Appeals court upholds ruling that language school company should not be wound up
Posted on 2nd March 2022 at 21:41
Parties had fallen into dispute over how business was run
The Court of Appeal (COA) has upheld a High Court ruling that a company which had operated a Dublin-based English-language school should not be wound up.
The case was brought by Tiago Mascarenhas against Rezaul Karim, and his wife Mahbuba Sultana over a company called SEDA (Skills & Enterprise Development Academy) Limited, which had operated a college that had catered for 600 students located at Capel Street in Dublin city centre.
Mr Mascarenhas is a shareholder and a director of the company.
Ms Sultana was the majority shareholder in the firm, which traded under the name ‘English Language College’.
The parties had fallen into dispute over the running of the company, resulting in matters going before the High Court.
The case centred around allegations that the couple, who are based in the UK and Bangladesh, had acted in an oppressive manner towards Mr Mascarenhas, in the running of the company.
The appeal concerned the 2019 judgment of Mr Justice John Jordan, who held that Mr Mascarenhas was entitled to relief under section 212 of the Companies Act 2014, that it was not appropriate or desirable that the company be wound up.
The judge also gave Mr Mascarenhas liberty to acquire the respondents’ shares in the company.
Mr Karim and Ms Sultana brought separate appeals against the judgment.
In its judgment the COA, comprised of Ms Justice Caroline Costello, Mr Justice Robert Haughton and Mr Justice Maurice Collins, upheld the High Court’s decision.
However, the COA did find that the High Court had wrongly concluded that Mr Karim was the beneficial owner of his wife’s shares in the company.
All other aspects of the appeals were dismissed.
Giving the COA’s unanimous decision Ms Justice Costello said that the couple conducted or purported to conduct the affairs of the company in a manner oppressive of the applicant, notwithstanding the fact that Mr Karim was neither a director nor a shareholder.
While Mr Mascarenhas was not without fault in the breakdown in relations between the parties, the High Court held that this was largely because of the conduct of the appellants, the judge said.
Ms Justice Costello said the High Court was correct to conclude that the applicant was entitled to relief under section 212 of the Act.
It was common case between the parties that they could not work together in the future and that the company ought not to be wound up, she said.
“To bring matters to an end it was necessary that either the applicant acquire the shares of Ms Sultana in the company or Ms Sultana acquires the shares of the applicant.”
“As the applicant had succeeded in his case, he was the key man in the company’s affairs, had experience in running a language school while Ms Sultana did not, had the support and loyalty of the senior staff and he was living and working in Dublin,” the judge said.
Ms Sultana lived and worked overseas, she added.
It was appropriate to order that the applicant could purchase Ms Sultana’s shares, if he wished, rather than vice versa, the judge said.
The fact that she was the majority shareholder did not preclude the court from so ordering, Ms Justice Costello said.
The High Court had evidence to support his valuation of the company and of Ms Sultana’s shares in the company, the judge added.
The High Court had carefully assessed the evidence from the experts on each side and explained his reasons for accepting or rejecting the relevant evidence and for his conclusions, the judge said.
There was no basis for this court to interfere with the High Court’s assessment or conclusions.
The High Court had also exercised its discretion in relation to the costs of the motions before him in accordance with established principles and his findings.
No reason has been advanced which would warrant this court interfering with his exercise of his discretion in his award of costs, Ms Justice Costello said.
The trial judge was not justified in concluding that Mr Karim was the beneficial owner of the shares held by Ms Sultana in the company, Ms Justice Costello added.
The COA was allowing Ms Sultana’s appeal on this point and directed the applicant pay Ms Sultana in respect of his purchase of her shares in the company.
The COA’s preliminary view was that Mr Mascarenhas is entitled to his costs against both appellants, jointly and severally.
However the judge said Mr Mascarenhas was less than candid with the High Court and the COA as to the deterioration in his immigration status and thus the crucial matter of his right to reside and work in the State.
This is a matter to which the court may have regard when ruling on costs.
The COA, the judge said, would normally therefore reduce the applicant’s costs by 10 per cent as reflecting an appropriate sanction for this conduct.
However, the appellants have equally conducted the litigation in a manner which this court cannot condone, and they twice refused the opportunity to resolve the dispute by mediation.
For this reason the COA was not making any deduction from the costs of the applicant in conducting the two appeals.
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