Team Y&r Holdings Hong Kong Ltd and Others v Joseph Ghossoub
Jurisdiction | England & Wales |
Judge | Laurence Rabinowitz |
Judgment Date | 06 October 2017 |
Neutral Citation | [2017] EWHC 2401 (Comm) |
Docket Number | CL-2015-00381 and CL 2015-000901 |
Court | Queen's Bench Division (Commercial Court) |
Date | 06 October 2017 |
[2017] EWHC 2401 (Comm)
IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT
Laurence Rabinowitz QC
(SITTING AS A DEPUTY HIGH COURT JUDGE)
CL-2015-00381 and CL 2015-000901
Joanna Smith QC & Max MallinQC (instructed by Squire Patton Boggs (UK) LLP) for the Claimants
Charles Bèar QC and Edward Levey (instructed by Holman Fenwick Willan LLP) for the Defendant.
Hearing dates 6–7 September 2017
There are three applications before the Court relating to two claims arising out of a dispute that has arisen between entities within the WPP group of companies ("WPP") who carry on a global media business, and Mr Joseph Ghossoub, a businessman resident in Dubai. The first claim (CL-2015–000381) is referred to below as the 'anti-suit claim'; the second claim (CL-2015–0009019) is referred to below as the 'defaulting shareholder claim'. I explain the nature of those claims in more detail in what follows.
The first application, brought by the claimants to the anti-suit claim, is for an interim injunction seeking to restrain Mr Ghossoub, the defendant to those proceedings, from pursuing related proceedings commenced by him in Hong Kong against four of those claimants until the trial of the anti-suit claim. The second application, brought by Mr Ghossoub as defendant to the anti-suit claim, seeks to set aside two orders made by the Court related to service on him of the anti-suit claim. The first, made by Phillips J dated 20 May 2015, granted permission to serve the anti-suit claim out of the jurisdiction. The second, made by HHJ Waksman QC sitting as a High Court judge dated 8 September 2016, granted permission to serve the claim form and other documents by an alternative method of service. The third application, brought by Mr Ghossoub as defendant to the defaulting shareholder claim, in effect mirrors his application in the anti-suit claim to set aside the service out and service by an alternative method orders.
The applications were originally due to be heard by Carr J on 14 June 2017 but for reasons explained below she ordered the matter be adjourned. The hearing before me was therefore the resumed hearing of the applications.
Background
As noted above, the claimants in both actions are all WPP companies. The fifth claimant in the anti-suit claim, WPP plc, is the group parent company. It has a primary listing on the London Stock Exchange and a secondary listing on NASDAQ. Prior to 2006, WPP plc, through its Dutch subsidiary ("Y&R"), the third claimant in the anti-suit claim, held a minority stake in a substantial media business based in the Middle East (known as 'Menacom') controlled by Mr Ghossoub and his former business partner Mr Makdessi.
In about 2006, WPP wished to increase the holding in Menacom into a majority interest. To this end, it was agreed with Mr Ghossoub and Mr Makdessi that a company would be incorporated for the purpose of holding the business following WPP's stake being increased. On 27 November 2007, Team Y&R Holdings Hong Kong Limited ("TYRH"), the first claimant in the anti-suit claim and the second claimant in the defaulting shareholder claim, the company through which the interests in Menacom were to be held, was incorporated in Hong Kong.
Thereafter, by a sale and purchase agreement dated 28 February 2008 (the "SPA"), Mr Ghossoub and Mr Makdessi agreed to sell in the aggregate 47.7% of the shares in TYRH to Y&R. WPP 2005 Limited ("WPP 2005") the fourth claimant in the anti-suit claim was party to the SPA as guarantor of Y&R's obligations. On the same day, TYRH and Mr Ghossoub entered into a service agreement (the "SA") under which TYRH employed Mr Ghossoub as its sole chief executive.
By a Deed of Novation entered into the following day, 29 February 2008, another WPP company, Cavendish Square Holding B.V. ("Cavendish"), the second claimant in the anti-suit claim and the first claimant in the defaulting shareholder claim, replaced Y&R as party to the SPA. The SPA was thereafter amended from time to time but none of those amendments are material to the issues with which I am concerned.
The net effect of the foregoing arrangements was that WPP came to hold a majority interest in TYRH, with 60% of the shares owned by Cavendish (47.4%) and Y&R (12.6%). Messrs Ghossoub and Makdessi each retained a 20% share.
The SPA included the following provisions:
(1) In accordance with clause 3.1, Cavendish agreed to pay the sellers US$34 million on completion with further consideration to be over a number of instalments up to a total maximum of US$147.5 million.
(2) In accordance with clause 5.1, a seller whose employment with TYRH was summarily terminated for acts of gross misconduct or who was found to have engaged in a competing business — referred to in the SPA as a 'defaulting shareholder' — would lose his entitlement to any unpaid instalment of consideration to which he would otherwise be due. In addition, in accordance with clause 5.6, Cavendish would in such circumstances also become entitled to exercise an option to acquire the defaulting shareholder's shares at what is referred to in the SPA as the 'defaulting shareholder option price', calculated by reference to the net asset value of TYRH. This could involve a sale at a value significantly below the actual value of the shares.
(3) In accordance with clauses 13.1 and 13.2, the parties agreed provisions relating to the management of TYRH, including the identification of matters with regard to which Cavendish could not act without the consent of the sellers, such consent not to be unreasonably withheld or delayed.
(4) In accordance with clause 13.4, the sellers and Cavendish agreed to procure that TYRH and its subsidiaries would promptly distribute as dividends the maximum amount of profits lawfully available for distribution at the end of each financial year.
(5) In accordance with clause 14, the parties agreed certain provisions relating to the governance of TYRH and more particularly as to the number and constitution of the board of directors as well as the formalities relating to the conduct of the board. Clause 14.2 provided that each seller was entitled to remain a director for as long as he continued to hold shares in the company.
(6) In accordance with clause 15, each seller was granted an option, in the circumstances and on the terms there set out, to require Cavendish to purchase his TYRH shares from him.
(7) In accordance with clause 21.11, the parties agreed that except as otherwise expressly stated in the SPA, a person not a party to the agreement could not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999.
(8) In accordance with clause 23.1, the parties agreed the choice of English law.
In addition to the foregoing, clause 23.2 of the SPA contains a choice of forum provision, namely that " The English courts have exclusive jurisdiction to settle any dispute arising out of or in connection with this agreement and the parties submit to the exclusive jurisdiction of the English courts."
So far as concerns the SA, the employment contract made between TYRH and Mr Ghossoub, this too contains a provision dealing with choice of law and jurisdiction. In particular, clause 29.2 of the SA provides that " This Agreement is governed by and interpreted in accordance with the laws of England and Wales and the parties submit to the exclusive jurisdiction of the English Courts."
Mr Ghossoub thus became chief executive of TYRH, whilst Mr Makdessi became its nonexecutive chairman and director. However, Mr Makdessi's association with TYRH did not endure. In December 2010, Cavendish and TYRH instituted proceedings in this jurisdiction against him alleging breach by him of the SPA and his fiduciary duty. The details of the wrongdoing alleged against Mr Makdessi can be found in the judgment of the Supreme Court in Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67.
It is unnecessary for present purposes to descend too far into the dispute between TYRH and Mr Makdessi, although it is relevant to note that Mr Makdessi at some point amended his defence to admit that he had, since 1 July 2008, been in breach of the SPA and his fiduciary duties. TYRH settled its claim against him by accepting payment of the US$500,000 Mr Makdessi had paid into court. By the same proceedings, however, Cavendish had also sought a declaration that Mr Makdessi was a defaulting shareholder under the SPA and, as such, in accordance with clause 5.6 of the SPA obliged to sell all his TYRH shares to Cavendish at the substantially discounted defaulting shareholder option price. Mr Makdessi resisted this on the basis that the provision constituted a void and unenforceable penalty, an argument ultimately rejected by the Supreme Court.
The breakdown in the relationship between Mr Ghossoub and WPP
By 2015, the relationship between WPP and Mr Ghossoub had also begun to sour. So far as concerns Mr Ghossoub, his initial grievance with WPP, as expressed in a letter dated 11 February 2015 from his solicitors, Holman Fenwick Willan ("HFW") to WPP plc, appears to have centred around the failure of WPP as TYRH's majority shareholders to declare and distribute dividends; no distribution had been made since the conclusion of the SPA. At this early stage, Mr Ghossoub framed his complaint in this regard as one involving a breach of the SPA rather than on any wider basis.
A response to Mr Ghossoub's complaint came in the form of a letter dated 25 February 2015 from Squire Patton...
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