The High Court has refused Edmond Kenny permission to bring a derivative action on behalf of Eden Music Limited and refused his request for the company to indemnify him for the costs. The application concerned a dispute among the company’s three equal shareholders and directors, who were members of its wedding band, Eden.
In a judgment delivered on 6 November 2013, Mr Justice Michael White said the relationship between Kenny and the other two respondents, David Lynch and Robert Pender, had reached an impasse. The judge said the grievances required agreement or court intervention, but concluded that allowing the proposed action and company-funded costs would be to the company’s “overwhelming disadvantage”.
Eden Music was incorporated in 2007 and had issued 1,500 shares, with 500 held by each of the three directors. Its stated main purpose was operating a three-piece wedding band that had bookings up to November 2014. The judgment identified a van and future bookings as company assets, while saying it was unclear whether any musical equipment belonged to the company.
Kenny alleged that Lynch and Pender made unauthorised payments from the company account, replaced him as lead singer, formed a new band called “The Eden Wedding Band” and stopped paying him. He also argued that their registration of the business name “Eden Band” sought to convert a principal company asset to their own use.
Lynch and Pender denied acting against the company’s interests. They alleged that Kenny took the company van, removed them from its insurance and reneged on an agreement to wind up the company. They said the disputed payments had been for an agreed winding-up process. The judgment recorded that the money had since been restored to the company and Kenny’s fee had resumed, although the amount remained disputed. Kenny said he was entitled to €440 net per engagement; the other respondents said he was paid €323, representing €440 gross.
The court considered the legal test for permission to bring a derivative action, including whether the applicant had shown a realistic prospect of success and whether another remedy was available. White J noted the respondents had restored money and resumed payments to Kenny, while a lead singer continued to fulfil existing bookings. He also noted Kenny’s earlier indication through his solicitors that he agreed to winding up, and his acceptance that band members could operate a new wedding band if it did not infringe the company’s name.
The judge said future bookings were only an asset to a limited extent because they could be cancelled and would not ultimately be assets until performed. Given the company’s finite and limited resources, he refused leave to commence the derivative action and refused the requested costs indemnity.