Citation

[2008] All ER (D) 438 (Jun) 

Alternative Citations

[2008] EWHC 1494 (Ch) 

Hearing Date

27 June 2008 

Court

Chancery Division, Birmingham District Registry 

Judge

Judge Purle QC Sitting as a High Court Judge 

Representation

Christopher Spratt and Tom Beasley (instructed by Chebsey & Co) for the claimants.Charles Machin (instructed by Read Law) for the defendants, other than the fifth defendant who did not appear and was not represented. 

Abstract

Company – Shareholder. Chancery Division: The court ruled on various issues arising out of a derivative action brought by the claimants against the first to fourth defendants on behalf of the fifth defendant company.

Catchwords

Company – Shareholder – Derivative action – First claimant company owned equally by second and third claimants – Second and third claimants also shareholders and directors of fifth defendant company – Second and third defendants also shareholders and directors of fifth defendant – Shareholders subsequently falling out with result that fifth defendant becoming deadlocked – Claimants bring derivative action on behalf of fifth defendant in respect of acts taken by defendants in relation to fifth defendant – Appropriate orders.  

Summary

The first claimant company (C Int Ltd) was owned equally by the second and third claimants. C Int Ltd at all material times was in the business of the selling holiday accommodation. The second and third claimants were also shareholders and directors of the fifth defendant (the company); and each owned a quarter of the issued share capital of the company. The other shareholders (also owning a quarter each) and directors were the second and third defendants. The banking arrangements for the company had, originally, been governed by a mandate under which the signatures of the second defendant and third claimant were needed, together with one further signature of either the third defendant or second claimant. The clear intention had been that in that way neither the claimants or defendants could make withdrawals from the bank account without the other side knowing. On 15 November 2005, the second and third defendants had entered into a business master customer agreement on behalf of the company with the bank. That enabled funds to be transferred electronically from the account. The business master customer agreement had effectively by-passed the mandate as regards electronic transfers and had been unauthorised by the board. The electronic facility had been used to effect significant transfers without the knowledge or approval of the second and third claimants. This On 6 June 2006, the second and third defendants incorporated the first defendant company. It had never traded, but its name was identical to the name which the company had been using following a special resolution passed the year before. Those manoeuvrings had been a clear breach of fiduciary duty towards the company. The second and third defendants were fully aware that the company had not only resolved upon the name change but had actually used that name in its business. From the summer of 2005, the fourth defendant came to work for the company. By late summer/early autumn of 2005, there were two parallel businesses, that of C Int Ltd (as selling agent) and that of the company (as the seller of holidays for property owners). Around that time the second claimant (who had experience in the furnishings business) opened discussions with IR Ltd, an English company, for the sale of furniture packages to property owners. Prices were negotiated, and premises were found which would operate as a warehouse, showroom and offices. The offices would be for the use of the company as well as the chosen Spanish vehicle on the side of IR Ltd which in the event became IRE Ltd. In 2006, the chosen vehicle for the furniture venture, BC was established. Before the second claimant's deal with IR Ltd was concluded, someone (possibly the fourth defendant) sent IR Ltd a supplier and property owner report taken from the company's database. C Int Ltd had built up a substantial database of purchasers of the company's properties, and much other information relating to its business connections. The shareholders of the company subsequently fell out, with the result that the company was deadlocked. The claimants bought a derivative claim against the defendants on behalf of the company.

C Int Ltd claimed database rights in respect of the company's database. It brought amongst other claims, a claim for alleged breach of those rights and for breach of confidence arising from the alleged misuse of the database.

(1) On the evidence it was held that the company was entitled in outline to the following relief (1) against the third defendant, as follows; (i) an inquiry in respect of the electronic facility dealings and as to any loss arising therefrom; (ii) an inquiry in respect of the incorporation of the first defendant; (iii) mandatory orders requiring him to procure the change of name of the first defendant and the conferring of the first defendant's name on the company; (iv) a declaration that he held his purported beneficial interest of 50 per cent of the shares in IRE Ltd upon trust for the company (v) a declaration that he held one third of the shares in BC upon trust for the company; (vi) an inquiry as to damages in respect of the attempted diversion and ultimate loss of the proposed furniture contract with IRE Ltd (after giving credit for the value of the IRE Ltd shares); (vii) injunctions restraining dealings with the shares of BC and IRE Ltd except with the authority of the company; (viii) an inquiry as to damages in respect of the database transfer and (if required) injunctions restraining further unauthorised dealings; (2) against the second defendant, the same relief with the exception of item (iv), and excluding in his case also the reference to the IRE Ltd shares in (vii); (3) against the fourth defendant the relief outlined in items (v) to (viii) inclusive, excluding in his case also the reference to the IRE Ltd shares (vii).

(2) As regards C Int Ltd, its claims would be dismissed. An attempt had been made to bring a claim by reference to their status as a joint venturer. However, no sustainable claim for damages or other relief had been made out in that respect. C Int Ltd had no interest in the company's bank account, or in the name, or in the BC or IRE Ltd shares, or the furniture venture. Moreover, the transferred database had been the property of the company, and did not belong to C Int Ltd.

Benjamin Weaver Barrister.

Comment first

Only registered users can write comments.
Please login or register.

Powered by AkoComment Tweaked Special Edition v.1.4.6
AkoComment © Copyright 2004 by Arthur Konze - www.mamboportal.com
All right reserved