Fanmail.com v Cooper and Others
| Jurisdiction | England & Wales |
| Judgment Date | 11 June 2008 |
| Neutral Citation | [2008] EWHC 2198 (Ch) |
| Docket Number | Claim No: HC06CO4445 |
| Court | Chancery Division |
| Date | 11 June 2008 |
[2008] EWHC 2198 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Robert Englehart Qc
(Sitting as a Deputy Judge of The Chancery Division)
Claim No: HC06CO4445
Hugh Tomlinson QC and Christopher Parker QC (instructed by Walker Morris) for the Claimants
Leslie Kosmin QC and Nigel Dougherty (instructed by Nabarro) for the 1 st to 4 th Defendants
PRELIMINARY
In this action the First Claimant, Fanmailuk. com Limited (“Fanmail”), seeks a declaration that the entire share capital of the Fifth Defendant, Dialtime Plus Limited (“Dialtime”), is held on trust for itself by the nominal shareholders of Dialtime. The Second Claimant, Mr Burtenshaw, brings a derivative claim for the benefit of Dialtime. He claims that the directors of Dialtime diverted a profitable or potentially profitable business opportunity away from Dialtime into the Fourth Defendant company (“MCashback”), which was their own corporate creature. On that basis he seeks for the benefit of Dialtime an account of profits made by the directors from their alleged breach of fiduciary duty or equitable compensation for such breach.
The above is the barest statement of the broad nature of the claims made in this action. The facts, at least in their detail, are far from straightforward and highly contentious with a number of twists and turns. A large body of evidence has been put before me on the present application. I understand how the parties, when faced with factual allegations with which they disagree, want to set the record straight as they see it. Nevertheless, I take the view that on an application of the present sort it would have been quite wrong for me to embark on anything like a mini-trial of the action. I have read all the evidence which I was asked to read, but I do not propose to lengthen this judgment unduly by a detailed factual analysis of every point where there is disagreement. In my view, it would be wrong, and it is unnecessary, to do so.
It is particularly unnecessary given the course which the hearing took. By the end of the argument I had come to the conclusion that the right course on the present, rather unusual, facts was as a matter of case management (a) to direct a trial of the claim brought by Fanmail as a preliminary issue prior to any trial of what is currently a derivative claim brought by Mr Burtenshaw and (b) to adjourn the application before me for consideration, if necessary, after the trial of that preliminary issue. I announced my conclusion at the end of the hearing. I also, at the invitation of Mr Kosmin QC representing the First to Fourth Defendants, expressed my view that a particular way of putting the case would not come within the scope of the Claimants' Particulars of Claim, as they currently stand after re–amendment. I should nevertheless say, in fairness to Mr Tomlinson QC who appeared for the Claimants, that I do not believe that he was in fact putting the case in that way. Having ruled that there should be a trial of Fanmail's claim as a preliminary issue, I gave directions with a view to such trial taking place on the first open date after 1 October 2008. In the time available it was not feasible for me to deliver a full reasoned judgment but I was invited by the parties to express my overall conclusion orally and deliver my reasons in writing in due course.
This judgment sets out the reasons why I took the course I did. However, my decision was essentially a case management decision such that a lengthy written judgment would be undesirable. Moreover, I must bear in mind that I have adjourned, not decided, the application before me. For reasons which I shall explain, it may become unnecessary for the application ever to be adjudicated upon. In case, however, it does in the event become necessary, it would be wrong for me now to express concluded views about the merits of the application except to the extent necessary to explain why I decided to adjourn it. In the circumstances, I propose to confine this judgment within narrow bounds.
APPLICATION
The application before me was an adjourned application under CPR 19.9. That Rule requires a minority shareholder, such as Mr Burtenshaw as regards Dialtime, to obtain the permission of the Court in order to maintain a derivative action for the benefit of the company in which the cause of action is vested. The application has to be considered by reference not only to CPR 19.9 but also by reference to sections of the Companies Act 2006 which came into force, subject to transitional provisions, in October 2007.
In fact, in the present case permission (unopposed) was granted by Lightman J on 3 May 2007. However, since then the Claimants have served Re–amended Particulars of Claim. On one view, at any rate, this document introduced substantial alterations to the way the case is put following, it is said, disclosure of documents by the First to Fourth Defendants. Accordingly, the latter took the view that permission to continue with the action was required. The Claimants for their part do not accept that further permission was necessarily required. Nevertheless, they accept that the Court retains a continuing supervisory role over derivative actions: cf. the observations of Lightman J in Fraser v Oystertec [2004] EWHC 2225 (Ch) at [29]. They are content to seek permission to continue the claim as now formulated in the Re–amended Particulars of Claim.
On 19 March 2008 the Claimants made various applications which came on for hearing before Floyd J. These included the application for permission to re–amend the Amended Particulars of Claim and the present application for permission to maintain the derivative claim. By consent, permission to re–amend was granted, and the application for permission to continue the derivative claim was adjourned with such permission being granted over the adjournment.
THE BACKGROUND
Fanmail was originally set up by Mr Burtenshaw and the Third Defendant, Mr Zghari, with a number of different investors including the First Defendant, Robert Cooper, and his son David. An idea for the development of a system whereby bonus airtime for mobile phones could be earned at supermarket checkouts was conceived and a new company, Dialtime, was formed to develop and market the idea. Three shares in Dialtime were registered in the names of Mr Burtenshaw, Mr Robert Cooper and Mr Zghari; the fourth share remained in the name of the Sixth Defendant, but she is a company formation agent who claims no beneficial interest in the share.
Apparently, there was considerable discussion and negotiation about the intended beneficial ownership of the Dialtime shares, but it is said that agreement was never reached. It is accordingly the case for Fanmail that all the shares in Dialtime are held on trust for Fanmail as the party which procured the incorporation of the company. That is the claim which Fanmail makes in the present proceedings.
Relations between Mr Burtenshaw and the others involved with Dialtime, that is Mr Robert and Mr David Cooper and Mr Zghari, deteriorated. It seems that the others formed a plan to transfer the benefit of the project for granting mobile phone airtime at supermarket checkouts to a new company of their own creation. On 30 July 2002 MCashback was incorporated. Then, by an assignment of 6 September 2002 the entirety of what was described as “the Dialtime IP” was transferred by Dialtime to MCashback. Effectively, this was the totality of Dialtime's rights and interest in the project. The assignment was approved at a Board meeting which Mr Burtenshaw did not attend.
Following the assignment to MCashback Dialtime was effectively moribund. All subsequent development and marketing of the project was carried out through MCashback, a company in which Mr Burtenshaw had no involvement. The evidence referred to various of what are claimed to be developments...
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