Film producers deny claims they diverted between €40m and €50m from German company

Film producers deny claims they diverted €40 and €50m from German company

A German film company has claimed that two well known Irish film producers diverted between €40m and €50m funds out of a film production company to either themselves personally or corporate entities controlled by them. 

The claim is made by Berlin-based W2 Filmproduktion Vertriebs GmbH against producers Morgan O'Sullivan and James Flynn, who it is alleged diverted the funds out of Octagon Films Ltd, a company they are all shareholders in.

Both men deny the allegations. 

W2 is taking proceedings against the producers on behalf of Octagon by way of a derivative action, which is a claim brought by a shareholder on behalf of a corporation against another party, which in this case is Mr Flynn and Mr O'Sullivan who are directors of Octagon.

In its action, W2 seeks an order for damages for alleged breach of duty, alleged fraud and alleged conspiracy against the producers.

W2, which invests in international film productions, says it acquired 49% of shares under a shareholders agreement in Octagon in 2002, which it considered to be a successful start-up company.

It also seeks a declaration that the defendants are obliged to account to the plaintiff in respect of all profits made through the producers and Octagon's alleged involvement in dozens of tv and movie productions. These include Vikings, The Tudors, Penny Dreadful, The Borgias, Love Hate, Swag, Skippy Dies, Calvary, Ondine, PS I Love You and many more. 

The claims are denied and the producers say they did not divert any fees, income or opportunities that were due to Octagon to themselves personally or to any corporate entities controlled by them personally.  

In their defence, Mr O'Sullivan of Ardmore Park, Bray, Co Wicklow, and Mr Flynn of Ballyedmonduff Road, Stepaside, Dublin -  who between them own 51% of Octagon's shares - deny they traded as Octagon and used the company's name and reputation.  

Octagon they say was set up as a company devoted to film development and production activities, and is a separate entity to the "work for hire" film production services they are associated with. 

They claim Octagon benefited from the defendant's association with projects, which were not part of Octagon's business. 

They also say they will produce forensic accountancy evidence to demonstrate that the alleged losses claimed by W2 are misconceived and misstated. 

The defendants claim they separately owed pre-existing duties to other corporate entities involved in television and movie production, which W2 knew of and ought to be aware of.  

A number of pretrial motions in the dispute in what has been a complicated dispute case first came before the court in 2016. The most recent of these opened before Ms Justice Teresa Pilkington the High Court on Wednesday.

Represented by Paul Gardiner SC with Edward Farrelly Bl W2 seeks various disclosure orders including orders for the discovery of Octagon's book and records of the company. 

Counsel said that while there had been some agreement in relation to the exchange of documentation the defendants have refused to furnish all the material it requires to advance its claim.   

The producers, represented by Lyndon MacCann SC and Niall Buckley Bl, claims that the level of discovery sought by the plaintiff is wide, costly and excessive. 

Counsel told the court that his clients have made proposals that would save costs in the discovery process. 

The hearing of the motions continues. 

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