The High Court has refused an application to remove two grounds from a shareholder’s oppression claim against Atlantis Seafood Wexford Limited and two of its directors.
Mr Justice Keane ruled on 12 October 2017 that the pleaded claims about stopping payments and benefits, and setting up a competing business, were not clearly irrelevant. The decision concerned only whether those parts of the pleadings should be struck out. The judge did not decide whether the allegations were true, whether the company was a quasi-partnership, or whether oppression had occurred.
Annemarie O’Connor’s petition seeks relief under section 205 of the Companies Act 1963, now replaced by section 212 of the Companies Act 2014. She alleges that the company’s affairs were conducted oppressively, or in disregard of her interests as a shareholder, by its directors and majority shareholders, John Kenny and her son, Mark O’Connor. The respondents deny the allegations.
The two challenged grounds concerned payments and benefits, including health insurance, that the company had paid in respect of Mrs O’Connor and her husband, John O’Connor Senior. Her pleading alleges that these stopped after an unsuccessful settlement meeting in February 2012 and breached an earlier agreement. The respondents accept that payments to Mr O’Connor Senior stopped, but deny that they acted unlawfully, without notice or in breach of an agreement. The judgment notes that separate proceedings brought by Mr O’Connor Senior concern substantially similar facts; the court did not determine how those proceedings might affect this case.
The second ground alleges that Mr Kenny and Mark O’Connor established Kilmore Quay Fine Foods Limited in 2012 and used Atlantis Seafood’s staff, premises, equipment and other resources, harming its business and reputation. The respondents admit establishing Kilmore Quay but say it serves a different market, pays Atlantis Seafood for services, and benefits the company financially. Those competing accounts were not resolved on this motion.
The respondents argued that Mrs O’Connor could not pursue claims belonging to her husband or the company. In response, she submitted that Atlantis Seafood operated as a quasi-partnership, where personal relationships and equitable principles could make the alleged conduct relevant to her rights as a member. The judge considered that argument tenable at this stage, while expressly declining to rule on whether the company was a quasi-partnership or on the merits of any issue.
Applying the test for removing allegedly unnecessary or prejudicial pleading material, the judge found a reasonable possibility that the two grounds could relate to exclusion from management, directors’ good faith or a fundamental change in the company’s business. He refused the strike-out application. The parties were to be heard on consequential orders. A related discovery application was to await the outcome of this motion; the respondents had withdrawn their separate request to pause the case for a share valuation.