The High Court has ruled that two Lisavaird companies can rely on an agreement to subordinate rent payments from a Kerry wind farm company, but has not yet decided how much they are owed.
In a judgment delivered on 14 November 2013, President of the High Court Kearns said the plaintiffs were entitled to judgment. He said he would hear further submissions on the amount of profits before entering judgment for any particular sum.
The plaintiffs, Lisavaird Sales Ltd and Lisavaird Marketing Ltd, claimed €504,000 from Muingnaminnane Windfarms Ltd. They had invested €1.2 million in the company in 2007 in return for B shares. The companies said they expected an annual return, initially set at 9% and later increased to 10.5% after the investment could not qualify for renewable-energy tax relief.
The company made payments for 2008 and 2009, but none for 2010, 2011 or 2012. The plaintiffs sought €378,000 for those three years and a further €126,000 for 2013. They argued that the unpaid dividends became a debt under the company’s articles of association, and that rent paid to the wind farm’s promoters should have been subordinated to payments to them.
The defendant argued that company law prohibited distributions without profits available for that purpose. It also said the plaintiffs remained shareholders, so unpaid dividends could not become a separate debt. The company counterclaimed for the payments made in 2008 and 2009. It disputed the rent argument, saying the share subscription agreement superseded an earlier email and that rent was payable under a lease.
The judge rejected the plaintiffs’ argument that the unpaid dividends could be enforced as a debt under a “special contract” that bypassed statutory limits on distributions. He found that payments calculated as dividends to the plaintiffs, who were members of the company, were prima facie distributions subject to those limits.
However, Kearns found that a collateral agreement had been made under which rent payments would be subordinated to dividends payable to the plaintiffs. He said the August 2007 email setting out that undertaking was clear, and accepted that the subscription agreement’s entire-agreement clause did not cover that separate matter.
The judgment records that the company’s accumulated negative reserves at the end of 2012 were €378,643; adding back rental payments would produce positive reserves of €205,631. The court did not specify a sum payable, resolve the amount of profits for judgment, or state the outcome of the defendant’s counterclaim in this decision.