Belmont Park Investments Pty Ltd and Others v BNY Corporate Trustee Services Ltd and Another (No 2); Butters v Bbc Worldwide Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 20 August 2009 |
| Neutral Citation | [2009] EWHC 1954 (Ch) |
| Docket Number | Case No: 10689/2009 |
| Court | Chancery Division |
| Date | 20 August 2009 |
[2009] EWHC 1954 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Peter Smith
Case No: 10689/2009
Mr Sheldon Qc, Mr Isaacs and Mr Haywood (instructed by Denton Wilde Sapte Llp) for the Applicants
Mr Howard Qc, Mr Jowell & Mr Arnold (instructed by Olswang Llp) for BBC Worldwide Ltd
Mr Anderson Qc & Mr Cullen for Bbc Video Ltd (instructed by Wiggin Llp)
Hearing dates: 12 th, 15 th, 16 th,30 th June and 30 th July 2009
Peter Smith J:
INTRODUCTION
The hearing of the Amended Ordinary Application arises out of the insolvency of the Woolworths Group of companies. The Application was issued by Messrs Kahn, Butters & Dargan of Deloitte LLP the Joint Administrators (“the Administrators”) of WW Realisation 8 Limited (“Media”) and Woolworths Group PLC (“Group”). The dispute which gives rise to the Application concerns the appropriate basis for the valuation of Media's Shareholding in 2 Entertain Limited (“2e”). It is a company owned by Media (as to 40%) and BBC Worldwide Limited (“BBCW”) (as to 60%).
CORPORATE STRUCTURES
Media is a subsidiary of Woolworths Entertainment Group Ltd and it is in turn a subsidiary ultimately of the holding company Group. Media owns 40% of the shares in 2e. One 2e's subsidiaries is BBC Video Ltd (“Video”) Media was previously called Woolworths Media PLC and prior to that VCI PLC. Media went into administration on 11th February 2009. Media was a public limited company but was re-registered as a private limited company on 13th March 2009. Group went into administration on 27th January 2009.
The issue concerns two documents. First there is the Joint Venture Agreement (“the JVA”) dated 9th July 2004 between BBCW (1) Group (2) Media (3) and 2e (4). It sets out the terms upon which BBCW and Media hold their shares in 2e.
Completion of the JVA was conditional on the grant by BBCW to Video of a licence of intellectual property rights and continuing access to future BBC rights in accordance with the Master Licence Agreement (“the MLA”). The MLA was in an agreed form at the date of the JVA although it was not dated until 27th September 2004.
THE DISPUTE AND PROCEDURAL MATTERS
The dispute concerns the basis upon which BBCW is entitled to acquire Media's shares in 2e as a result of the insolvency of Media and/or Group. As will be seen further in this judgment there are detailed provisions which confer rights on BBCW to acquire Media's shares in 2e upon the happening of an Insolvency Event as defined in the JVA. The JVA contains provisions for exercise of the right and determination of the price to be paid in the event that the parties are unable to agree the price. As will be seen those are linked to the MLA. The most significant linkage is that the MLA according to clause 16.2.5 terminates immediately after any company in the Woolworths Group suffers an Insolvency Event and BBCW serves notice (“The Notice”) in accordance with clause 26.7.1 of the JVA to acquire Media shares. The main issue between the parties arising out of the Amended Ordinary Application is the validity of that provision.
Initially Media by way of an Ordinary Application dated 15th April 2009 sought directions pursuant to paragraph 63 of Schedule B1 Insolvency Act 1986 that the Independent Investment Bank (“the IIB”) engaged pursuant to clause 27.1 of the JVA to determine the Fair Value of the shares in 2e should take into account a number of factors (6 in total). At that time BBCW was the only Respondent. By an amendment in May 2009 Media sought to include a preliminary objection namely that (in the events that have happened) clause 26.7.3 of the JVA and clause 16.2.5 of the MLA are both void and that the IIB is obliged to determine the Fair Value of the shares in 2e taking into account that those clauses are void or alternatively to treat them as void.
The original directions sought are then relegated in the sense that they only arise if those clauses are not declared to be void.
At the same time 2e and Video were joined as Respondents to the Ordinary Application but initially they had taken no part in the proceedings although they were present throughout the proceedings by solicitors acting in effect on a watching brief. Video was joined so that it could make representations as to the effect as contended by the Applicants of the MLA. It had initially chosen not to do so. This has caused a significant difficulty as will appear further in this judgment.
During the hearing a clear issue arose as to the status of the MLA in the event that the Applicants were successful in contending the offending clauses were void. The difficulty was as appears below. After the Notice relied on by BBCW as in effect terminating the MLA was served it offered Video a new temporary licence on basically the same terms as the MLA save that it was terminable on 30 days notice. Clearly this is far less valuable than the apparently perpetual licence granted by the MLA. Video accepted the new licence without any qualification or reservation whatsoever.
The argument raised by BBCW as a fall back was that there was in any event a new relationship and the MLA even if not terminated by the Notice because the relevant provisions were void was nevertheless impliedly terminated by the unqualified acceptance of the new licence. This was fully argued as between Media and BBCW. However the relevant licensee Video did not make any argument as to the impact of the disputes on its licence (whichever one it held). Apparently it did not occur to either Media or Video although it did occur to BBCW.
After the initial hearing of the Amended Ordinary Application when judgment was reserved Video became alive to the possibility that the judgment might rule on the status of its licence. This was to my mind a self evident proposition; it was only joined after Media amended its Ordinary Application to raise the validity of the clauses for the first time. I cannot see why else it would have been joined as a party.
Video finally became alive to this possibility. Its solicitors wrote to me seeking to make representations and even lead evidence on this issue. I directed it to issue an application for permission to adduce evidence and make submissions on this point which it did on 25 th June 2009.
I heard the application on 30 th June. Media unsurprisingly supported it as it was in its interest to have the MLA in existence to maximise the value of its shares. There was no real opposition and I granted it permission to make its submissions and lead evidence. The other parties were also granted permission to lead evidence in reply. In the event after a flurry of correspondence on the point no evidence was challenged which gave me a little difficulty as appears below.
By the time of the hearing of the application by Video I had already written my judgment which I handed out to the parties. I indicated that the clauses were void but could be saved as set out below. That made the status of the MLA unnecessary as I was minded to decide it had been validly terminated. Nevertheless in case that determination was challenged elsewhere I would have held that the MLA in any event had been impliedly terminated by reason of the unreserved entry into the new licence.
I provided the draft to help the parties in their further submissions. In so doing I made it clear that I was not prepared to allow further submissions beyond the status of the licence point. The parties accepted that restriction. It was not intended to be a rerun of the main issue as to the validity of the clauses.
The day before the hearing I was provided by BBCW with a copy of the decision of the Chancellor on the same principle in Perpetual Trustee Co Ltd v BNY Corporate Trustee Services and others [2009] EWHC 1912 handed down on 28 th July 2009. The Chancellor has given permission to appeal his decision. Given the importance of the principle and to ensure judicial consistency I granted BBCW permission to reargue the provisional decision on the voidness point on the refixed hearing on 30 th July. No one objected to that either.
Accordingly I heard full argument on both issues on 30 th July 2009. This judgment is a result of the original hearing and the later hearing.. This judgment therefore replaces the draft although I have included some amendments to the original as I saw fit in the light of submissions from BBCW and Media. In so doing I have naturally taken on board and accept the criticisms of the BBCW submissions by Media. Some of them clearly go beyond the limited right to correct typing and obvious errors as opposed to seeking to rerun the hearing. Accordingly I have not incorporated the majority of BBCW's proposed amendments.
At the end of the hearing on 30 th July I reserved judgment. Due to the urgency of the issue (although an appeal is inevitable I would have thought given the Chancellor's decision to grant permission in the case before him) I indicated I would issue the judgment to the parties as soon as possible in the Vacation. This judgment is the result. I intend the parties to be able to publicise it as soon as it is received. However as it suffers from being typed up by me as opposed to my clerk it will not meet her high standards so I will hand it down formally on Thursday 20 th August at 10.00am. Any typographical corrections should be provided to my clerk by 4.00pm Friday 14 th August 2009.
INSOLVENCY/INSOLVENCY EVENT
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