Eric Duneau v Klimt Invest SA
| Jurisdiction | England & Wales |
| Judge | Cawson |
| Judgment Date | 17 March 2022 |
| Neutral Citation | [2022] EWHC 596 (Ch) |
| Docket Number | Case No: CR-2020-003966 |
| Court | Chancery Division |
[2022] EWHC 596 (Ch)
HHJ Mark Cawson QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CR-2020-003966
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF KLIMVEST PLC
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Rolls Building
Fetter Lane
London, EC4A 1NL
Daniel Lightman QC and Max Marenbon (instructed by Marriott Harrison LLP) for the Petitioner and Third Respondent
Charlie Newington-Bridges (instructed on a Direct Access basis) for the First Respondent
Hearing dates: 2–4, 7–9 and 15 February 2022
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.
HHJ Cawson QC
HIS HONOUR JUDGE Cawson QC:
| CONTENTS | PARAGRAPH |
| Introduction | 1 |
| Relevant individuals and entities | 8 |
| Witnesses and my assessment thereof | 10 |
| Introduction | 10 |
| ED | 17 |
| FS | 25 |
| Other witnesses in support of the Petition | 26 |
| Witnesses in opposition to the Petition | 27 |
| Factual narrative | 37 |
| Introduction | 37 |
| Origins – CATS | 38 |
| EDUCATS | 51 |
| Incorporation of the Company – 2002 | 58 |
| Plc, listing and public offer – 2006 | 77 |
| Further acquisitions | 84 |
| 2010–2018 | 87 |
| P1C approach and sale of the Company's assets in January 2019 | 95 |
| Events after the sale of the Company's assets to P1C | 126 |
| Presentation of the Petition | 168 |
| AGM on 24 May 2021 | 179 |
| Just and equitable winding up | 184 |
| Loss of substratum | 200 |
| ED's and FS's case | 200 |
| MB's/Klimt Invest's case | 208 |
| Authorities on loss of substratum | 214 |
| Is the case on loss of substratum made out? | 229 |
| Assurances alleged to have been given by MB | 247 |
| Removal of ED from Board in breach of agreement or understanding | 256 |
| Introduction | 256 |
| ED's and FS's case | 258 |
| MB's/Klimt Invest's case | 259 |
| Findings on removal from the Board issue | 260 |
| Company founded on the basis of a personal relationship of trust and confidence between ED and MB which has broken down | 281 |
| Loss of confidence in the management of the Company | 284 |
| Section 125(2) and Alternative Remedy | 292 |
| Discretionary considerations | 298 |
| Clean hands | 298 |
| Value of the listing | 307 |
| Outstanding litigation | 310 |
| Views of other shareholders | 311 |
| Overall Conclusion | 313 |
Introduction
This case concerns a petition (“ the Petition”) presented by the Petitioner, Mr Eric Duneau (“ ED”), on 14 October 2020 seeking an order that Klimvest Plc (“ the Company”) be wound up under section 122(1)(g) of the Insolvency Act 1986 (the “ 1986 Act”) on the basis that it is just an equitable that the Company be wound up.
The Third Respondent, Mr Frédéric Sénégas (“ FS”), supports the petition, but did not have locus standi to join as a petitioner because his shares were held in the name of an institutional nominee when the Petition was presented.
ED is the beneficial owner of 3,348,793 shares (representing 44.05% of the issued shares) in the Company, of which 1,750,000 are registered in his name and 1,598,793 are held on his behalf by a nominee, Interactive Brokers LLC. He was a director of the Company from its incorporation in 2002 until he was excluded from this role following an annual general meeting (“ AGM”) of the Company held on 24 May 2021.
There are three Respondents to the Petition:
i) The First Respondent (“ Klimt Invest”) is a company incorporated in Luxembourg whose 100% beneficial owner and sole directing mind is Mr Michel Balcaen (“ MB”), who has been a director of the Company since its incorporation. Klimt Invest holds 3,665,880 shares (representing 48.22% of the issued shares in the Company), of which 3,249,000 are registered in its name and 416,880 are held on its behalf by a nominee. 163,871 shares (representing 2.16% of the issued shares in the Company) are held by Adrien Pol (“ Mr Pol”) through Tosca Invest, these shares having been acquired in December 2019 and January 2020. It is ED's and FS's case that Tosca Invest/Mr Pol hold these shares as nominee for MB/Klimt Invest, or at least that Mr Pol (through Tosca Invest) acts in concert with MB, so as to give MB (though Klimt Invest) effective control of the Company.
ii) The Company is nominal Second Respondent to the Petition. Having sold its assets and business in January 2019, its sole significant asset is cash reserves of approximately £8 million. The Company was not represented at this trial, and adopts a neutral stance.
iii) FS, the Third Respondent, who is now the holder of 369,950 shares (representing 4.87% of the issued shares in the Company).
ED and FS contend that it is just and equitable that the Company be wound up for a number of reasons, namely:
i) The purpose, or substratum, of the Company has come to an end, or has failed following the sale of the Company's assets and business in January 2019;
ii) ED is entitled to expect a return of his investment in the Company in the light of assurances alleged to have been given to him by MB prior to the sale of the Company's assets in January 2019 that the Company would be wound up;
iii) There was an agreement or understanding between MB and ED, giving rise to equitable considerations, that ED would be entitled to serve on the Company's Board, and MB has, as from 24 May 2021, caused ED to be removed from the Board in breach of that agreement or understanding;
iv) The Company was founded on the basis of a personal relationship of trust and confidence between ED and MB which has broken down;
v) ED has justifiably lost confidence in the management of the Company, which has become dysfunctional.
MB, through Klimt Invest, opposes the Petition. It is, in essence, Klimt Invest's case that:
i) The purpose, or substratum of the Company has not come to an end or failed on the basis that, prior to the sale of its assets, the Company had become what was, in essence, an investment holding company, and that purpose can, and is intended by MB/Klimt Invest who now control the Company, to be achieved through the investment of the Company's cash reserves in promising technology companies;
ii) MB did not give the assurances alleged in respect of the winding up of the Company, and, in any event, it is neither pleaded nor demonstrated that any such assurances were relied upon;
iii) The Company is a public company listed on a French exchange, and as a matter of law there is no scope for maintaining that the Company was a quasi partnership, or a Company in which equitable considerations of the kind contended for by ED and FS could arise. In any event, it has not been established, on the facts, that the Company operated as a quasi partnership, or that equitable considerations based on alleged agreements or understandings as between ED and FS ever arose. Consequently, there is no proper scope or ED and FS to complain in respect of ED's exclusion from acting as a director, or to contend that the Company was founded, or latterly operated, on the basis of a relationship of trust and confidence between ED and MB which has broken down.
iv) A reasonable offer has been made to ED which provides him with an alternative remedy which he has unreasonably declined to take up.
v) Further, and in any event, ED ought, as a matter of discretion, to be prevented from obtaining the relief that he seeks by reason of the fact that he does not come to Court with clean hands.
ED and FS were represented at trial by Mr Daniel Lightman QC and Mr Max Marenbon, instructed by Marriott Harrison LLP. Klimt Invest has not instructed Solicitors and appears through MB as a litigant in person, albeit instructing Mr Charles Newington-Bridges of Counsel to represent it at trial on a direct access basis. I am grateful to Mr Lightman and Mr Marenbon, and to Mr Newington-Bridges, for their helpful written and oral submissions, and assistance through the course of the trial.
Relevant individuals and entities
The following table sets out the key relevant individuals concerned with the circumstances behind the Petition:
| Name | Description |
| Randall Anderson (“ Mr Anderson”) | US qualified attorney. Company Secretary from November 2014. |
| Antoine Andre (“ Mr Andre”) | Shareholder and former employee. Witness in support of the Petition, who gave evidence at trial. |
| Christian Augustin (“ Mr Augustin”) | Shareholder. Witness in support of the Petition, whose witness statement was admitted in evidence. |
| Michel Balcaen (“ MB”) | Co-Founder of the Company with Mr Duneau, and Chairman of the Board. Through the First Respondent, Klimt Invest, the largest shareholder in the Company. Witness for Klimt Invest. |
| Dan Charron (“ Mr Charron”) | Representative of Canadian private equity fund Partner One Capital (P1C), the purchaser of the Company's assets and business in January 2019 |
| Tony Coates (“ Mr Coates”) | Director of the Company from April 2005, and former director of DACG. |
| Jean-Francois Delcaire (“ Mr Delcaire”) | Shareholder. Witness in opposition to Petition who did not attend at trial. |
| Eric Duneau (“ ED”) | Co-Founder of the Company with MB, and second-largest shareholder. The Petitioner. |
| Jeff Forwood (“ Mr Forwood”) | Director of the Company from May... |
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