished to the third and fourth named defendants so as to enable the said defendants deal with a deregulated air transport market and/or the threats posed by the presence of genuine competition for the provision of air services within and without the State. The plaintiff pleads that subsequent to the establishment of the second named defendant as a genuine competitor with the third named defendant at a date which cannot be specified until discovery herein, secret meetings took place between the first, fifth and sixth named defendants their respective servants or agents of the one part and the third and fourth named defendants their respective servants or agents of the other part. The plaintiff pleads that the said meetings dealt with and discussed matters prohibited by the competition rules of the European Community. Prior to discovery herein, the following are pleaded inter alia as particulars.
(a) Entering into agreements, decisions or concerted practices which affect trade between member states and which have as their object or effect the prevention restriction or distortion of competition within the common market by sharing markets or sources of supply in breach of Article 85(1)(c) of the EEC Treaty.
(b) Entering into discussions concerning agreements decisions and concerted practices affecting trade between member states and which have as their object or effect the prevention restriction or distortion of competition within the common market in contemplating matters specifically prohibited by the competition rules of the European Economic Community and in particular Articles 85 and 86 thereof.
(c) Giving advice to the third and fourth named defendants which have as their inevitable consequence the adoption of policies which are in breach of the competition rules of the European Economic Community and in particular Articles 85 and 86 thereof. The first, fifth and sixth named defendants their respective servants or agents furnished the third and fourth named defendants with advices in competition strategy and policy which infringed the competition rules aforesaid. The plaintiff pleads that the said advices were used in part by the third and fourth named defendants in adopting the anti-competitive practices against the second named defendant as herein before particularised.
I am satisfied that the true meaning of paragraph 18 is that the first, fifth and sixth defendants unlawfully advised the third and fourth defendants to implement policies and practices of competition with the second defendant for air transport business which were contrary to the competition rules of the Treaty.
Paragraph 19 of the statement of claim is as follows:
The plaintiff has suffered loss and damage as a consequence of the alleged unlawful actions of the first, third, fourth, fifth and sixth named defendants. The value of the plaintiff's shareholding in the second named defendant has been greatly reduced. In the premises the plaintiff claims damages for breach of directly applicable provisions of Community law.
This paragraph speaks for itself and makes it quite clear that the damage alleged to be suffered by the plaintiff is the alleged reduction in value of his shareholding in the second defendant by the damage allegedly caused to the second defendant by the alleged wrongful conduct of the first defendant and the last four defendants.
Paragraph 20 of the statement of claim is as follows:
The plaintiff further pleads that the actions of the first, fifth and sixth named defendants of the one part and the third and fourth named defendants of the other part to advise and recommend the unlawful and anti-competitive means of confronting competition in the air transport sector together with the secret meetings that took place between the said parties referred to in paragraph 18 herein and the damage thereby suffered by the plaintiff amounts to a conspiracy on the said defendants' part. The plaintiff pleads that as a consequence of the unlawful means utilized by the said defendants to advance their business interests the plaintiff has suffered loss and damage. In the premises the plaintiff pleads that the first, third, fourth, fifth and sixth named defendants their respective servants or agents wrongfully and maliciously conspired and combined amongst themselves to injure the plaintiff. The particulars pleaded in paragraphs 17 and 18 herein are repeated mutatis mutandis as particulars of the unlawful means alleged in respect of the said conspiracy.
On a first reading of this paragraph it might seem to allege a tortious conspiracy directly to injure the plaintiff. A closer reading of the paragraph however and in particular the reference back therein to paragraphs 17 and 18 as the particulars of the allegations made in paragraph 20 makes it quite clear to me that the plaintiff is not alleging any direct damage to himself but rather damage by the reduction in value of his shareholding in the second defendants by the damage allegedly caused to the second defendants by the alleged wrongful conduct of the first defendant and the last four defendants. This construction of paragraph 20 is reinforced by the prayer or claim in paragraph 24 at subparagraph (1) which is as follows:
A declaration that the advices guidance or directions furnished aforesaid and the meetings held between the first named defendant, the fifth named defendant and or the sixth named defendant their respective servants or agents and the third named defendant and the fourth named defendant their servants or agents amount to a conspiracy agreement combination or concerted practice between the said parties to damage the value of the shareholding in the second named defendant including those shares held by the plaintiff.
Paragraphs 21 and 22 of the statement of claim, while complaining of the loss and damage suffered by the second defendant and the alleged reduction in value of its shares by the alleged unlawful conduct of the third defendant are actually directed against the first defendant only as is paragraph 23 which relates to the alleged wrongful dismissal of the plaintiff from his post of chief executive of the second defendant allegedly at the behest of the first defendant.
The last paragraph of the statement of claim is paragraph 24 which contains the prayers or claims and I have already quoted subparagraph (i) thereof. It is not necessary to quote any of the other subparagraphs except subparagraph (e) which is as follows:
Damages for conspiracy against the first named defendant, third named defendant, the fourth named defendant, the fifth named defendant and the sixth named defendant.
Clearly this subparagraph must be read in conjunction with subparagraph (i) already quoted above and therefore the damages referred to are the damage to 'the value of the shareholding in the second named defendant including those shares held by the plaintiff'.
The motion to dismiss or stay the plaintiff's action as against the four last defendants was grounded on four affidavits which are to all intents and purposes identical. I quote paragraph 3 of the affidavit of Oisin O'Siochru filed on behalf of the third defendants:
In any event, I have been advised by Aer Lingus solicitors McCann Fitzgerald and believe that the plaintiff has no locus standi to maintain these proceedings against Aer Lingus. I say and believe that the plaintiff in these proceedings is seeking to make a case against Aer Lingus in respect of alleged wrongdoing by Aer Lingus, GPA and others against Ryan Air Ltd the second named defendant. I also say and believe that as appears from paragraph 1 of the statement of claim the plaintiff is an individual shareholder in Ryan Air Ltd holding a mere 7.2% of the issued share capital thereof. In that context I am advised by Aer Lingus solicitors and believe that the plaintiff as an individual shareholder is not entitled to bring an action in this Honourable Court complaining of wrongs allegedly done to Ryan Air Ltd. If any such action is to be brought ( so I am advised and believe) it can only be at the suit of Ryan Air Ltd.
In reply to the affidavits filed on behalf of the last four defendants the plaintiff's solicitor filed an affidavit paragraph 4 of which is as follows:
I beg to refer to the affidavit of Oisin O'Siochru. The said affidavit merely denies the allegations of wrongdoing against Aer Lingus plc and apart from advancing a legal argument on an alleged lack of locus standi makes no attempt whatsoever to deal with the substantial matters alleged in respect of the said defendant. I am advised that the plaintiff has the locus standi to institute these proceedings and that the said averment is based on a misinterpretation of community law. I am advised that the plaintiff has a cause of action as a private individual and natural person (as distinct from a legal person) and can claim a legitimate interest in respect of the matters complained of in these proceedings that allege breach of community law. I say that the plaintiff is a substantial private investor and shareholder in Ryan Air Ltd. I say and am advised that the 7.2% shareholding in the said defendant gives him standing to institute proceedings in respect of the matters complained of in the statement of claim herein. As a substantial shareholder and investor in the second named defendant the plaintiff complains that certain anti-competitive and illegal practices adopted by Aer Lingus in meeting the genuine competition introduced into the Irish market for the first time in Ryan Air has damaged and reduced the value of the plaintiff's shareholding in the said undertaking. I am advised that the provenance of the plaintiff's cause of action derived from the competition law of the European Communities and in particular the rules on competition contained in Articles 85 to 94 of the EEC Treaty. I say and am advised that the fact that a similar cause of action might also be instituted by Ryan Air Ltd against Aer Lingus in no way alters the position of the plaintiff or the cause of action instituted against the said defendant.
The submissions
Counsel for the last four defendants (the moving parties) submitted that the plaintiff's claim against them was only as a shareholder in the second defendant and accordingly having regard to the rule in Foss v Harbottle (1843) 2 Hare 461 to the effect that an individual shareholder cannot bring an action that should properly be brought if at all by the company the claim did not lie at the suit of the plaintiff. Counsel further submitted that although Articles 85 and 86 of the Treaty had direct effect in Irish law and must therefore be enforced by Irish courts, nevertheless the articles should be enforced in the same manner and subject to the same limitations as would apply to an analogous claim under Irish national law. Consequently the rule in Foss v Harbottle should be applied to claims based on alleged breaches of Articles 85 and 86 as much as to claims based on alleged tortious conspiracy. Counsel for the last four defendants cited the authorities referred to in the first schedule to this judgment.
Counsel for the plaintiff (the respondent in the motion) submitted that the plaintiff is entitled as a natural person to seek to enforce Articles 85 and 86 of the Treaty and that the limitations of the rule in Foss v Harbottle did not apply to such a claim especially where, as he alleges in this case, the breaches of the articles caused damage to himself Counsel further submitted that the plaintiff was entitled to maintain his claim for damages for conspiracy causing loss and damage to himself and also for the declarations as claimed in the statement of claim. Counsel submitted that the jurisdiction to make declarations such as those sought in the statement of claim was much more widely accepted in Ireland than in the United Kingdom and that the plaintiff is therefore entitled to prosecute a claim for such declarations. Counsel for the plaintiff cited the authorities referred to in the second schedule to this judgment.
Conclusions
As is apparent from what I have already said, the plaintiff's claim against the last four defendants is made solely as a shareholder in the second defendant for relief in respect of alleged wrongful conduct of the last four defendants (together with the first defendant in certain respects) causing damage to the second defendant and thereby to the plaintiff by reducing the value of the plaintiff's shareholding in the second defendant. The plaintiff's former status as chief executive of the second defendant has nothing to do with this claim: it is as shareholder only and not as a former officer of the second defendant that the plaintiff claims against the last four defendants.
In order to test the validity of the plaintiff's claim against the last four defendants it is appropriate to consider what would necessarily follow if it is valid. A holder of 100 shares in a very large public company trading internationally throughout Europe with a capital of one hundred million shares would be entitled to maintain an action against one or more other companies large or small if he honestly believed that such other company or companies were seeking to limit his company's international trade by unfair means contrary to the competition rules of the European Community and/or by conspiring so to do. Many such actions could be brought by individual shareholders even though the directors of the allegedly wronged company, for reasons that seemed to them to be commercially valid, did not consider that any such action should be brought by the company at all.
It was submitted however on behalf of the plaintiff that the rule in Foss v Harbottle does not apply to a cause of action based on a breach by other parties of the competition rules of the Treaty causing damage to the company in which the plaintiff is a shareholder. It cannot be doubted but that it is the duty of national courts to enforce and give effect to directly applicable provisions of the Treaty such as the competition rules and in particular Articles 85 and 86. I quote from the judgment of the European Court of Justice in the case of Rewe v Hauptzollamt Kiel [1981] 2 ECR 1805, 1841:
The system of legal protection established by the Treaty, as set out in Article 177 in particular, implies that it must be possible for every type of action provided for by national law to be available before the national courts for the purpose of ensuring observance of community provisions having direct effect, on the same conditions concerning admissibility and procedure as would apply were it a question of ensuring observance of national law.
It is therefore clear that I must give effect to Articles 85 and 86 of the Treaty but it is also well settled that effect must be given by the national courts in like circumstances and subject to like limitations as would be applied by the national courts to an analogous cause of action in national law, it being clearly understood however that no limit which would wholly or substantially negative the enforcement of Articles 85 and 86 in Irish law could be applied. I quote from Halsbury (4th ed.) vol. 51 para. 3.71 at p.448:
Where an individual or trader wishes to enforce Community law against national authorities before national courts, the basic principle remains that, in the absence of any relevant Community rules, normal national remedies should be used provided that they do not make it practically impossible to exercise enforceable Community rights, and that these national rules are non-discriminatory and subject to the overriding obligation on national courts to protect directly effective rights under Community law. Hence the relevant national limitation periods apply if they comply with these conditions. However, whilst in a claim for restitution of sums wrongly paid to the national authorities the national courts may take account of the fact that those charges were actually passed on to the plaintiff's customers so as to prevent the unjust enrichment of the plaintiff, if national law so provides, they cannot impose an excessive burden of proof that such charges were not passed on to the customers even if such a burden would be imposed in relation to an analagous claim arising under national law. On the other hand, if recovery for an overpayment is available on grounds of equity in relation to a national tax, it should also be available in relation to an overpayment made under Community law.
The rule in Foss v Harbottle does not wholly or substantially negative the effectiveness or enforceability of Articles 85 and 86 in Irish law. Breaches of those articles can be challenged by the company which is the victim of the breaches. The rule merely prohibits persons who are not directly affected by the breaches from maintaining an action which is more properly to be maintained, if at all, by the company in which such persons are shareholders. The desirability of avoiding a multiplicity of actions perhaps in many cases contrary to the will of the directors and/or the majority of shareholders is obviously a major factor in the thinking underlying the rule in Foss v Harbottle and demonstrates the sound sense of that thinking.
I am of the opinion that the plaintiff's present action against the last four defendants is a classic case to which the rule in Foss v Harbottle applies and I accordingly dismiss the plaintiff's action as against the last four defendants.