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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Irish Microforms Ltd. v. Browne & Anor [1987] IEHC 70 (3 April 1987) URL: http://www.bailii.org/ie/cases/IEHC/1987/1987_IEHC_70.html Cite as: [1987] IEHC 70 |
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1980 No. 10121
IRISH MICROFORMS LIMITED
Plaintiffs
AND
SEAN BROWNE AND ANN CLUNE
Defendants
Judgment of Mr. Justice Murphy delivered the 3rd day of April 1987.
In July last this action was heard as against the first named Defendant alone. Due to the indisposition of the secondly named Defendant the trial as against her was adjourned. When the matter was re-entered last November the Court was informed that all differences between the Plaintiffs and the secondly named Defendant had been resolved. Regretfully I must accept responsibility for the delay, which has occurred since then.
The association between the Plaintiffs and Mr. Browne goes back for approximately twelve years. From the incorporation of the Plaintiff Company on the 8th January 1974 and for six years thereafter Mr. Browne was involved with the Plaintiff Company as a director, shareholder and employee. In the next six year period commencing with the institution of these proceedings on the 12th of November 1980 much of the time of both parties has been taken up in interlocutory applications relating to these proceedings. The background to the commercial relationship between the parties was as follows. For some time; prior to 1975 a company known as Irish University Press Limited was engaged in the publication of a variety of academic material. The procedure was that that company identified valuable historical material and procured the right to publish it. The company employed the appropriate staff to edit the material to the point where it could be reproduced by a variety of means, one of which was a photographic procedure. In connection with photographic reproduction IUP availed of the services of a company known as Memo Limited. That company was controlled by Mr. G.E. Ryan and his two brothers D.J. Ryan and G.J. Ryan and a fourth member Mr. J.A. Martin. They were the directors of that company and between them owned the entire issued share-capital thereof. Memo Limited carried on business from its premises at Sandymount Road, Dublin.
Sometime in 1974 or 1975 IUP got into serious financial difficulties and a Receiver was appointed over the assets and undertaking thereof. The precise date of his appointment was a matter of some dispute between the parties but it does not seem to me to be necessary to resolve that dispute. Two of the employees of IUP a Mr. McGlinchey and Mr. Browne, the first named Defendant, negotiated the purchase from the Receiver of the goodwill of IUP insofar as it consisted of outstanding orders for the publication of archive material. The directors of Memo Limited were approached. Agreement was reached between them and the two former employees of IUP to promote a third company, that is to say Irish Microforms Limited, the Plaintiffs herein, to carry on work similar to that previously undertaken by IUP. The arrangement reached between the parties was that the new company should have a share capital of £6,000 subscribed as to £1,000 by each of the interested parties. Whilst the matter does not appear to have been the subject of any specific agreement it appears to have been the intention of the parties that the Plaintiffs would avail of the services of Memo Limited in the same way and for the same purposes as IUP had done previously. For some time after the incorporation of the Plaintiff Company its premises were situate at Kildare Street, Dublin. Subsequently they moved to Ranelagh in the suburbs of Dublin. Unfortunately the development of the company was hampered by the death in 1976 of Mr. McGlinchey whom all of the parties recognised as a person of considerable expertise and authority in the business in which he was engaged.
It is difficult to analyse satisfactorily the progress made by the Plaintiff Company. Quite apart from any matter in dispute between the parties there is a surprising lack of consistency in the quality of the records and documents maintained on behalf of the company. Some minutes were taken and preserved in considerable detail. Of other meetings there appears to be either no minutes or else a variety of drafts in respect of which no one version was finally accepted. Indeed there is no book of minutes and no file purporting to include all of the minutes taken. That this should happen in relation to the affairs of a small private company is by no means unusual. However the existence of some records and the absence of others; detailed documentation in relation to some matters and none at I all with regard to others, has provided scope for wide ranging argument between the parties.
It seems to me that it can be said with confidence; first that Mr. Gerry Ryan was the Managing Director of the company at all material times. Secondly, that Mr. Browne was General Manager and Secretary thereof. Thirdly, that the actual operations of the company were under the de facto control of Mr. Browne. Fourthly, that by 1980 the remuneration payable by the company to Mr. Browne was a sum of £6,500 per annum. It was said, and I accept, that there were considerable disputes between Mr. Browne on the one hand and Mr. Gerry Ryan and indeed other members of the Board in relation to the affairs of the Plaintiff company and in particular with regard to the amount from time to time due by one company to the other. The Plaintiff] company (which instituted these proceedings at the instigation of what I may call the Ryan faction) placed great importance on the agreement which was reached in the month of July 1978 ™ which was attached or was expressed to have been attached to the minutes of the meeting of the Board of Directors of the Plaintiffs held at Sandymount Road on the 13th of July 1978.
Several versions of this document each differing slightly from the other were put in evidence but the point on which the Plaintiffs rely is that Clause 6 of the agreement provided as follows:-
"Future personnel employed by Irish Microforms Limited temporary or full-time to be approved by the Company's Board."
It is contended on behalf of the Plaintiffs that this effectively placed an embargo on Mr. Browne employing any further staff without the approval of the Board and that the payment of wages or salary to staff employed without the consent of the Board was and amounted to a misappropriation of the moneys of the company. Mr. Browne's reply to that argument was first that Mr. Ryan and his group neglected to perform the other terms of the contract imposed upon them and secondly that agreement was reached simply to overcome a disagreement then current between the parties and that when this was resolved the agreement fell into disuse. The matter then passes to early 1980. A decision was made by the Directors of Memo Limited to move their operations from Sandymount to Ossory Road in the North Strand, Dublin. The Ryan faction in the Plaintiff Company took the view that it would be desirable for Irish Microforms Limited to move its operations from Ranelagh to the Memo premises in Sandymount. It is not clear what merits this step would have had or to whom the benefits would accrue. Certainly there was no significant financial gain to the Plaintiff Company in undertaking the move. The rents of the Sandymount premises and of the Ranelagh premises were almost identical.
On the other hand it does not appear that there was any very serious reason to oppose the move. But it was opposed by Mr. Browne. The matter was taken a stage further on the 2nd of July 198.0 when the Board of Directors of Irish Microforms Limited formally resolved to transfer the business of that Company from Ranelagh to Sandymount or Ossory Road as from the 1st August 1980 despite the opposition of Mr. Browne. Shortly afterwards Mr. Browne submitted a memorandum to Mr. Alan Martin dated the 29th of July 1980 in relation to the proposed transfer which apparently it had then been decided would be to Sandymount rather than Ossory Road.
In that memorandum he accepted that the transfer would take place. However, the transfer was not implemented on the planned date and there is some difference of opinion as to why that was. At about the same time there was another matter requiring the attention of the Directors of the Plaintiff Company. The Auditors Messrs. Reynolds Cooper and McCarron completed the annual audit and produced draft accounts for the company's financial year ended the 31st March 1980. In fact four different sets of accounts were produced. The first three sets of accounts were expressly marked "draft accounts". The fourth though not so marked, were never finalised by the signature of the Directors or that of the Auditors. The adjustment of the accounts does confirm however that some debate took place in relation to the amount of the creditors of the company and probably that the Auditors were satisfied that the figure had been overstated in the first draft of the accounts. However, the final breach between the Ryan group and Mr. Browne came in the middle of September 1980 when Mr. Gerry Ryan visited the company's premises in Ranelagh with a view to persuading Mr. Browne to implement the proposed transfer to Sandymount. Mr. Ryan described his visit to the company's premises at Ranelagh. < The stairway was he said covered in boxes, the place was alive with people, typewriters were clattering everywhere. He described how he met a young lady and asked to see Mr. Browne. She enquired who he was and he told her that he was the Managing Director of the company. She asked him to hold on and when she returned she explained that he would have to make an appointment to see Mr. Browne. In fact Mr. Ryan went straight into Mr. Browne's office and he enquired, according to his recollection, from Mr. Browne "Sean, what is going on here?
There is no doubt that this incident made a strong impression Mr. Ryan and that he was deeply hurt by it. From that point onwards events moved quickly. At times too quickly. On the 22nd of September 1980 Mr. Ryan wrote to Mr. Browne demanding J that certain documentation specified therein should be delivered™ to him at the Memo Limited premises in Sandymount. On the 14th of October the Solicitors on behalf of the Ryan group demanded possession of the same documents and some others. It does seem that Mr. Ryan had overlooked the fact that by letter dated the 23rd September 1980 Mr. Browne had undertaken to deliver certain documents and that indeed some of those were probably delivered at that time. What has given rise to considerable confusion is the fact that there was a parallel request for other documentation from the Auditors. Whether arising from Mr. Browne's failure to move the business of the company from Ranelagh to Sandymount or whether it was as a result of the incident which occurred in mid September is not clear but certainly Mr. Ryan was very disturbed and one of the steps which he took was to direct the Auditors to prepare draft accounts for the period from the 1st of April to the 30th of September 1980. There is no doubt but that this exercise was approached with some preconception or suspicion by the Auditors and a more searching enquiry was carried out than had been undertaken in relation to earlier accounts. In relation to the half yearly accounts the Auditors sought from Mr. Browne a number of financial documents of the company and it is not clear whether those documents were provided or whether there would have been any difficulty in so doing. However, by the 6th of November1980 the Accountants, Reynolds Cooper and McCarron, indicated that they were unable to finalise the half yearly account unless and until the information set out in their letter of that date was obtained. Enclosed with that letter was a fifteen-page document specifying the many documents and papers which would be required by the accountants for the purposes of the outstanding account. There were, as I say, therefore, two sets of documents being sought. First the Managing Director was seeking the transfer of all of the books, records, and documents of the company by Mr. Browne from Ranelagh to Sandymount and the Auditors were seeking either from Mr. Ryan or from Mr. Browne certain books and records which they needed to enable them to complete the accounts.
The Plenary Summons herein was issued on the 12th of November 1980 and the primary relief sought by the Plaintiffs was a Mandatory Injunction requiring the Defendant to deliver up to the Plaintiffs various files, invoices, correspondence, stock and other chattels. This was followed immediately by a Motion on Notice seeking interlocutory relief which was heard by this Court on the 15th December 1980. That Motion was compromised on terms which included an undertaking by Mr. Browne to deliver up to the Plaintiff company all papers and records and all stock and microfilm in his possession which were the property of the Plaintiff company and a further undertaking by both parties to co-operate in the carrying out of a joint audit of the Plaintiffs business for the period from the 1st day of April 1977 to the 30th of September 1980.
In the course of the evidence given by him Mr. Gerry Ryan accepted that the Defendant had indeed returned all of the company's documents to the Plaintiffs or their then auditors
Reynolds Cooper McCarron. Indeed it appears in the correspondence which passed between Mr. Ryan and the then auditors of the company in February 1981 that the documents which Mr. Ryan believed were still outstanding had indeed been safely delivered by Mr. Browne to the auditors.
As a result of the joint undertakings given by the parties to co-operate in carrying out a joint audit of the Plaintiffs business Mr. Michael F. Hargaden, A.C.A., was engaged on behalf of the Plaintiffs and Mr. Noel Plynn of Messrs. Fay McMahon & Co., Chartered Accountants, was engaged by the Defendant. Mr. Hargaden undertook a meticulous investigation of the affairs of the Plaintiff company and produced a detailed analysis purporting to show that Mr. Browne was indebted to the Plaintiffs in a sum in excess of £40,000.00 or alternatively that Mr. Browne had failed to produce appropriate documentation authorising or vouching expenditure by the company in that sum.
Mr. Hargaden did have a meeting with Mr. Flynn in February of 1981. It was Mr. Hargadenfs evidence that the meeting was held in a cordial atmosphere and that he sought explanations and vouchers from Mr. Browne through Mr. Flynn but that no such
documentation or explanations were ever received by him. Mr.Browne in his evidence accepted that no effort was made by him to meet with the demands made by Mr. Hargaden as it was his, Mr. Browne's, understanding that a hostile attitude had been P taken up by Mr. Hargaden which precluded the possibility of any meaningful discussions taking place.
There were, therefore, demands or requests made of Mr. Browne by different people, at different times for different documentation. This has undoubtedly given rise to considerable confusion as the parties did not at all times bear in mind the distinction between books and records of the company which did undoubtedly exist and which Mr. Gerry Ryan wished to have moved from the company's Offices in Ranelagh to the alternative premises in Sandymount and the documentation or vouchers which were sought by the auditors, and in particular Mr. Hargaden, which, he says would have been appropriate to verify or authorise certain financial transactions carried out by the Plaintiff
Company.
In these circumstances I turn to explore the claims made on behalf of the Plaintiffs.
First it is alleged (see paragraph 8 of the Statement of Claim) that "due to the negligent manner in which he ran the Plaintiff company or alternatively due to fraud on his part, the Company Accountants, Messrs. Reynolds Cooper & McCarron were not able to produce a final set of accounts for the period April 1979 to March 1980 due to the fact that they were unable to obtain all the information and explanations which they considered necessary for the purpose of the said audit". It is further alleged in paragraph 10 of the Statement of Claim that as a consequence of the Defendant's failure to deal with the queries raised by the auditors that the Plaintiffs "suffered much loss and damage and has been greatly injured in its business and reputation".
Secondly, it was contended (in paragraph 11) that the Defendant did "knowingly and fraudulently, without the Plaintiffs consent, charge to the Plaintiff company many invoices which did "not appertain to the trading activities of the Plaintiff company".
Thirdly, it was alleged that the Defendant engaged on his own behalf in the business of publishers trading as Academy Press without the knowledge of the Plaintiff Company.
Fourthly, it was alleged that on the 9th of September 1980 the Defendant "fraudulently represented and warranted to Clear Water Publishing Company New York that he the Defendant and Academy Press were interested in and connected with the Plaintiff
Company and thus sought to deprive the Plaintiff company of the business of the American Company".
In June 1981 the Solicitors then acting on behalf of the Defendant sought particulars of certain matters alleged in the J Statement of Claim. Details were sought (among other things) of the fraud alleged by the Plaintiffs and the loss and damage sustained by them. In their reply dated the 25th of August 1981 the Solicitors on behalf of the Plaintiffs maintained that adequate particulars had been given either in the Statement of Claim or certain Affidavits sworn in the matter. As to the loss and damage, the Plaintiffs took the unusual course of maintaining that these were matters to be proved in evidence at the trial and accordingly declined to give particulars. With regard to the allegations of fraud it was made clear to the Plaintiffs that whilst the Court would entertain an application
even at a late stage to amend the pleadings if that should be| appropriate the Court could not deal with an allegation of fraud otherwise than by reference to express allegations within the pleadings themselves. No application was made for an amendment.
In addition to the problems which arose as a result of confusion between the different categories of documentation and vouchers sought from the Defendant, misunderstandings clearly existed due to the failure to distinguish between the loss (if any) occasioned by the absence of proper documentation either authorising or recording a transaction and the loss which might be caused by the transaction itself. Where payments are made with the object and effect of benefiting a company and the officer responsible neglects to make an appropriate record thereo; no doubt inconvenience, delay and some financial loss occurs as a result but there would be no justification for equating that loss with the payments actually made. Perhaps the appropriate remedy would be to reprimand or even dismiss the officer responsible. There could be no justification, however, for calling upon the officer to pay to the company the full amount of the payment, which he neglected to record.
As no evidence was tendered of any loss suffered by the Company as a result of the delay in producing the accounts for the year to April 1980 I reject the first of the claims made as aforesaid by the Plaintiffs against the Defendant.
As the third and fourth claims adumbrated above involve directly the association of the Defendant with a firm known as "Academy Press" and that association arises only indirectly in relation to the second claim it may be more helpful to consider next the third and fourth claims.
The Plaintiffs assert that the Defendant did at all material times carry on the business of publishers trading as Academy Press and further that he did so without the knowledge of the Plaintiff company. It is dear on the evidence that the first of these assertions is correct and that the second is not.
Academy Press is the firm name of a business which was established by the Defendant with a Mr. Seamus Cashman on the 6th of May 1976 under which the promoters intended to carry on and did carry on the business of general publishers. That a director and full-time executive of one company should at the same time engage in business on his own account in competition with his employer is one of the most extraordinary features of a commercial relationship which was unusual in many respects. However, the conflict of interest to which his involvement in the two businesses gave rise formed only part of the picture. It appears that Mr. Browne and Mr. Cashman held between them the entire issued share capital in a company known as Ellerton Limited, which also carried on a publishing business and traded under the name "Academy Press". Furthermore it appears that on the 7th of October 1980 Mr. Browne procured the registration of| the business name "Academy Microfilms (Dublin)". Not only does it appear that Ellerton Limited was in direct competition for business with Irish Microforms Limited but it is Mr. Browne's own evidence that the staff or some of the staff which he engaged on behalf of the Plaintiff company and who worked at the company's premises in Ranelagh devoted part of their time to the business of Ellerton Limited. Mr. Browne explained that he apportioned the staff costs between the two enterprises by reference to the amount of the work done by them respectively for each of the businesses. It was not only at staffing levels that the affairs of the two competing businesses were interwoven. The Plaintiffs cheques payment ledger discloses numerous payments to the Academy Press and those transactions were explained by Mr. Browne as representing, for the greater part, repayments by the Plaintiff company to Academy Press of moneys borrowed by the former from the latter when Mr. Browne's co-directors were not available to countersign cheques on the Plaintiff Company's bank account. Mr. Browne's evidence was that Academy Press acted as Bankers for the Company.
I would have assumed readily that this extraordinary state of affairs formed part of a fraudulent conspiracy but the| evidence makes it clear that such an assumption is unwarranted. No effort was made by Mr. Browne to conceal his involvement with Academy Press. The documentation relating to the registration of that business name and the incorporation of Ellerton Limited were of course matters of public record. The business names of Mr. Browne's companies were apparently displayed on the Ranelagh premises. The staff engaged on the Academy Press work were employed in the premises in Ranelagh and the fact of their employment and the nature of the work which they were doing was something which could have been ascertained by any of the directors for the time being of the Plaintiff company by visiting the Plaintiffs premises at any time as Mr. Gerry Ryan ultimately did in September of 1980. Attention should also be drawn to the fact that the auditors of the Company Messrs. Reynolds Cooper and McCarron were at the same time auditors to Academy Press. There was, therefore, no attempt at concealment. But that is not all. The involvement of Mr. Browne with Academy Press was the subject matter of an article in the Sunday Independent in October 1978. Finally, the specific question, "what percentage of Sean Browne's time is spent on Academy Press Limited"? was an express item on the agenda for a meeting of the Board of Directors of the Plaintiff company in October 1979. Indeed there was some controversy between the parties as to how that question was answered at the meeting. On one copy of the agenda a figure of 25% was written in from which it might be inferred that a very significant part of the time which Mr. Browne might otherwise have devoted to the affairs of the Plaintiff company was being taken up with the business of Academy Press whereas Mr. Gerard Ryan's recollection was that the percentage of time involved was only 10%. It was Mr. Browne himself who reconciled this apparent conflict. He explained that the figure of 25% was used in relation to his full working day, which included several hours of each evening. The figure of 10% represented the intrusion on his ordinary working day, which would otherwise have been available for the affairs of the Plaintiff Company.
In those circumstances the contention that the Defendant involved himself in the business of Academy Press without the knowledge of the Plaintiff Company is clearly unsustainable.
The claim fourthly made by the Plaintiff company is that a letter dated the 9th September 1980 to the Clear Water Publishing Company constituted a fraudulent representation made with the intention of depriving the Plaintiff company of the business of the addressee and furthermore that the representation was made in breach of contract and in breach of trust. The first paragraph of that letter which was written by Mr. Browne
on Irish Microforms Limited notepaper includes the following sentences:-
"Pending corporate changes here made it very difficult to get back to you on any of the points covered at our meetings. However, you can take it that most of the projects etc that we discussed will go ahead albeit under a different corporate name "
The second paragraph of the letter refers to an enclosed invoice and goes on to say:-
"As you will see the invoice is from the Academy Press. This reflects some of the company changes presently occurring. I will fill you in in greater detail on these later"
Mr. Browne explained the foregoing statements by reference to the disagreements, which were taking place at the date of the letter between himself and Mr. Gerry Ryan and his belief that changes would indeed take place. He explained that he made a general reference to "corporate changes" rather than any specific details because he was anxious to avoid damaging the goodwill of the Plaintiff Company. In relation to the invoice issued under the name "Academy Press" Mr. Browne explained that he was anxious to collect this debt himself which was admittedly due to Irish Microforms Limited so as to ensure that the Irish Times would be paid the moneys which were due to them and which formed the greater part of that invoice. In fact the Plaintiffs accept that the amount due to the Plaintiff Company out of the transaction was very modest indeed and reliance was placed on the transaction - which only came to light some time after the proceedings had been instituted - as indicating a course of conduct in which the Defendant was engaged. Whilst I suspect that Mr. Browne did not fully appreciate the consequences of his actions in writing the letter of the 9th of September 1980 I think that he may have felt that certain connections of the Plaintiff company were of value to him, Mr. Browne, but not to Memo Limited. Nevertheless it is clear that even if Mr. Browne was not guilty of a fraudulent misrepresentation he certainly acted in breach of his fiduciary duty as a director of the Plaintiff Company. However, there was no evidence of any other attempts by the Defendant to appropriate any other part of the business or goodwill of the Plaintiff Company.
The remaining allegation relates to the misappropriation or misapplication by the Defendant of the funds of the Plaintiff Company. The Plaintiffs sought to substantiate this allegation by adducing evidence through Mr. Hargaden of the innumerable disbursements made by the Plaintiff company between the years 1977 and the end of 1980 whilst under the de facto control of the Defendant and which transactions did now appear from any record available to Mr. Hargaden or any explanation given to him by Mr. Browne to have been duly authorised by the Company or expended for its benefit. There is no doubt but that this analysis of Mr. Hargaden was made available to Mr. Browne as far back as February 1981 but that Mr. Browne did not offer any explanation for sums totalling approximately £45,000 which appear to have been misapplied. Mr. Browne's explanation for refusing to co-operate has already been referred to. However,
in the course of the hearing the parties were afforded an opportunity of engaging in further discussions and this did result in some adjustment of the figures. It was not feasible for the parties to debate each and every of the disputed disbursements. However, it is fair to say that Mr. Browne was in a position to establish that some of the payments were correctly accounted for.
A rough analysis of the disputed disbursements expressed in round figures is as follows:-
1. Sums totalling £17,000 paid to the Defendant.
2. Sums totalling £ 9,000 paid to Academy Press.
3. Sums totalling £ 7,500 paid to employees or contractors whose employment or retention had not been authorised by the board.
4. Sums totalling £1,500 which was the liability of Academy Press and which was discharged by the Plaintiff company and
5. Sums in excess of £4,500 in respect of invoices, which were attributable to "The Digest of Irish Affair "
The Digest of Irish Affairs (or the current affairs index as it was more properly called) was a record of news items compiled by Radio Telifis Eireann for the years 1969 and onwards. On the 14th of June 1978 R.T.E. entered into a written agreement with Ellerton Limited (expressed to be trading as the Academy Press and having its place of business at 124 Ranelagh Dublin 6) under which Ellerton undertook to microfilm the current affairs index and to publish it in book form. The contract provided that in addition to providing copies of the cassette film of the work and of the first edition of the book that Ellerton would pay to R.T.E. a royalty in the order of 10% of the publishers net receipts. The fact that Mr. Browne could negotiate such a contract on behalf of Ellerton Limited at a time when he was in the full-time employment of the Plaintiff: company illustrates the ludicrous position in which he had placed himself. But that was only the beginning of the story. According to Mr. Browne he transferred the film rights in the index to the Plaintiff company in or about January or February 1979 in consideration of the payment to Ellerton Limited of a sum of £800. The evidence in this regard appears to be supported by the accounts of the Plaintiff Company for the year ended the 3rd March 1979.
The publication of the index required very considerable academic and skilled research. It also involved, as the contract itself recognised, considerable expense. According to the evidence of Mr. Cashman and Mr. Browne discussions took place between them with regard to the financing of this work. It was their evidence that Mr. Browne insisted upon transferring the R.T.E. contract to the Plaintiff company despite the objections of Mr. Cashman because he, Mr. Cashman, was unable to raise sufficient moneys to have the publication completed by Ellerton Limited.
I am satisfied that Ellerton Limited did not at any time assign the benefit or burden of the contract which they had entered into in 1978 with R.T.E. to the Plaintiff company. It is common case that neither Mr. Cashman nor Mr. Browne obtained or sought legal advice as to whether that contract was, assignable in law. No written document was ever executed or drafted to give effect to the assignment. It does not appear that the alleged assignment was approved in any formal way by the board of Ellerton Limited and certainly it was not considered by the board of the Plaintiff Company. Mr. Browne did swear that the current affairs index was discussed by him from time to time with his co-directors in the Plaintiff Company and I do accept that some references were made to it. However, I do not accept that the board of the Plaintiff Company was ever invited even in an informal manner to accept a transfer of the interests of Ellerton Limited under that agreement. Furthermore, I would doubt that such a transfer would have been effective, quite apart from any other consideration, without the approval of R.T.E. and that approval was never given nor sought.
As counsel suggested in replying to the Defendant's case the execution of the R.T.E. contract and its alleged assignment to the Plaintiff company lies at the core of these proceedings. That being so it was unfortunate that the matter was not identified in the pleadings as an issue between the parties. Again, it was regrettable that no submissions were made to the Court as to the consequences in law of the purported arrangement between Mr. Cashman and Mr. Browne concerning the contract. Mr. Browne contented himself with saying that he had been given full power to enter into contracts on behalf of the Plaintiff company and the Plaintiffs in reply to that argument stated that having regard to Mr. Browne's fiduciary relationship with the Plaintiff company it would have been necessary for him to disclose the special nature of the transaction to at least one other director of the Plaintiff company.
Whilst I can see that disclosure to a fellow director might go a long way to negativing an allegation of fraud I know of no principle of law which either requires disclosure to at least one director on the one hand or validates a transaction which would otherwise be void provided it is disclosed to a single director. However, it is clear and necessarily accepted by both parties that Mr. Browne as a director of the Plaintiff Company was in a fiduciary position in relation to it. It is likewise clear that there was an obvious conflict of interest in relation to the duty, which he owed to Ellerton Limited and that which he owed to Irish Microforms Limited in any negotiations concerning the R.T.E. contract. This conflict was exacerbated by the fact that Ellerton Limited had already incurred expenditure in exploiting the contract and was under its terms responsible to incur even more. In those circumstances the acquisition of the publishing rights of the index from Ellerton Limited would be distinguishable from the general run of commitments entered into by Mr. Browne on behalf and for the benefit of the Plaintiff Company. In my opinion; it would not have been possible for Mr. Browne in his capacity as de facto executive of the Plaintiff company to acquire the R.T.E. contract for the benefit of the Plaintiffs without the board approving the acquisition of the rights in the knowledge that the supplier was a company in which Mr. Browne was a substantial shareholder.
The consequence of this decision is twofold. First of all it follows that the burden and the benefit (if any) of the R.T.E. contract remains vested in Ellerton Limited and secondly that all costs and expenses and all payments made by the Plaintiff company at the behest of Mr. Browne in connection with— the R.T.E. contract or to persons engaged in editing or promoting the current affairs index were incorrectly debited to the Plaintiffs and should and must be borne by the Defendant or Ellerton Limited. It would seem, for example, that all of the invoices attributable to the Digest of Irish Affairs were sums wrongly withdrawn from the funds of the Plaintiff Company at the direction of Mr. Browne. Similarly moneys paid to employees or contractors, whether nominally engaged by the Plaintiff company or not, but whose work related to the index or to the extent to which it so related would likewise constitute misapplications of the Company's funds. It may be that other questioned payments likewise constituted misapplications of the Plaintiffs money's. It does seem to me that prima facie all of the payments made to Academy Press, should be refunded unless express justification can be found for any particular payment. The other payments would require to be judged on their merits but with the proviso that a particular payment is not a misapplication merely because the records of the Company are inadequate. To be recoverable from the Defendant it must be shown that the particular payment was expressly or impliedly authorised by Mr. Browne for a purpose, which was not calculated to benefit his employer.
Whilst I regret the delay and expense which such a procedure would entail I feel that the matter would have to be referred to the Examiner of the High Court to take an account of the moneys so misapplied unless some agreement can be reached between the parties so as to avoid this additional burden.
With regard to the Defendant's counterclaim there was in fact only one real issue, namely, whether the Defendant resigned his employment with the Plaintiffs or whether he was wrongfully dismissed. I have no doubt but that he resigned in the manner and in the circumstances of which Mr. Gerry Ryan gave evidence. Indeed that account was not seriously disputed. Instead the Defendant argued in general terms that he was coerced into his resignation but in my view that contention was unsupported by any evidence.
I will hear the parties in regard to the nature of the Order, which they suggest should be made having, regard to the foregoing judgment.
