High Court of Ireland Decisions

1. The Plaintiff claims that in 1974 he was approached by the first Defendant with a view to establishing a public relations business. They agreed to establish a partnership and that the second Defendant should be a partner in that business. They then agreed that their partnership business would be conducted through the medium of a company (“MCL”). All went well for some twenty years. The business thrived and expanded, moved to a new premises and changed its name.

2. At the end of 1994 the first Defendant threatened to pull out of this business relationship unless he was given complete control. The Plaintiff offered to sell his shares in the company to the other two but negotiations on price were unsuccessful. There were acrimonious meetings, failed negotiations and the Plaintiff claims that the other two have unilaterally purported to terminate their partnership with the Plaintiff and have been running the company to the exclusion of the Plaintiff (a fundamental breach of their original agreement to have equal tripartite control). Moreover, they have conspired to reduce the recorded profits and to dissipate the assets of the company and to induce the company to break its contract of employment with the Plaintiff both by failing to pay his salary and purporting to terminate his employment. The Defendants and in particular the first Defendant have insulted, threatened, hurt and degraded the Plaintiff as a consequence of which he has suffered personal injury by way of stress and has had to consult his doctor.

3. The Plaintiff, accordingly, in these proceedings claims a number of declarations based on the primary one that he was a partner with the two Defendants in the business known as “MCL”, an injunction restraining the Defendants from dissipating the assets of the business of the partnership and damages for breach of contract, inducement of breach of contract, conspiracy and defamation.

4. In this motion the Defendants seek to have this entire case struck out on the basis that the pleadings disclose no reasonable cause of action in accordance with Order 19 Rule 28 of the Rules of the Superior Courts or alternatively pursuant to the inherent jurisdiction of the Court. It is well established that the Court will be slow to accede to such an application and will do so only in a clear case.

5. The Defendants say that the entire case, briefly summarised in the foregoing, has already been made the subject of two further proceedings, one brought under Section 205 of the Companies Act and the second being plenary proceedings for wrongful dismissal.

6. Furthermore, the Defendants say that insofar as the Plaintiff’s claim depends on a loss of value to his shareholding in the company brought about by the alleged wrongdoing of the Defendants, such a claim can only be brought by the company itself under the rule in Foss -v- Harbottle [1843:2:HARE:461] unless the Plaintiff can bring himself within any exceptions to that rule which is not the case here.

7. Mr. Gallagher S.C. for the Defendants conducted a detailed and elaborate analysis comparing virtually paragraph for paragraph the Statement of Claim in the present proceedings with the Statement of Claim in the wrongful dismissal proceedings and the points of claim delivered in the oppression proceedings in order to demonstrate that the facts upon which all three proceedings are based are the same.

8. Mr. Gardiner B.L. for the Plaintiff accepted, in large part, that the facts relied upon by the Plaintiff in the present proceedings are the same facts as give rise to the other two proceedings but stresses that the reliefs sought in the present proceedings are quite different from those sought in those other proceedings.

9. The Defendants place particular reliance on O’Neill -v- Ryan & Ors [1993:ILRM:557] and emphasise that the Plaintiff in that case had also alleged tortious conspiracy resulting in damage to the company’s interest and a consequent devaluation of his own shareholding. Lynch J. described that case as a classic example of a “case to which the rule in Foss -v- Harbottle applies”.

10. Mr. Gardiner B.L. relies in particular on Irish Press Plc -v- Ingersol Irish Publications Ltd and Ors [1995 2:ILRM:270] in which the Supreme Court held (per Blayney J. at page 269):-

11. Relying on this principle the Supreme Court struck down orders for money payment which had as their object not the bringing to an end of the oppression but the payment of compensation for wrongs done by the Defendants. Mr. Gardiner submits that his client is entitled to claim damages against the Defendants who are in breach of the tripartite partnership agreement between the parties which exists independently of and is anterior to the setting up of the company which was, by the agreement of the partners, to run the public relations business. The only way the Plaintiff can get damages for breach of this partnership agreement is by bringing the present proceedings because the oppression proceedings will only be able to deal with bringing the oppression to an end but not with compensating the Plaintiff for breach of the partnership agreement. Furthermore, he submits that his client is entitled to damages for defamation.

12. In response to this Mr. Gallagher S.C. submits that any alleged damaging consequences occasioned to the assets of the company by reason of the alleged wrongdoing of the Defendants will be taken into account in the oppression petition and that any suggestion which may arise from Irish Press Plc v. Ingersol Irish publications Ltd to the effect that a petitioner in a Section 205 case might also be entitled to claim damages against the parties involved in that petition, begs the question whether there is a statable cause of action which can be made in the first place giving rise to such damages. He submits that there is no statable cause of action in the present case, not only because of the rule in Foss -v- Harbottle but also because on the pleadings and the case as presented, there is no separate partnership agreement which subsists independently of the relationship between the parties as fellow shareholding members in the company MCL. He submits that in every case where a company is formed there must be some prior agreement between the individuals forming the company so to do. This does not mean that such prior agreement amounts to a partnership. On the contrary, Section 1(2), where relevant, of the Partnership Act, 1890 effects just the opposite when it provides:-

13. He relies on the following observation of Murphy J. in Crindle Investments -v- Wymes [1998:4:IR:567 at 576]:-

14. The case presented by the Plaintiff is that the three parties to these proceedings agreed that their partnership business would be conducted through the medium of a company, namely, MCL. This was the entire of their relationship and therefore there is no other relationship which could comprise a partnership. That being the case, there is no factual basis to support a partnership relationship which exists independently of the basis comprising the relationship between the parties as fellow shareholding members of MCL, upon which can be founded a separate and independent claim for breach of that relationship. If it be correct, therefore, that the only relationship between the parties to these proceedings is as fellow shareholding members of MCL, and given that Mr. Gardiner does not contend that the Plaintiff brings these proceedings on the basis of one of the exceptions to the rule in Foss -v- Harbottle , these proceedings should be dismissed as an abuse of the process of the Court because all complaints relied on will be taken into account and remedied either in the Section 205 petition or in the wrongful dismissal proceedings.

15. A possible exception to this is the claim for damages for defamation but, as pleaded, this arises from an allegation of “insulting, threatening, hurtful and degrading” treatment which cannot give rise to a claim for defamation.

16. I am unable to agree with Mr. Gardiner that any basis has been pleaded or established whereby a Court could infer a partnership relationship between the parties to these proceedings which is separate and anterior to their relationship as common shareholding members of MCL (now “Nocrumb Limited ”). In my view, to use the language of Murphy J. in Crindle Investments , the “undertaking was conceived and consciously promoted in the form of a company incorporated under the Companies Act, 1963, and it was the requirements of that legislation which governed the relationship between the parties.”

17. I cannot agree that there is any indication on the pleadings that clear evidence will be advanced to show that obligations or rights apart from or additional to those arising under the companies code were contemplated or agreed between the parties. On the contrary, Mr. Gardiner has accepted in argument that the relationship between the parties under what he submits is an independently subsisting partnership relationship are precisely the same as those which exist between them as fellow shareholding members of the company. In my view, there is no case for a partnership: these parties conceived and promoted a public relations business to be conducted through the medium of MCL. If the business of the company has been damaged through any alleged wrongdoing of the Defendants, then it is for the company to take action and the Plaintiff can do so only if he can bring himself within the exceptions to the rule in Foss -v- Harbottle which he has not attempted to do in dealing with this Motion.

18. The Plaintiff's claim for an injunction (at paragraph 6 of the prayer of his Statement of Claim) is in precisely the same form as paragraph 4 of the prayer of the Section 205 petition and can, therefore, be dealt with under those proceedings.

19. In regard to the claim for damages for defamation, it seems to me that the Statement of Claim does not disclose a reasonable cause of action in this regard as no particular words are relied on nor any precise meaning thereof. I note also that no suggestion was made that the Statement of Claim might be amended in such a way that it could be “saved” (to use the concept employed by MacCarthy J. in Sun Fat Chan -v- Osseous Ltd [1992:1:IR:425 at page 428]).

20. In these circumstances I will accede to the application of the Defendants and make an Order striking out the Plaintiff’s Statement of Claim, insofar as it alleges and claims damages for defamation pursuant to the provisions of Order 19 Rule 28 as disclosing no reasonable cause of action, and insofar as the balance is concerned as an abuse of the process of the Court.