In a recent judgement by Mr. Justice Denis McDonald the High Court refused to grant an interlocutory injunction to prevent a company from selling valuable Dublin properties until shareholder oppression proceedings were fully resolved.
The Applicant brought oppression proceedings against the board and various companies by reason of the decision of the board to proceed with various asset sales. The Applicant as part of its oppression proceedings sought an interlocutory injunction (intermediate application) restraining the sale of the assets until the oppression proceedings were heard and decided. The Applicant wanted the company to obtain an independent valuation of the property holding company which was selling its assets as a going concern as they argued that this would realise a greater dividend than selling the properties on an individual basis. The Applicant argued that the Company had not taken proper expert advice.
The Defendants argued that the Applicant’s case fell well short of oppression but also sought to rely on a rule called Foss -v- Harbottle which goes back to 1843 and which they say fatally undermined the Applicant’s case by reason of the fact that the Applicant did not join all shareholders to the proceedings.
They argued that the decision to sell was a democratic decision made by the board and that damages would be an adequate remedy. It is very important to note that in bringing any application for an injunction that such application will fail if the Court is of the view that the damages (as opposed to the injunction ( i.e. preventing certain actions) would be an adequate remedy.
The Defendants also argued that the Applicant had delayed bringing his application by waiting several weeks and that this delay should be taken into account.
The High Court reviewed the seminal case of Merck Sharpe and Dohme Corporation -v- Clonmel Healthcare Limited which highlighted the guiding principles of injunction applications and reaffirmed the position that the Court must decide whether the balance of convenience favours the granting of an injunction and whether there was a fair question to be tried.
The Court did not make a ruling based on the Foss and Harbottle case and accordingly, did not refuse the injunction on the ground that the shareholders had not been joined.
The Court accepted that damages might be a difficult remedy to establish but felt that the damage suffered to the shareholders by granting an injunction would be very significant if the injunction was granted. The Court noted that the majority of shareholders had voted for the early realisation of assets and that the market could change and that the shareholders could lose significant sums if the injunction was granted.
The Court also took into account the fact that the Applicant had waited a number of weeks before bringing his application and noted that the Applicant had not moved as quickly as ought to have had in such a circumstance.
Although there was a fair issue to be tried in this case the Court was not satisfied that the balance of convenience required the granting of the application, and the Court refused the application for an injunction.
For any advice on any commercial /litigation matter please do not hesitate to contact Brendan Dillon, Donna Phelan or Conor White on 01-2960666.
