In re Herald, Primeo and Thema Funds Securities Litigation

Filing 325

DECLARATION of Jarlath Ryan in Opposition re: #252 JOINT MOTION to Dismiss.. Document filed by Shmuel Cabilly, Neville Seymour Davis, Repex Ventures S.A. (Bunch, Stephen)

UNITI1) STATES DISTRICT COURT
SOUTIIIIRN DISTRICT OF NEW YORK

In rc HERALD, PRIMEO AND THEMA
FUNDS SECURITIES LITIGATION

: Civil Action No. 09 Civ. 0289 (RMI3)

This Document Relates To:
ALL ACTIONS.

D•CLARATION OF J.R1.vFII RYAN

5129383.1

JARLATII RYAN declare as follows:
1.

I flin a barrister. ha% in. been called to the bar in Michaelmas 2004. I am o graduate of
I. ersiiv Collem‘, Galwa\.. 1 apprenticed in the law Firm McCann Fit/Gerald, beint
admitted to the roll of solicitors in 2001 aml subsequently I trained aml practiced as a lawyer
(associate) in the international law firm 1 - 1-c ,d0it.thk Bruckhaus Derinl!er in London and
FranklUrt in the areas a internatiuiril kinking Since my call to the Bar of Ireland I have
practiced io the areas of chancer\ commercial, banking and private international law.

2.

I have been instructed by ByrneWallace Solicitors, 2 Grand Canal Square, Dublin , bn|umL
who in turn have been retained by the law firm Robbins Geller Rudman & Dowd, LLP, to act
on behalf of the Lead Plaintiff in the class action snit herein Mr. Neville Seymour Davis ("Mr
Davis") in Ireland specifically in the context of his joinder as Notice Party to Irish Commercial
Court proceedings entitled Thema International Fund plc and HSBC Institutional Trust
Services (Ireland) Limited and Thema Asset Management Limited and 2020 Medici AG,
Record Number 2008/10983P.

3.

I have been furnished with a copy of the claim documentation under which Mr Davis is
seeking redress before the Federal Court of New York against various defendants including
papers filed in the Joint Motion to Dismiss on behalf of a number of defendants in the within
proceedings ("Joint Motion to Dismiss"). I have been asked to make this declaration in respect
of certain issues pertaining to the Irish legal system and to Irish law to assist the Federal Court
of New York in determining matters in the Joint Motion to Dismiss before that court.

4.

The statements and conclusions contained in this declaration are to the best of my knowledge
and belief true and accurate and are based on my knowledge of Irish law and the Irish legal
system.

5129383.1

2

1.

1 II IRIS!! LEGAL SYSTEM

5.

Hie Irish legal system is common law in nature deriving from the English common law

stem \\ hich applied for much of its history.

[11.

.11 . RISDICTION

6,

1 . itiler Irish law, the basis of the exercise of jurisdiction in personam by the Irish Courts is:
(a)

Valid service uf the proceedings in question upon the defendant as authorised by,

and in the manner prescribed by statute or statutory order; and
(b)

Where a claim relates to a c vil or commercial matter within the meaning of (a)
Council Regulation (EC) 44/2001 or (b) the Brussels and Lugano Conventions ("the
Ju(gments Regulations and Conventions") the Courts have jurisdiction to entertain
claims in persona

a claim brought against a person compelling him to do

something) solely in accordance with the prov sions of the judgments Regulations
and Coax entions.
7

Therefore in c v`l and commercial matters the Court will seise itself of the matter if it has
authority to do so under the Judgments Regulations and Conventions and in accordance with
thc adjectival rules relating to service that apply in Ireland.

8.

Therefore, after considering the Judgement Regulations and Conventions, the circumstances in
which service may be duly effected within and outside of the territory as well as the mode of
service are set out in the Rules of the Superior Courts 1986 as amended ("RSC").

9.

At common law, any person within Irish territory may be made subject of jurisdiction where
there has been personal service upon him or her of an originating summons in accordance with
rules governing the issue and service of summons. The fact that a defendant is an Irish
national does not render him or her per se amenable to the jurisdiction of the Irish Courts. In
Rainford v Newell-Roberts: Davitt P. held:
"Personal jurisdiction in this country depends upon the right of a Court to summon the
defendant. Apart from special powers conferred by statute it is obvious that, since the
right to summon depends on the power to summon."

I

[1962] 112 95.

5129383.1

1 0.

Subject to the provisions of the judgment Retnilat ions and Conventions, a derendant mav enter
a conditional appearance and contest jurisdiction by arguimi that IrcLind is a jinwm non

conrcnicns.

The judicial jurisdictional dkcretion is ol 1,milicance now that the

legislative regime involving the Judgment Regulations and ',inventions apply. If there is a
question relating to the jurisdiction of the court over a detendant xhv has no domicile within
Regulation State or Con \ cution State. then jurisdiction is determined by the national law of
the Court seised ot the matter.
11.

Some of the defendants appear to be domiciled in Ireland but others arc domiciled outside the
jurisdiction in LC States, EFTA States and in non-EC non EFTA States.

12.

Under Order 11 rulel(h) of the RSC, the applicable test is whether if the person were within
the jurisdiction he would be a proper person to be joined as a defendant.' The inclusion of the
party "must not be a mere device to get a foreign party before the Irish courts"

i.e., there must

be a substantial element in the claims igainst the both parties. 3 This will depend on the
substance of the matter in the light of all the circumstances, and not on the mere form of the
pleading and whether there is technically a cause of action.' The claim against the foreign
domiciliary does not have to be the same as the claim against the Irish domiciliary. 5
1 3.

Factors relevant to an assessment of Ireland asforum non conveniens include:
(a)
(b)

Proceedings have been initiated in New York.
The defendants have entered an appearance to the New York proceedings and are
contesting the Lead Plaintiff's claim on its merits. In Irish law, the New York Court
is seised of the proceedings.

(c)

The matter before the New York court is not pending before the Irish Courts. For
such proceedings to commence, the New York proceedings would have to be
withdrawn or stayed pending the initiation of proceedings in Ireland.

= Mussel.. v. Ileynes (1888) 21 Q.B.D. 330 at p.338; Witted v Galbraith [1893] I QB 577, 579; Short v Ireland [1996] 2 IR 188, 216, Analog
Devises BV v Zurich Insurance Co /2002] I IR 272; AkCarthy v Pillay [2003] 1 IR 592; [2003] 2 ILRM 284.
Massey v Ileynes (1888) 21 Q.B.D. 330 at p. 338.
Multinational v. Multinational Services [1983] Ch. 258 per Dillon LI
Zurich Insurance Co [2002] 1 IR 272, p.286.

p. 286 (quoted and approved by Fennelly J in Analog Devises BV v

International Commercial Bank plc v Insurance Corporation of Ireland plc [1989] IR 452, 460; [1989] ILRM 788.

5129383.1

4

Most oldie relo.xn/ vitnesses on the part of he Plaintiff are in New York which goes
to the issue of comparam e cost and con% eience.
With respect to choice of law (considered below), Irish law will apply to procedural
aspects how L.\ er. o
current lk.:titql

Illav

\A cue to

be that

it el!211 11 \V

will be required to be proven if the

he initiated hefore the Irish Courts. Although some of the

defendants ;ire corporate entities registered and regulated unde Irish law, the
constitution of the corporate defendants is not in issue.
(f)

While individual actions have been commenced against Thema in Ireland, there can
be no assess ent as to the oN, erlap or interaction between and among the causes of
action in the Irish proceedings \\ here pleadings filed are not public and advisors on
behalf of the Lead Plaintiff have no right to access them.

(g)

The link between the Lead Plaintiff s suit and those before the Irish Courts is
arguably tangential in nature and there would be limited economical benefit in
centralising the hearings at this point in time given the current stage of the foreign
proceedinos.

(h)

The number of American witnesses required for the Irish proceedings will not
necessarily be significantly fewer than for the foreign proceedings although where
there are fewer claims brought, fewer proofs are required which may impact on
witness numbers.

14.

There are therefore grounds upon which an Irish Court may decline jurisdiction on the basis of
forum non conveniens.

In addition, if a civil claim for damages or restitution which is based

on an act giving rise to criminal proceedings, then the Court seised of the criminal proceedings
may exercise special jurisdiction which is the providence of Irish Criminal law.
LIS ALIBI PENDENS
15.

Although Order 11A rule 2(2) of the RSC provides that for service to be effected thereunder,
no proceedings between the parties concerning the same cause of action are pending between
the parties in another Member State of the EU, Order 11A rule 2(2) of the RSC requires the
Court to have the power to hear and determine the claim by virtue of Regulation 44/2001.

5129383.1

5

Artiele2 and 28 of Regulation 14/2001 in effect provide for a defence of (is alibi pcnili.ns in
respect u1 prueeediui.s i ()lying the same cause of action or related causes o I action
reliectivelv. With regi.ird to inter-related claims, Article 27 provides that where proceedings
ltt \kil\ing

the same cause 01 action and between the same parties ;ire brought in the courts of

di Herein Member States, any court other than the court first seised must of its own motion stay
its proceedings until such time as the jurisdiction of the court first seised is established.'
16. Where it is established, any other court must decline jurisdiction in favour of that court under
Article 27(2). Article 28 provides:
Where related actions are pending in the courts of different Member
States, any court other than the court first seised may stay its proceedings.
(b)

Where these actions are pending at first instance, any court other than the court
first seised may also, on the application of one of the parties, decline jurisdiction if
the court first seised has jurisdiction over the actions in question and its law
permits the consolidation thereof.

(c)

For the purposes of this Article, actions are deemed to be related where they are so
closely connected that it is expedient to hear and determine them together to avoid
the risk of irreconcilable judgments resulting from separate proceedings.

17. In circumstances where actions come within the exclusive jurisdiction of several courts, any
court other than the court first seised must decline jurisdiction in favour of that court pursuant
to Art.29. For the purposes of both Arts 27 and 28, a court is be deemed to be seised when:
" I.

at the time when the document instituting the proceedings or an equivalent
document is lodged with the court, provided that the plaintiff has not subsequently
jailed to take the steps he was required to take to have service effected on the
defendant, or

See Droz, Cornhjtunce Judiciaire et Effects des .Indgments dans lc Afache Comanme (Paris, I 972)at pp 164-169 who advocates a reflexive
approach cited but not followed in Goshawk Dedicated Ltd & Ors Ltle Receivables freland Lid [2008] IEHC 90 (subsequently appealed to
the Supreme Court which disagreed with High Court in its view that Owusu was determinative).

5129383.1

6

betOre win!

if the document has. to he

-ed with Ihc court, at the time

when it is received bt the authority respoimhle Jar service, provided that the
plain/W . 110s not suhsequently ailed to take the steps he was required to take to

have

18.

iro,f,',/ it

WI

In short, the essence of /is

ineaw, that with he exception ol matters arising under

Art.22 \\ hich do not arise here. the resolution of priority in conflicts is determined simply by a
rule favouring the court first seised.'
19.

It is submitted that c‘ en \vhere the Irish Courts are shown to have jurisdiction under
Regulation 44/2001 either through Article 5 or Article 23. the proceedings before the New
York courts would give risc to a defence

lis alibi pendcm

following a reflexive application

of the doctrine. Therefore the Irish Court would be required to decline jurisdiction or at the
least stay any proceedings where the foreign proceedings are seised first over the matters
raised by the claims (there are no proceedings as and between the Lead Plaintiff and the
defendants initiated before the Irish Courts) and, as I have been instructed and am so advised,
where the New York Court has already consolidated the foreign proceedings by means of
using the class action procedure. Furthermore, it would not be open to the Irish Court to
examine the forum clause as to do so would be to contest the basis upon which the first Court,
i.e.,

the New York Court, is seised.

IV.

CHOICE OF LAW

20.

I have been asked to state the general law in relation to choice of law as it relates to tort. The
law in relation to the governing law of a tort committed abroad now contained in EC
Regulation No. 864/2007 on the law applicable to non-contractual obligations (the "Rome II"
Regulation) came into force in Ireland on 11 January 2009. However, by virtue of Article 31 it
applies only to "events giving rise to damage which occur after its entry into force." As the
tortious acts giving rise to the liability in question occurred prior to that date, the Rome II
Regulation is of no application to the determination of the choice of law and the old common

7

Article 30 of Regulation 44/2001.

See Harris, Jonathon, "The Brussels I Regulation and the Re-Emergence of the English Common Law" (2008) 4 European Legal Forum 181,
182.

5129383.1

7

Liw will Apply. There would be a laek of clarity

applicd to non contraL.Lual

o. the Rome II

there is no precedent

was to be retrospectively

known to me where Rome

\\ as applied to non-contractual obligations arising prior to the entry into force of the Rome II
Regulation. I his declarai ion iloc-; not deal with the choice of law rules in relation to other
polential

Citl.V•L!

:10.1k)11`, .

V.

RP:COGNITION AND ENFORCEMENT

21.

No

to public morality or pone) vould arise if the Lead Plaintiff was to attempt to

recognise and enforce jud , iiient obtained in the New York Courts. The situation as seen in
rolootschop (lc I- -( jam v Dorset ,14-anufilc ing Co. 5 would not arise as an order made pursuant

to the settlement would not be in direct contradiction of an Irish legal instrument.
VI.

MANNER OF PROCEEDING IN IRELAND — REPRESENTATIVE ACTIONS

22.

Class actions, where an individual is deemed by a competent court to be the "Lead Plaintiff and thereafter assumes a duty of care towards a putative class of affected plaintiffs with the
same cause of action, is unknown in Irish law.

23.

The law in this jurisdiction simply has not developed to that extent to sue out and determine
matters in this way.

24.

There is little similarity between the class action process, as I understand it, and the
representative action process under Order 15 Rule 9. Under Irish law there is no entity known
as a lead plaintiff with the rights and responsibilities of a lead plaintiff, as I understand them
under US federal law, no potential to bind a class of putative plaintiffs into a determination or
settlement of the proceedings and no duty of care owed by one leading plaintiff to any other.

25.

Once a determination is made by a Court under the procedure sct out and described in Order
15 Rule 9, then the Court might individually assess damages for each plaintiff."'

[1949] 1.R. 203.
'° See OVearhhuill v An Bora' Telecom H Ct, Lardner 1st April, 1993 and Greene v

5129383.1

8

for Agriculture [1990] 2 IR 17

VII.

DISCOVERY AND DISCLOSURE OF DOCUMENTS

26.

In Irish la sN ; (liscovery is not permitted for documents to prove the defendants' state of mind or
nnention. )rifer 31, Rule 29 of the RSC provides for non-party discovery. The Court has a
discret 1011

R://f.W

thc application it cam that particular oppws ion Or prejudice will
s

be caus(d to the person called upon to ma4a discr(ycly which is. not ( a table of being
adequately compensated by the payment by the party scelting discovery of the costs of the
malting thereof"

A restrictive view has been taken to rule 29 and in Chambers' v Times

Newspaiwrs. Ltd. 12 Morris P held:
"I believe that as a general principle third party discovery. with all the inconvenience
which it involves, should only he ordered when there is no realistic alternative
available..""
VIII. WITNESSES AND EVIDENCE
27.

The power of Irish courts to subpoena is limited to witnesses residing or present within the
jurisdiction. Therefore American witnesses not resident nor present in Ireland cannot be
subject to the Irish courts power of subpoena.

IX.

STANDING

A.

The Rule in Foss v Harbottle and Derivative Actions in Irish Law

28.

In Irish law, the rule in Foss v Harbottle'4 governs the circumstances in which a shareholder
may step into the shoes of the company. In that case, Wigrarn VC held:
"It was not, nor could it successlitlly he argued, that it was a matte of course jbr any
individual members of a corporation thus to assume to themselves the right of suing in
the name of the corporation. In law, the corporation and the aggregate members of the
corporation are not the same thing jbr purposes like this; the only question can be,

11
12

13
14

Ulster Bunk v Byrne [1997] IEHC 120.

[1999] 2 IR 424; [1999] 1 ILRM 504.
[1999] 2 IR 424, 430; [1999] 1 ILRM 504, 509.

(1517)2 Hare 461.

5129383.1

9

whether the facts„. juvtili
ak a / / I t '

1111111r

I Am:

iiporation

1. 011101W

,l(parntre from the rule whh prima 1,.tic would require

OM

lic1/11C and

It

the law h a, i ,p0) /„Iril

in

//.,,

-ow(

chdr

,

in the

ht ,

In Edwards' Ha8iwe/1, 16 an unauthorised increased in Trade Union Member subscriptions
was ;It issue. Jenkins Lj found the memhers' personal rights had heel] violated and therefore
the matter fell outside the scope of P ss v Ilarbottle. Jenkins L.J. summarised the mle as
follows:

"The rule in Foss v Harbottle, as I underst,nol it, routes to no more than this. First,
the proper plaintiff in an (u.tion

revert of a wron:; alleged to be done to a

company or association of persons is prima facie the rompimy or the assoriathm of
persons Uself Secondly, where the alleged wrong is a transaction which might be
made binding on the company or assoriatimi and on all its members by a simple
majority of the members. no individual member of the company is allowed to
maintain an action in respect of that mailer JO,- the simple reason that, if a mere
majority of the members of the company or association is in avour of what has
been done. then cadit quaestio."
30.

This summary was quoted and approved by the Irish Supreme Court.' 7 In Prudential

Assurance Co. v. Newman Industries Ltd. (No.2), / " the English Court o( Appeal held:
"The rule [in Foss v. Harbottle/ is the consequence of the fact that a corporation is a
separate legal entity. Other consequences are limited liability and limited rights. The
company is liable jbr its contracts and torts; the shareholder has no such //u6ildr The
company acquires causes o

15

fbr breaches o antract and for torts which damage

Ibid, pp.490-1.
[1950] 2 All ER 1064.

17

Balkanhank v Tuher (9th January 1995) and more recently in Glynn & ,Inor -v- Oven & Ors [2007] IEIIC 328 (05 October 2007) by

Finlay Geoghegan J.
18

[1982] 1 All E.R. 354.

5129383.1

10

er)11I01111'.

Cal/N. e

acquires ,h, tic

, itiOh veNIS in the

sharehohler. !filen th e shareho lder

the _foci that dic value of his investment f011ows the fOrtunes

of the company and that he can only exercise his influence over the fin-tunes of the
,.oll tpaav dh. e‘er;.ise of his. rotiat.! rights in !,..,-eneral meeting. The law confers n him
"
the ri:gn to en,7tre that the c(nnpany observes the limitations of its memorandum of
association and the right to ensure that other shareholders observe the rule, imposed on
them hy the articles o ss elation. If it is right that the law has con erred or should in
certain reswicted circuinctonces confer fUrther rights on a shareholder the scope and
e M ISCgifi 'lleeN

31

,

eh further rights require carefUl consideration."

In Prudential Assurance, the Court of Appeal set forth five propositions derived from Jenkins
LJ's statement (set out above):
The proper plaintiff in un action in respect of a wrong alleged to be done to a
corporation is, prima facie. the corporation.
(2)

Where the alleged wrong is a transaction which might be made binding on the
corporation and on all its members by a simple majority of the members, no
individual member of the co(poration is allowed to maintain an action in respect of'
that matter because,

the majority con

the transaction, cadit quaestio; or, if

the majority challenges the transaction, there is no ru/idrooxun why the company
should not sue.
(3)

There is no room fbr the operation of the rule if the alleged wrong is ultra vires the
corporation, because the majority of members cannot confirm the transaction.

(4)

There is also no room for the operation of the rule if the transaction complained of'
could he validly done or sanctioned only by a special resolution or the like, because
a simple majority cannot con ir a transaction which requires the concurrence o
greater majority.

(5)

There is an exception to the rule where what has been done amounts to fraud and the
wrongdoers are themselves in control of the company. In this case the rule is relaxed

5129383.1

11

in jayour of the al..f,grUn l minority, who are allowed to bring
shareholders' action '111

themselve' and all others, The reason

that. if they Ivure denied Ilua

minority
this is

thcir .gri,Tanee could never reach the court

because the wrongdoers themsell es, being in control, would not allow the company
to sue."

32.

17HVY

v Harbottle continues to be accepted and applied by the Irish courts.' 9 Tl)ere arc some

exceptions to the rule and then there are circumstances, as illustrated in hlwards that fall
outside the scope of the rule and are not therefore properly exceptions. Courtney states:
"The exceptions to the rule in Foss v Harbottle amount to a recognition that the rule
does not prevent a member from bringing either two types o

. First, a member is

entitled to bring a personal action to vindicate an infringement of his personal rights.
Secondly a member may he entitled to bring a derivative action on behalf of the
company. " . 20
33.

Actions on foot of a breach of a member's personal right as opposed to the company's rights
are not within the scope of the rule and are not limited by it. Section 25 of the Companies Acts
1963 creates a statutory contract between the company and its members breaches of which
may ground a cause of action. In Pender v Lushington (1877) 6 Ch D. 70 the chairman
refused to count the votes of the plaintiffs nominees contrary to the articles of association.
Thc plaintiff applied successfully for an injunction in the name of the company and his own
name. Jcsscl MR held that it was:
"cm individual's right in respect of which he has a right to sue. That had nothing to
do with the question like that raised in Foss v Harbottle and that line o

I

.

.

v Ryan [1993] ILRM 557: Diezpan v Bourke, High Court, 30th May 1986, Costello .1; Courtney, The Law of Private Companies (2nd
ed), para.19.094, Ruyan Restaurant -v- & ors [2009] IESC 28 (27 March 2009); Martialone Ltd -v- Companies Acts [2009] IEHC 570
(23 December 2009)(Poss applied); Ejc/wooi/ Ltd & Ors -v- Companies Acts [2010] IEHC 57 (05 March 2010) (Prudential Assurance and
O'Neill applied, para.:19).
20

The Law of Private Companies (2nd ed), para.19.098. Emphasis original.

5129383.1

12

34.

Similarly in

atm\ e. the change to the subscriptions amounted to

an 111\ idid

alteration

of the table id ioniribithoo. Jenkins. LJ skaed:
mc that the rule in Foss v Harbottle has no applicathm

all, 'or the

individual members who are suing sue, not in the right of the union, but in their own
right to protect from invasion their own individual ri:.fhts. 1 s• members."

Ifrvon

111frrnatioihti lora Gnulc. ,:harcholdcr neouxi/|cJuauuioumxuuodno

against a director in their

ONs II

name as there had been no loss occasioned to the

company iniking 1 -rom the poor advice in respect of a takeover bid he had given
although the shareholders |mJ personally sustained loss in reliance.
35.

The e\cep(iims to Foss v larboule were summarked

fanning v Murtagh as:

"(a)

tin act which is illegal or ultra vires to the company;

lb)

An irregularity in the passing of a resolution which requires a qualified majority.

(c)

An act purporting to alwidgc or abolish the individual rights of a member.

(d)

An act which constitutes a fraud against the minority and the wrongdoers are
themselves in control of the company."

36.

Both (a) and (d) will be considered here; (c) is not properly an cxemption and has been
considered above.
(a)

An act which is illegal or ultra vires to thc company.
Where an ultra vires act was committed, a shareholder may sue for a declarat(on that an
act was ultra vires as an action on a personal right. In Simpson v Westminister Palace
Hotel [o.22 funds established for one undertaking were used for another, which was
ultra vires although sanctioned by the directors and a majority. Additionally, a member
of a company may apply to restrain ultra vires acts under s.8(2) of the Companies Act

[1983] BCLC 244.
:2 (1860) LR 3 Ch App. 262.

5129383.1

13

1 0 61. Similarly. a member Ina% indate proccedintts where illegal acts have been
Counniucd. Co, birrn Saitiiary Steam Laundry Co - '

the managing

director had paid hit hes to WM. Wick: officials. The company and other shareholders
\\ ere disinclined to initiate. O'Brien LC held:
"1 nc rule ()flaw and good sense laid down in Foss v Harbottle is indisputable. hut is

subject to the e.\e‘pa, )11 thin' whcrc di('

(1(1.;

complained of are of a fraudulent character

or beyond lac palv,m - of the compnv. The action may be maintained by a shareholder
weim„f. on behalf of himself and the other shareholders, the company being made a

(hjendant in the action."

An act which constitutes a fraud against the minority and the wrongdoers are

(d)

themselves in control of the company.
What constitutes a "fraud on a minority" is widely interpreted and will include actions
falling short of negligence. Usually this involves appropriation of the company's
property by a majority in a controlling positions or where the majority support directors
acting in breach of their fiduciary position. There are three factors usually shown:
there was a fraud perpetuated by the majority on the minority and the company i.e. where
- the

majority have put something into their pockets at the expense of the minority" 24

Fraud

in this context does not have any element of dishonesty 25
the defendant majority was in control of the company

(e.g.

50% of the voting control, etc)

the defendant derived a benefit.
37.

A shareholder may bring a derivative action where one of the exceptions arises. The nature of
such an action is summarised by Courtney:
"Nil a derivative action a shareholder acts in a non-personal capacity, namely, he acts

not only for himself but also for all the other shareholders. Accordingly, it was held in

- [1915] 1 IR 237.
:4 Menier v Hooper's Telegnqth 11PrAs Ltd (1874) 9 Ch. App. 350.
25 Keane, Company Luw para.26.15.

5129383.1

14

oke v Cooke that where a sharehohler sought to join in one action a claim Ibr relic(
h s perconal capacity with a derivative elairn as ripres.entative

shareholders, leave was required to join those causcs

38.

all

the other

or.," 26

Significantly where a shareholder is successful in prosecuting a derivative claim, they will
Wen drop out of the action and the court will award the judgment ni favour We company.
As Me shareholder is acting as an agent of the company, he is entitled to be indemnified by the
company against costs and expenses arising out of the agency It is important to note that
this action is not intended to provide members with relief, and that there is a separate statutory
protection for minority members of a company who have suffered oppression at the hands of
the majority or the board of a company. This can be found in section 205 of the Companies
Act, 1963.

39.

There is a two step test to be met in bringing a derivative action. In

PrudentiaLks. uralwe,

the

test was set out:
"[E:Istablish a prim facie case (i) that the company is entitled to the relief claimed, and

tii) that the action falls within the proper boundaries of the exception to the rule in Foss

v Harbottle:

40.

This appears to have been accepted by Keane J in
Croft (No.3), 3°

Crindle Investments v Wymes 29 .

In

Smith v

Knox J held it was proper to have regard to the views of independent

shareholders.
41.

Thc determination as to whether the plaintiff comes within the scope of the exceptions to
v Harbottle

would follow after a consideration of all relevant evidence including the factors

motivating the decision of the Thema directors to initiate proceedings.

The Law of Private (ompanies (2nd ed), para.19.101. References omitted.
27
'8
_'9
30

Foss

Spokes v Grosvenor Hotel Co. Lid [18971 2 QB 124; Wallersteiner v Moir (No.2)[I975] I QB 373.
Wallersteiner v Moir (No.2), ibid.

[ 1998] 4 IR 578.
(1987] BCLC 355.

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42.

If there is some persuask e reason w hy a company '4)1.ild clot bring the claim then the
shareholder will not be permitted to sue on its behalf.

Ali ael ion or this sort is outlined in SI

No 503 of 2010: Kx|c^ of the Suncric,r Courts (Derivali e Actions) 2010 and requires ;Ind
affidavit that should exhibit an opinion from counsel indicating that the applicant has a
realistic prospect or success.

B.

Fiduciary Duties

43.

While fiduciary duties are generally owed to the company. Irish law recognises a cause of
action on the part of shareholders tOr hreach of fiduciary duties where a director expressly
undertakes certain obligations to shareholders giving rise to fiduciary relationship. Irish law
accepts that there are equitable fiduciary obligations resting on directors oC companies which
include the duty to act in the best interests of the company, the duty not make a secret profit
and the duty to insure that one is not conflicted in ones interests when acting as a director.

X.

COMMON LAW CLAIMS ALLEGED

44.

Under Irish law, a cause of action may accrue for negligence including professional
negligence, negligent misrepresentation, fraud, breach of fiduciary duties, breach of contract,
and recovery of monies had and received and recovery of monies pursuant to the artificial
construction of the constructive trust. Unjust enrichment is recognised conceptually in
Ireland. Irish law does not recognise a tort of aiding and abetting causcs of action in civil law.

45.

With regard to negligence, a plaintiff must show the existence of a duty of care, a breach of
that duty and damages resulting from that breach. The same proofs are required for
professional negligence which is a species of general negligence although the standard of care
applicable differs from negligence simpliciter. In the case of negligence, the standard of care
used is that to be expected of the reasonable person. In the case of professional negligence, the
standard of case is that of the reasonably skil[ul professional in question. 3t The Irish Courts
do not recognise gross negligence as a separate species of negligence or tort. 32

31

32

Dimne v National Maternity Hospital [1989] IR 91; Roche v Peilmv[19S6] [LEW 189; O'Donovan v Cork County Council [ 1967] IR 173.

APH Manujacturing RV v DHL Worldwide .VvI s hvorA NI/ [2000] 1EHC 121.

5 129383.t

16

46.

In both contract :ind ton, there is an obligauon to mitigate loss under s.34 of the Civil Liability
Act MI and a 1

u do so will constitute contributory negligence and limits financial

reco cry.
47.

Irish law doc ,, not recognise some oldie causes of action pleaded by the plaintiff in the foreign
proceedMgs specifically aiding and abetting and gross negligence and recognition of unjust
enrichment is conceptual.

XI

RISKS IN IRISH LITIGATION

48.

A 'loser pays rule is part of the practice of the Irish Courts.

The general rule is that costs

the event. litigation is financed by interim fees rendered on account of total costs
hich arc then assessed or (igreed at the end of the case. This is a fundamental difference
between the United States and Ireland. Lawyers in Ireland are paid up front or as the case
progresses.
49.

It is also the case that the assessment process in Ireland means that the rates that solicitors and
barristers charge are being reduced at the end of the case which has facilitated the practice of
obtaining monies up front or during the case.

50.

In short, no litigation of this order can realistically progress in Ireland without monies being
set aside for it. If the matter is ansmitted to Ireland on grounds of forum non conveniens
there will almost certainly be no actions capable of being brought if sufficient funds are not set
aside for it by the plaintiffs.

I declare under penalty of perjury under the laws of the Unitcd States that the foregoing is
114,
day of September, 2011, at Dublin, Ireland.
and correct. Executed this

SO

lath Ryan B

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