The Supreme Court

Irish Press Public Limited Company v Ingersoll Irish Publications Limited 

1994 No 117/223 

25 May 1995 

BLAYNEY J:

For many years prior to 1988, Irish Press Plc (hereinafter referred to as PLC) had been the owner of the three well-known Irish newspapers, the Irish Press, the Evening Press and the Sunday Press. In 1988 it became clear to the directors of the company that substantial additional capital was required for the development of the newspapers and they set about seeking such capital. Their efforts were successful. Mr Ralph Ingersoll, who had substantial interests in the newspaper business in the United States, and also in England, agreed to invest £5 million in the newspapers. 

The manner in which it was agreed that the investment should be carried out was that two new companies would be created, Irish Press Newspapers Limited (hereinafter referred to as IPN) which would be concerned with the actual business of running the three newspapers, and Irish Press Publications Limited (hereinafter referred to as IPP) in which would be vested the right to the titles of the three newspapers. It was agreed that PLC and Ingersoll Irish Publications Limited (hereinafter referred to as IIP) should be equal shareholders in the two new companies and that each company should have a board of six directors, three A directors to be appointed by IIP, and three B directors to be appointed by PLC. 

The arrangement was formalised on the 30 November 1989 when two main documents were executed between PLC and IIP. The first document was a subscription and shareholders agreement and the parties to it were PLC, IPN, IPP, IIP, Corduff Investments Limited and Eamon de Valera. Prior to this agreement being entered into, the business of the three newspapers had been assigned by PLC to IPN, and the right to the titles of the three newspapers had been assigned to IPP. Under the terms of the agreement IIP subscribed £1 million for shares in IPN, and £4 million for shares in IPP, and it was provided that in consideration of the subscription of those amounts IIP would become entitled to 50 per cent of the equity in each of the companies. 

Having regard to the limited nature of the issues which arose on this appeal it is not necessary to set out in detail the other provisions of this agreement except to indicate that it also provided that IIP should have the right to appoint the chief executive of each of the companies while the editorial functions in respect of political or public policy of the newspapers should be the prerogative of the editor-in-chief of IPN and IPP who would be nominated by Dr de Valera. 

The second agreement, which was also executed on the 30 November 1989 was made between Ingersoll Publications Limited (hereinafter called IPL) of the first part, IPN of the second part, and IPP of the third part. Under this agreement IPN engaged IPL "to conduct, operate and manage" the business of IPN as subsisting from time to time, and the business of any subsidiary from time to time of IPN, in consideration of an annual management fee of £300,000, such fee being adjustable upwards depending on profits achieved. 

The effect of the two agreements was that PLC and IIP became equal shareholders in IPN and IPP, and the management of the business of IPN was entrusted to IPL under the terms of the management agreement. 

The relationship between PLC and IIP worked reasonably well for about eighteen months but a number of events occurred which created problems for it. In or about the month of July 1990 the Ingersoll operation in the United States collapsed. This left the Ingersoll organisation consisting solely of two papers which they were managing in New England and some papers in Birmingham and Coventry. In late 1990 more capital was required and £3 million was subscribed by Ingersoll and £2 million by PLC. It was decided to launch the Evening Press as a two part paper in April 1991 but unfortunately the launch was not a success. After a period of about four weeks it was necessary to revert to the original format. At about this time also most of the Ingersoll personnel working in IPN left Dublin so that at the end of June 1991 the only person remaining was Mr Guastaferro who had been appointed commercial director of IPN in September 1990. 

In November 1991 there was a management buy-out of IPL with the result that Mr Ingersoll no longer controlled that company or had anything to do with it. And it became necessary to assign the management agreement which IPL had with IPN. But there was already a problem in regard to that agreement. Dr de Valera was maintaining that it was dead because of the failure of IPL to operate it for the previous six months. 

As a result of no longer being in control of IPL, Mr Ingersoll turned his attention to IPN and over the next twelve months he exercised the powers given to him under the subscription and shareholders agreement to appoint the chief executive of IPN and IPP. For a variety of reasons which it is not necessary to go into in detail, but which are fully set out in the judgment in the High Court, the good relationship which had originally existed between the partners broke down and on the 21 January 1993 PLC presented a petition against IIP under s 205 of the Companies Act, 1963. The relief sought was an order providing for the termination of the management agreement and for an order restraining IIP from making any payment of fees or expenses under the management agreement. The petition also sought an order directing IIP to procure the repayment to IPN of monies paid under the management agreement. 

Points of claim were then delivered by PLC and IIP delivered points of defence and a counterclaim. In the counterclaim it was alleged that PLC had been guilty of oppression and a number of different forms of relief were claimed including an order dismissing Dr de Valera as editor-in-chief and chairman of IPN and IPP. Subsequently amended points of claim were delivered by PLC and seven additional forms of relief were claimed the main ones being for damages for breach of contract and/or breach of duty and/or breach of fiduciary duty, and an order removing all current A directors by reason of their gross breach of fiduciary duties. 

The petition was heard oyer thirty-eight days starting in June 1993 and finishing on the 30 November 1993. In a lengthy reserved judgment delivered on the 15 December 1993 Barron J held that IIP had been guilty of oppression in two respects: Firstly, by insisting on the management agreement still being operated when in fact it had come to an end and secondly, by the de facto take over of IPN and IPP by appointing nominees for the purposes of the interests of IIP and not in the interests of IPN. 

The substance of the order made by Barron J was as follows: 

"1. The Court doth declare that the affairs of Irish Press Newspapers Limited and Irish Press Publications Limited are and were being conducted by the respondent and that the powers of the "A" directors are and were being exercised in a manner oppressive to the petitioner and in disregard of its interest as a member. 

2. It is Ordered that the respondent do sell its shareholding in Irish Press Newspapers Limited and Irish Press Publications Limited to the petitioner at a price to be determined by the Court comprising a judge sitting alone -- such shares to be held upon trust for the petitioner and purchaser until completion of the transfer but until then the exercise of the beneficial rights attaching to such shares shall be subject to such directions as the Court may make from time to time. 

3. It is Ordered that the respondent be perpetually restrained from exercising or purporting to exercise any rights as the holder of such shares whether such rights would have arisen under the subscription and shareholders agreement dated the 30 day of November 1989 or otherwise. 

4. It is Ordered that Denis Guastaferro and Jacob Daiber be restrained from exercising their power as directors or from receiving notice of meetings of directors or from attending meetings of directors. 

5. It is Ordered that the management agreement herein dated the 30 day of November 1989 be and the same is hereby set aside. 

6. And the Court doth declare that said management agreement has had no force and effect since the 14 day of November 1991. 

7. It is Ordered that the valuation of the said shares and the assessment of damages be adjourned to the 25 day of January 1994 particulars of claim to be delivered by the 12 day of January 1994 and the respondent's particulars of defence (if any) to be delivered by the 19 day of January 1994. 

8. It is Ordered and Adjudged that the petitioner do recover against the respondent its costs of the hearing of said petition and of this order including all costs reserved by orders made herein such costs to include all costs ordered against the petitioner in respect of third party discovery when taxed and ascertained. 

9. It is Ordered and Adjudged that the petitioner do recover against the respondent his costs of all the consolidated actions herein in respect only of pleadings and motions to the Court prior to the commencement of the hearing of the petitioner when taxed and ascertained -- future costs to be subject to such order or orders as may be made from time to time." 

The consolidated actions referred to in the last part of the order were three actions in which PLC was plaintiff and the defendants were respectively Patrick McC Montague; Denis J Guastaferro and IIP; and Dan McGing and IIP. The main relief sought in each of the actions was an injunction restraining the defendants and no pleading had been delivered in any of the actions. In a fourth consolidated action IIP and Dan McGing were plaintiffs and Eamon de Valera and PLC were defendants. 

The formal order drawn up does not set out adequately the precise form of the monetary relief to which the learned trial judge held that PLC was entitled. It is necessary to refer to the judgment itself to see what this was. At page 84 of his judgment the learned trial judge said:- 

"Having regard to the nature of the oppression and the consequential losses to the companies as a result, the nature of the relief must be designed not only to bring an end to the matters complained of, but also to compensate the petitioner and the companies for the losses sustained. This can best be done by directing a purchase of the respondent's shareholding". 

The learned trial judge then went on to say:- 

"The price to be paid for such shares shall be the present value of the respondent's shareholding having regard to the terms of the subscription and shareholders' agreement but not to the terms of the management agreement on the basis that there shall have been made good in money terms all actual financial loss to the company by reason of the oppression. In addition, the petitioner shall be entitled to recover from the respondent the drop in value, if any, between the present value of its shareholding upon the same basis and the value of its shareholding on the 14th November 1991 being a date contemporaneous with the commencement of the oppression but before it commenced having regard to the terms of both agreements." 

Pursuant to the direction contained in the order of the 20 December 1993, the adjourned hearing for the purpose of valuing the shares in IPN and IPP and assessing the damages to which PLC had been held to be entitled, was heard over fourteen days in early 1994 and a reserved judgment was delivered by Barron J, on the 13 May 1994. The main provisions of the order made on the 16 May 1994 for the purpose of giving effect to the said judgment were as follows:- 

1. It was Ordered that IIP should repay to IPN and IPP the sum of £6 million and to PLC the sum of £2,750,000. 

2. The Court assessed the value of IIP's shareholding at the sum of £2,250,000 and directed PLC to pay such sum to IIP on payment of the amounts referred to in the preceding paragraph and upon the execution of a transfer to PLC of IIP's shares in IPN and IPP. 

3. It was Ordered that the payments to be made by IIP were to be effected within two months from the date of the order. 

4. It was Ordered that any sums which might have to be paid to IIP in respect of loans made by IIP to IPN or IPP should not be payable until all of the monies payable by IIP under the order have been paid. 

5. It was Ordered that all of the shares in IPN and IPP then held by IIP be transferred to PLC two months after the date of the order. 

6. It was Ordered that PLC do recover against IIP its costs of the assessment and of this order when taxed and ascertained. 

IIP had on the 15 February 1994 served notice of appeal against the entire of the first order which had been made by Barron J on the 20 December 1993 and on the 15 July 1994 IIP served notice of appeal against the entire of the second order which has just been cited. The effect of the two notices of appeal was to put PLC on notice that every issue decided by Barron J in his two judgments was being contested. However, this attitude was not persisted in. When counsel for IIP opened the appeal he informed the Court that the finding of oppression made by the learned trial judge was no longer being contested and neither was the order that IIP should transfer their shares to PLC. The case that IIP proposed to make on the appeal was that the oppression found by the learned trial judge had not been the cause of any of the losses sustained by the companies and that, even if this were not the case, the Court had no power to award damages in a petition brought under section 205 of the Companies Act, 1963. In addition IIP were contesting the valuation of £2,250,000 placed on their shares in IPN and IPP. These, accordingly, are the only issues which have to be considered by the Court on this appeal and the fact that the finding of oppression is not being contested makes it unnecessary to go into the very complex background to this finding which is set out in great detail in the lengthy judgment of the learned trial judge. 

The first issue has two separate parts to it, the first being concerned with fact and the second with law. The factual issue is whether the learned trial judge was correct in finding that the loss sustained by the companies was caused by the oppression of which he held IIP to have been guilty. The issue of law is whether section 205 gives the Court power to make an award of damages and having regard to the view I have formed on this issue I propose to deal with it first. 

The relevant provisions of section 205 of the Companies Act 1963 are as follows:- 

"(1) Any member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself) or in disregard of his or their interests as members, may apply to the Court for an order under this section." 

(3) If, on any application under subsection (1) or subsection (2) the Court is of opinion that the company's affairs are being conducted or the directors' powers are being exercised as aforesaid, the Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether directing or prohibiting any act or cancelling or varying any transaction or for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and in the case of a purchase by the company, for the reduction accordingly of the company's capital, or otherwise." 

In considering what power this section gives to the Court, and how it should be applied in the circumstances of the present case, the first thing to be noted is that the order of the High Court, that IIP transfer its shares to PLC, is no longer being contested. The position accordingly is that an order has been made in the case under section 205 that will bring to an end the oppression complained of since it will terminate IIP's interest in IPN and IPP. The question to be considered, accordingly, is whether the High Court had, in addition, power to make the order directing £6 million to be paid by IIP to IPN and IPP and £2,750,000 to PLC. In my opinion s 205 did not give the High Court power to make such an order. 

The relief which may be given under the section is that the Court may make such order as it thinks fit "with a view to bringing to an end the matters complained of." The Court is not at large as to what it may do. Whatever order it makes must have this object. It must be made with a view to bringing to an end whatever it was that was causing the oppression. 

Could it be said that the order directing IIP to pay £6 million to IPN and IPP and £2,750,000 to PLC was made with a view to bringing to an end the oppression of which PLC had complained? In my opinion it could not. The object of the order was clearly something quite different. It was to compensate IPN and IPP for the loss suffered by those companies, and to compensate PLC for the reduction in the value of its shareholding. The object quite clearly was not to bring to an end the oppression which the learned trial judge had found to exist. The object was to compensate the three companies for the consequences of the oppression. Even if no other order had been made by the High Court, that would still have been the position, but the fact that IIP was directed to transfer its shares to PLC, and that this put an end to the oppression, as referred to earlier, puts it beyond doubt that the order for the payment of compensation could not also have been made with a view to bringing to an end the matters complained of. That object had already been achieved by the direction to transfer the shares. 

Counsel for PLC submitted that the transfer of the shares was an inadequate remedy and that the companies should be entitled to compensation for the losses they had suffered. He argued that compensation had been awarded in other cases brought under s 205 and cited as authorities the decision of Keane J in Greenore Trading Co Ltd [1980] ILRM 94 and of the House of Lords in Scottish Co-Op Wholesale Society v Meyer [1959] AC 324. 

In Greenore Trading Co Ltd, Keane J found that there had been oppression and directed the oppressor to purchase the shares of the party who had been oppressed. In fixing the price to be paid he added to the par value of the shares so much of a sum wrongfully applied by the oppressor as was proportionate to the equity of the oppressed shareholder. Keane J said in his judgment at page 102:- 

"That, however, does not conclude the matter, since it is clear that in prescribing the basis on which the price is to be calculated, the Court can, in effect, provide compensation for whatever injury has been inflicted by the oppressors. (See Scottish Co-Operative Wholesale Society v Meyer [1959] AC 324)." 

In the Scottish Co-Operative case the oppressor was also directed to purchase the shares of the oppressed shareholder. Lord Denning said in his judgment at page 9:- 

"One of the most useful orders mentioned in the section -- which will enable the Court to do justice to the injured shareholders -- is to order the oppressor to buy their shares at a fair price: and a fair price would be, I think, the value which the shares would have had at the date of the petition, if there had been no oppression. Once the oppressor has bought the shares, the company can survive. It can continue to operate. That is a matter for him. It is, no doubt, true that an order of this kind gives to the oppressed shareholders what is in effect money compensation for the injury done to them: but I see no objection to this. The section gives a large discretion to the Court and it is well exercised in making the oppressor make compensation to those who have suffered at his hands." 

The provision in section 210 of the English Companies Act, 1948 dealing with the purchase of shares, to which Lord Denning was referring, is exactly similar to the provision in our section 205. It provides that one of the reliefs which the Court may give is an order "for the purchase of the shares of any members of the company by other members of the company." 

While compensation was included in the relief given in each of these two cases, it was given in an extremely limited context -- where the oppressor had been directed to purchase the shares of the oppressed shareholder, and where the compensation resulted from the Court's determination of what would be a fair price for the shares in the particular circumstances. The element of compensation was incidental to the main relief which was the purchase of the shares. The cases are not authority for a general right to compensation for loss resulting from oppression, which is what is being contended for, and in my opinion this submission is not well-founded. 

It was also submitted that the provisions of section 205(3) of the Companies Act 1963 were so wide that they would permit damages to be awarded. I am unable to agree. Firstly, an award of damages would not satisfy the condition that the order be made "with a view to bringing to an end the matter complained of", secondly, an award of damages is a purely common law remedy for a tort, breach of statutory duty or breach of contract, and acts of oppression would not come within any of these categories, and finally, if the Oireachtas had intended to include the remedy of damages as one of the reliefs which could have been granted, there would have been no difficulty in doing so, and it is quite clear that this was not done. 

I would adopt as a correct statement of the law the following passage from Gower's Principles of Modern Company Law (4 edition) at page 630:- 

"In talking about the duties of shareholders, whether they be to refrain from fraud on the minority or to refrain from oppression, the duties differ markedly from those of directors and officers -- and not only because they fall short of those of a fiduciary. The duties of directors, as such, are owed only to the company; those of members may be owed either to the company or to their fellow shareholders. The remedies for a breach of the members' duties are much more restrictive. There is no duty in the sense of an obligation giving rise to damages or compensation in the event of breach; the duties can be enforced only by injunction, declaration, winding-up or a regulating order under section 210." 

Counsel for PLC also submitted that if damages could not be given in the proceedings under section 205 they could be given in one of the actions which had been consolidated with those proceedings in which, inter alia, there was included a claim for damages for conspiracy. In my opinion this submission also must be rejected. As referred to earlier, no pleading had been delivered in any of these proceedings. The only step that had been taken after service of the plenary summons was an application for an interlocutory injunction. In view of this it would not have been open to the learned trial judge to consider awarding any relief in any of those proceedings, apart from dealing with the question of costs, and it is quite clear from his judgment that he did not. As there was not, and could not have been, any decision in the High Court on the question of awarding damages for conspiracy, that issue could not be raised in this Court. 

For all these reasons I am satisfied that the appeal against the order directing payment of £6 million to IPN and IPP and £2.75 million to PLC must succeed and that this order must be set aside. In the circumstances it is not necessary to consider the other issue referred to earlier, namely, whether the learned trial judge was correct in finding that the losses sustained by the companies was due to the oppression. 

There remains the question of the appeal against the valuation of £2.25 million placed by the learned trial judge on the shares which IIP were directed to transfer to PLC. 

Evidence of the value of the shares in IPN and IPP as of the 14 November 1991 and the 21 December 1993 was given on behalf of IIP by Mr Christopher Glover, a chartered accountant and share valuation specialist, and on behalf of PLC by Mr Kevin Keating, also a chartered accountant and a director of AIB Capital Markets. 

Mr Glover valued the shares at £8 million on the 14 November 1991 and at £6 million on the 21 December 1993. He indicated that his valuation as of the 21 December 1993 would have to be increased in due course by the amount of the financial loss, as determined by the courts, arising from the oppression. 

Mr Keating valued the shares at £4.25 million on the 14 November 1991 and in his view the shares had no value on the 21 December 1993. He considered what impact the award of damages would have and took the view that in order to create any value in the shares it would need to be substantial. 

The learned trial judge analysed in great detail the evidence of the two valuers but did not accept the conclusions of either of them. He stated that the approach taken by Mr Glover was too limited, and he did not accept Mr Keating's approach either. The basis on which he arrived at his valuation of £4.5 million for the equity in the two companies was as follows. He found on the evidence of Mr Ryan (the financial controller of the companies), Mr Glover and Dr de Valera, that it would now cost £13.5 million to turn the two companies around. As he had directed that £6 million be paid by IIP to IPN and IPP to restore the balance sheet to the November 1991 level, he deducted that amount from the £13.5 million which reduced that figure to £7.5 million. The latter figure was then reduced further to £5.5 as the learned trial judge held that £2 million of the £13.5 million would already have been required in 1991 and so should be excluded. He then deducted the £5.5 million from the figure of £10 million which he held was the value of the shares in 1991, and this gave the figure of £4.5 million which was the valuation he placed on the shares so that the amount to be paid by PLC to IIP for their 50 per cent interest was £2.25 million. 

It was submitted on behalf of IIP that this figure should be £3.25 million; that the learned trial judge ought to have accepted the evidence of Mr Glover and that if he had done so, this is the figure he would have reached. It was also submitted that there was no evidence to support the finding that the companies had a value of £10 million in 1991. On behalf of PLC it was argued that the learned trial judge ought to have accepted the evidence of Mr Keating and held that the shares had no value on the 21 December 1993. 

As had been repeatedly stated, in particular since the decision of this Court in Hay v O'Grady [1992] IR 210 this Court cannot disturb findings of primary fact made by a trial judge provided there is credible evidence to support them. It follows that the finding of the learned trial judge that the shares were worth £10 million in November 1991, and that it would take £13.5 million to turn the companies around, being findings of primary fact, cannot be disturbed, provided there was credible evidence to support them, and I am satisfied that there was. It was submitted by counsel for IIP that the learned trial judge was not entitled to value the shares at £10 million in November 1991 but it was not argued that there was no evidence to support such a valuation, and indeed if the learned trial judge had placed a lower valuation on the shares at that date (such as Mr Glover's valuation of £8 million) that would not have favoured IIP's case as it would have the effect of lowering the valuation he placed on the shares at the date of the hearing. 

As I indicated earlier, in arriving at his valuation of £4.5 million, the learned trial judge deducted from his 1991 valuation of £10 million what it would now cost to turn the two companies around. And in making that calculation he took into account his order directing IIP to pay to IPN and IPP £6 million in order to restore the balance sheet of the companies to its 1991 level. As this £6 million is not now going to be paid, it can no longer be taken into account in valuing the shares. The result is that the amount required to turn the companies around will be £11.5 million, instead of £5.5 million and the effect of this, following the method applied by the learned trial judge, is to give the shares a nil value. 

The fact that the shares would have no value if the compensation of £6 million was not paid was relied on by PLC as an argument in support of their claim that they were entitled to compensation. It was pointed out that if the shares had no value, PLC would be at the loss of £5 million, which is what the shares had been worth in 1991, and in addition their loan of £2 million would be valueless. This is undoubtedly so but, as demonstrated earlier in this judgment, the problem is that section 205 of the Companies Act 1963 does not give power to award compensation of the nature sought. And while PLC has undoubtedly suffered a huge loss, IIP has possibly suffered an even greater loss since its loans to the two companies amount to £4 million of which only £1 million is secured. 

This joint venture has been a costly failure for both parties and the circumstances are such that the only relief which PLC can be granted is the transfer of IIP's shares. Now that the legal proceedings have been concluded it is to be hoped that notwithstanding the troubled waters that they have passed through it may be possible to restore the three "Press" newspapers to the position they formerly occupied in Irish journalism. 

For the reasons I have given, I would set aside the order directing PLC to pay £2.25 million in respect of the transfer of IIP's shares, and would substitute a nominal consideration. I would hear counsel on the question of what form the order allowing the appeal should take as there are a number of elements in the High Court orders that need to be considered.