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Latest in Employment Law>Case Law>Joe Simpson v Alan Torpey, Eduardo Doandes, Paul Doody and Gerry Cosgrave t/a R.I. Investment Group [2011]
Joe Simpson v Alan Torpey, Eduardo Doandes, Paul Doody and Gerry Cosgrave t/a R.I. Investment Group [2011]
Published on: 25/10/2011
Issues Covered: Tribunal Practice, Procedures & Jurisdictional Issues
Article Authors The main content of this article was provided by the following authors.
Eamon Harrington
Eamon Harrington
Background

Mr. Justice Clarke noted the risks that can arise when formalities are not completed:

“There is often a tension between businessmen and their advisers stemming from the pace at which each might feel that business can safely be progressed. Understandably, businessmen wish to grasp opportunities as soon as they arise. Their advisers often counsel caution and emphasise the need to have legal and accountancy details clarified in advance. There is not necessarily a right or a wrong answer to the question posed by that tension.

Often, businessmen press ahead and hope that the necessary details will be put in place in due course. When things work out well, it may transpire that it is possible to allow the legal and accountancy structures to “catch up” with the actual conduct of business. However, allowing business to get ahead of formalities necessarily involves a risk, most particularly where things go wrong. It is not that there is anything intrinsically inappropriate in business forging ahead of the putting in place of the necessary formalities.

Rather, it is that businessmen who make a conscious decision to allow business to progress faster than those formalities, take a risk. Where things go wrong, and it is necessary to define with some precision the rights and obligations of the respective parties, then the absence of necessary formalities creates an obvious difficulty.” 

The Court noted that in the particular case, the defendants, in one guise or another, became involved in property development in Romania. The precise legal structure within which that business was engaged in, and which it was intended in the future to be engaged in, was both complex and, to a significant extent, not fully worked out. However, the conduct of the business galloped ahead. 

The plaintiff (“Mr. Simpson”) was employed as a project finance director. The business was expanding and it was felt that a person such as Mr. Simpson, who had experience in putting together advantageous financial arrangements for property projects, would be a very useful addition to the team. That Mr. Simpson started work as project finance director is not in doubt. Who precisely his employer was, however, was of significant dispute. While there was written confirmation of his terms of employment, the precise way in which those terms were to be implemented did not, in reality, appear to have been fully worked out.

The Court considered various issues including:

1. Was the contract with individuals or a corporate entity?
2. What was due to the employee on foot of the contract?
3. What bonus was due to the employee?
4. What entitlement (if any) had he to profit share?

The court had to reconcile the factual matrix with limited documentation to ascertain who was the employer. Again, Mr. Justice Clarke succinctly summarised the problem.

“There seems to me to be little doubt as to what the medium or long term intention of all of the parties was. It was the view of the defendants that they would ultimately seek to bring all of their Romanian interests into one corporate group with a single group holding company. In that context it is, perhaps, important to note a number of aspects of the general intent of the parties. 

First, it was mentioned by a number of the defendant witnesses that, at least in broad terms, the model which they were contemplating was a model which they believed had been successfully employed by Treasury Holdings, the large Irish property company. Mr. Simpson had, of course, worked for Treasury Holdings. As I understand it, what was contemplated was that potential individual investors would be secured for specific projects which would be managed by R.I. This, indeed, was already the case in respect of some of the projects which were in place prior to Mr. Simpson becoming involved. Up to the time of Mr. Simpson’s involvement, each separate project had an SPV established. The precise shareholding in each SPV varied from case to case. 

In addition, independent investors (that is to say, investors independent of the defendants) had shares in some of the relevant SPVs. It appears to be the case that it was intended that that broad model would continue so that individual projects would be directly owned by an SPV, with there being a significant possibility that some of the shareholding in each separate SPV would be held by independent shareholders who would have been induced to invest in the project concerned. However, what appears to have been contemplated is that the interests of the defendants in any of the relevant projects (presumably represented by the shareholding of the defendants in the SPVs concerned) would be held in a group structure with an ultimate group holding company. 

However, as is often the case, the structure which was already in place had grown up in a somewhat haphazard way. The evidence disclosed that quite an amount of work had been done by professional advisers (including taxation advisers) in attempting to work out the best way (including from a tax perspective) of achieving the end of bringing all of the defendants’ ownership in the relevant projects within a single corporate group. While the evidence suggests that such a project was ongoing, it was clear that it was far from straightforward. No final decision on how it was to be achieved had been arrived at. Different proposals as to an appropriate structure had been put forward. 

I have no doubt but that the overall intent of the parties was that, in due course, and subject to it being possible without incurring unacceptable tax liabilities, such a group structure be put in place and that, in that eventuality, it would be the ultimate group holding company which would employ Mr. Simpson. 

However, the problem with which I am faced is that that group structure never came into place. It was indeed a case that the identification of suitable projects continued apace and a certain degree of progress on the exploitation of those projects was maintained. In the meantime, some effort was made to address the question of putting in place an appropriate group structure. However, there can be little doubt that the business on the ground was moving ahead much faster than the nuts and bolts of establishing, with the benefit of legal, accountancy and taxation advice, an appropriate group structure”.

Ultimately, the Court concluded that Mr. Simpson was entitled to enforce his contract against the individual defendants, as the group structure had not been put in place.

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Disclaimer The information in this article is provided as part of Legal Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article. This article is correct at 25/10/2011
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