The High Court refused an application by seven minority shareholders of Permanent TSB Group Holdings plc to prevent current and former directors from using company or bank resources to defend an oppression petition. The application also sought repayment of money allegedly paid on the directors’ behalf. The court made no determination on the underlying oppression claims or on the disputed interpretation of the insurance policy.
The shareholders’ petition, brought under section 205 of the Companies Act 1963, alleges that the company’s affairs and directors’ powers were handled oppressively or in disregard of members’ interests. It includes claims concerning two court direction orders relating to the bank’s recapitalisation and the sale of its insurance business, as well as the treatment of one petitioner while he was a director. Those claims remained to be decided in the main proceedings and related cases.
The directors opposed the application, saying AIG was covering the defence costs under a directors’ and officers’ liability policy. The company secretary exhibited letters in which AIG said the proceedings were covered from 25 January 2013 and that it would pay eligible defence costs as they arose. AIG also said full indemnity would continue unless a court determined that an insured director had committed a wrongful act, or the director admitted one.
The petitioner who swore affidavits for the group disputed the coverage, arguing that the policy was a limited “run-off” policy that did not cover alleged wrongful acts after 27 July 2011. The judge did not decide how the policy should be interpreted. She said that would be inappropriate without the insurer and the policyholder, Holdings, before the court. For this application, she relied on AIG’s stated commitment that the defence costs would not be borne by Holdings.
The judge also considered whether company funding of a director’s defence in an oppression case could ever be proper. She said the relevant test was whether the funding was necessary or expedient in the interests of the company as a whole. But the court could not resolve the parties’ dispute over whether the petition challenged the validity of the two direction orders, and she considered it inappropriate to make an order that could pre-empt the trial judge’s later decision on costs.
The application was not shown to be limited to the period before the main petition was decided, and no undertaking as to damages had been offered. The judge said that if the petitioners succeeded, they could apply to the trial judge for an appropriate reimbursement order if the circumstances warranted it. She refused the application, finding no legal or equitable basis for the relief sought at that stage, even if the insurance indemnity did not exist.