A dispute between siblings in the family-owned Ward Cinema Group over the sale of €31.5 million in shares in the group will have to be reheard, the Court of Appeal has ruled.
In 2019, Paul Ward was sued by his sisters Jean Kennedy, a company director, and Carol O’Riordan, a retired director. The Ward group runs the IMC cinema chain, which includes the Savoy in Dublin and a number of multiplexes around the country.
Carol died in September 2021 and her part in the action had, before her death, been taken over by her husband, Andrew O’Riordan, under an enduring power of attorney.
In their action, it was claimed that, in April 2019, the parties entered into a binding “heads of terms” agreement, whereby they would resolve their differences in relation to matters connected with various companies.
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The heads of terms provided, among other things, that Mr Ward would procure the acquisition of certain shares owned directly or indirectly by his sisters for a total of €31.5 million.
The first €25 million was to be payable by October 31st, 2019, with the remainder payable in smaller tranches by October 2022.
The parties agreed to use their best endeavours to ensure all sums paid to the sisters would be structured in a tax-efficient way.
Outstanding balance
It was also agreed that if the money was not paid in accordance with the terms Mr Ward would consent to judgment for the outstanding balance.
The full €25 million tranche was not paid on time, though Mr Ward later lodged some €12.5 million to Ms Kennedy’s bank account and €6 million to Ms O’Riordan’s account.
The sisters complained that Mr Ward had used cash reserves from the companies to make these payments which they said was not permitted under company law.
They also complained this represented “a significant risk” that they would have to pay income tax on a large portion of the monies, rather than capital gains tax which, at 33 per cent, was considerably lower.
Mr Ward opposed their action. It was listed before the High Court’s commercial division, which last March gave its decision following a hearing.
The court granted summary judgment to each of the plaintiffs for €14.5 million against Mr Ward which represented the €29 million that would have been due to be paid by March last (with another €2.5 million payable in October 2022).
Reciprocal obligations
The court adjourned the issue of the dispute as to Mr Ward’s entitlement to a transfer of the shares.
Mr Ward appealed the summary judgment, arguing, among other things, the heads of terms agreement was intended to create and did create reciprocal obligations so that the plaintiffs’ claim ought never to have been considered as apt for summary judgment. Ms Kennedy and Mr O’Riordan opposed the appeal.
On Tuesday, the Court of Appeal overturned the High Court decision.
On behalf of the three-judge appeal court, Mr Justice Senan Allen said a significant plank, “if not the foundation stone”, of the case made on behalf of the plaintiffs was that they were under no continuing obligation to transfer the shares to Mr Ward or his nominees.
While the High Court rejected that argument, it fell into error because heads of terms agreement created mutual rights and obligations.
This meant it was at the very least arguable that the remedy was not a decree (for judgment) but an order for specific performance of the agreement or damages in lieu of that, he said.
The plaintiffs “belatedly acknowledged” the requirement to transfer the shares on payment of the first tranche of the money was not reflected in the order of the High Court, Mr Justice Allen said.
He concluded that the appeal must be allowed and the matter should be remitted to the commercial list of the High Court for rehearing.
