The High Court ordered specific performance of an agreement requiring Donegal Investment Group plc to transfer shares worth €350,000 after it ruled that an option to buy them had been exercised within the required period. It dismissed the company’s counterclaim seeking €807,000 in dividends.
The dispute concerned a 2007 Heads of Agreement between Danbywiske and Donegal, which allowed Danbywiske to buy 5% of the share capital of ESLT, the company that became the ultimate parent of Monaghan Middlebrook Mushrooms. The option was later novated to the Wilson Limited Partnership. Donegal argued that the agreement was not binding or, alternatively, that further conditions had to be met before the option could be exercised.
Mr Justice Brian J. McGovern found that the Heads of Agreement was a legally binding contract. He said the option depended on two conditions: average annual profit before tax of €6 million over the five years from 1 January 2007, and repayment of the Carbury Fixed Amount. The parties did not dispute that both conditions had been met; the fixed amount was repaid in September 2013.
The court rejected Donegal’s argument that a new shareholders’ agreement was also required. It found no such condition in the option clause and said the option was subject only to the stated financial conditions and exercise within the two-year period ending 1 January 2014.
The plaintiffs’ solicitors wrote on 11 December 2013 to exercise the option and asked Donegal to return a share transfer form. They said the €350,000 would be paid when the completed form was received. Donegal argued that the option had lapsed because the money was not paid by 1 January 2014. The judge held that the option had been exercised in time, accepting evidence that the price would have been paid within the deadline if Donegal had returned the form.
Donegal’s counterclaim sought €807,000 in dividends, alleging sums should have been declared or accrued. The judge found no evidence that the board had considered or voted on declaring a dividend, and noted that the Carbury Fixed Amount had not been repaid until September 2013. He also accepted unchallenged evidence that the company could not pay dividends under its bank facility while its adjusted leverage remained at 3:1, above the required threshold of less than 2:1.
The court concluded that the plaintiffs were entitled to specific performance of the option. Donegal failed to prove its counterclaim, which was dismissed.