Eclairs Group Ltd v JKX Oil & Gas Plc
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Mann |
| Judgment Date | 30 August 2013 |
| Neutral Citation | [2013] EWHC 2631 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC1302145/HC13F02147 |
| Date | 30 August 2013 |
[2013] EWHC 2631 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Mann
Case No: HC1302145/HC13F02147
Mr David Mabb QC and Mr Nigel Dougherty (instructed by Freshfields Bruckhaus Deringer LLP) for Eclairs Group Ltd
Mr Andreas Gledhill and Mr Paul Sinclair (instructed by Locke Lord (UK) LLP) for Glengary Overseas Ltd
Mr Michael Swainston QC and Mr Tony Singla (instructed by Allen & Overy LLP) for JKX Oil and Gas plc
Hearing dates: 23rd-26th July, 29th July, 1st August 2013
Approved judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is the expedited hearing of two claims, which, having been caused by the same course of events, largely rely on the same grounds and can properly be dealt with together. At issue is the validity of certain restrictions on voting and transfer,imposed by the board of directors of the defendant company (the "company" or"JKX") under its articles on shares beneficially (though not legally) held by twosignificant shareholders, Eclairs Group Limited ("Eclairs") and GlengaryOverseas Limited ("Glengary", together "the claimants"). Mr Mabb QC led for Eclairs, Mr Andreas Gledhill led for Glengary and Mr Swainston QC led for the company.
The board of JKX perceived that it was being "raided" by Eclairs and Glengary who, it was feared, sought to destabilise the company by replacing senior management and obstructing necessary fund raising processes with the ultimate aim of acquiring the company at less than its proper value. The board, or the principal executive directors, served a notice under section 793 of the Companies Act 2006 ("the Act") and article 42 of the company's Articles of Association seeking disclosure of interests in shares. When the responses came in the board considered the responses to be materially inaccurate and served restriction notices imposing restrictions which prevented the voting and transfer of the Eclairs and Glengary shares. This occurred some 6 days before the AGM of JKX. The company's annual general meeting was scheduled to take place on 5th June. It was known that Eclairs and Glengary would be likely to oppose certain ordinary and special resolutions, and while it was not clear whether their votes would be crucial to the fate of the ordinary resolutions, it was clear that the special resolutionswould not be passed if Eclairs and Glengary voted against them. The effect of the restrictions would have been to prevent them from voting and thus giving effect to their opposition. Immediately on receiving the notices Eclairs, and then Glengary,sought interim relief in advance of that meeting, challenging the validity of there strictions. The result of that application was an order of David Richards J,incorporating undertakings by the company, which created a regime under which the AGM could go ahead and Eclairs and Glengary could vote their shares, but there would be no declaration as to the effect of the votes on the resolutions pending this trial, and the effectiveness of that vote would depend on the success or otherwise of the attack on the restrictions. When the meeting took place and the votes were ultimately cast, the ordinary resolutions were carried and the Eclairs/Glengary votes would have made no difference; but the special resolutions would have been affected — they would be carried if the Eclairs/Glengary votes are disallowed, but lost if they are allowed. David Richards J ordered a speedy trial of the matter, and thus it arrived before me.
The case was set down for 5 days, and expedited on the footing that that would be the time allowed to it. Getting it to trial within that timeframe has led to some shortcuts in certain areas, but not at the expense of doing justice. Conducting the trial within 5 days required some significant trimming of cross-examination. In the end one of the company's witnesses (who would normally have been crossexamined)was not cross-examined at all, and another was not cross-examined by Mr Mabb, but the trial time limit was still not achieved, even with a degree of trimming and early and late sittings, but the evidential phase was achieved in five (longer than usual) days. The final submissions took place on one further day (plus some further written submissions). I am satisfied that such trimming as hasoccurred has not resulted in injustice and that the parties have had a fair chance to advance their respective cases. The subsequent need to produce this judgment within a reasonable timeframe has led to a certain amount of trimming of my own,in that I have omitted references to a significant number of authorities which appeared in the written submissions of the parties. I have, however, considered them all where relevant, whether referred to or not. This judgment has not appeared with the speed I would have wished, but that was due to other sitting commitments in the vacation and the fact that the condensed nature of final submissions led to a longer period of gestation for this judgment.
The principal objections to the restrictions fall under three heads:
(a) The preceding notices are said to be invalid because, in various respects, they do not comply with the Articles and/or the statute.
(b) The directors were not entitled to impose the restrictions because they did not have reasonable cause to believe that the responses to the notices wereinadequate.
(c) The directors acted for an improper purpose in imposing the restrictions.
The following additional points are also said to arise:
(a) Whether, even if the article 42 notices were invalid, the recipients were estopped from so asserting by reason of their responses to the notices.
(b) Whether the restriction notices were invalid for failing to contain a particular reference to the power of the directors to remove the restrictions.
(c) Whether certain non-disclosure on the part of the Claimants has the effect that undertakings given by the company at the interim application should be treated as discharged with the effect that the result of the vote can be treated as being what the company contends it to be.
(d) Whether Eclairs and Glengary, who are each beneficiaries behind nominees (the latter being the registered holders of the shares) are entitled to bring this claim (as opposed to the nominee shareholders).
Companies, individuals behind them, structures and shareholdings
Before moving on to the factual background of the claim and the parties involved it is worth elaborating a little as to the rather complex means by which the interested individuals have opted to hold the shares in the Company. This section is not intended to give a detailed breakdown of every company that is or has been involved in such a structure but will serve to give a sufficient picture of some of the names and individuals encountered in the substantive part of this judgment.
JKX is a publicly traded company and listed on the London Stock Exchange. Its business is the development of oil and gas reserves, and the sale of the resultant products. While it has assets in Russia, the more important one for the purposes of this judgment is its Ukrainian subsidiary called PPC, which is a valuable company with interests in oil and gas. The two claimants presently have a combined beneficial interest in the company of some 39%, of which Eclairs' interest amounts to 27.55% and Glengary's interest to 11.45%. Those interests are held behind a wall of nominees and the ultimate individuals behind those groupings are as follows:
• At the centre of this case is a Ukrainian businessman called Mr Igor Kolomoisky. He is a very wealthy man with a number of business interests, including interests in the energy sector of which Eclairs is one.
• Mr Gennadiy Bogolyubov is a long-standing and close friend and business associate of Mr Kolomoisky. It is said that in March 2013 he acquired an interest in some of the shares then held beneficially by Mr Kolomoisky (via a discretionay trust of which he and his family are beneficiaries).
• Mr Alexander Zhukov is the ultimate beneficial owner of Glengary (or of 95% of it).
The structure of the holdings giving the claimants their interests
Eclairs only has an indirect interest in the shares through the numerous nominees and custodians it employs. The structure can be summarised as follows — the direct link to the Company is Hanover Nominees Limited ("Hanover") whichholds the shares in the Company (and is therefore registered as shareholder) as nominee for Renaissance Securities (Cyprus) Limited which, in turn, holds the rights to the shares on behalf of Renaissance Advisory Services Limited and,finally, Renaissance Advisory Services Limited holds the shares as custodian for Eclairs. Thus Eclairs (a BVI company) is treated as the beneficial owner. The shares in Eclairs are currently said to be held as to 59.1% by Trival Ltd, which is owned by Mr Kolomoisky, and as to 40.9% by Marigold Trust Company Ltd ("Marigold"), which is owned by what is said to be a trust whose beneficiaries are Mr Bogolyubov and his family. How the trust acquired its shares, and the relationship between Mr Bogolyubov and Mr Kolomoisky in relation to them, is one of the matters significant to this case.
Glengary is the vehicle of Mr Zhukov. It is said to be a beneficiary under nominee arrangements covering its shares, passing through Lynchwood Nominees Ltd (which is registered as shareholder) and further nominees. The "ultimate beneficial owner" (the expression used by Mr Ratskevych, who gave evidence for Glengary on the...
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