Iesini v Westrip Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE LEWISON,Mr Justice Lewison: |
| Judgment Date | 16 October 2009 |
| Neutral Citation | [2009] EWHC 2526 (Ch) |
| Docket Number | Case No: 15804/09 |
| Court | Chancery Division |
| Date | 16 October 2009 |
[2009] EWHC 2526 (Ch)
Mr Justice Lewison
Case No: 15804/09
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
John Wardell QC and Elizabeth Weaver(instructed by Withers LLP) for the Claimants
Michael Todd QC and Ruth Holtham(instructed by Farrer & Co) for the First, Fourth and Fifth Defendants
Peter de Verneuil Smith (instructed by SC Andrew LLP) for the Second, Third, Sixth and Seventh Defendants
Hearing dates: 28 th—30 th September and 5 th & 6th October 2009
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
Mr Dimitri Iesini and his co-Claimants are shareholders in Westrip Holdings Ltd (“Westrip”). They say that the Defendants (other than Westrip itself) have deliberately engaged in a course of conduct which has led to Westrip losing ownership and control of a very valuable mining licence and which, but for their intervention, would have led to Westrip losing all or almost all of its remaining assets. They say that the course of conduct that they allege amounts to breaches of duty by the individual defendants. They apply to the court under section 261 of the Companies Act 2006 for permission to continue a derivative claim on behalf of Westrip in which they claim to reverse the alleged asset stripping and also claim declarations about Westrip's ownership of certain assets.
Background facts
Rimbal Pty Limited (“Rimbal”) is an Australian company beneficially owned by Mr Gregory Barnes (“Mr Barnes”). Mr Barnes is a geologist experienced in mining. In May 2001 the Government of Greenland Bureau of Minerals and Petroleum granted Rimbal an exclusive exploration licence for an area in West Greenland. This licence has been referred to as the Tanbreez licence. The Tanbreez area is thought to contain substantial quantities of valuable and rare metals. These include zirconium (used in high tech products), tantalum (used in capacitators to slow electrical charges), niobium (used in steel alloys), uranium and rare earths. The Tanbreez licence, however, does not allow these metals to be extracted (for which a further licence will be necessary) and, moreover, the terrain is such that extraction poses serious practical problems. Nevertheless it is common ground that the Tanbreez licence is a very valuable asset. In 2007 it was valued at $900 million.
Westrip was formed as a vehicle to raise and provide the funding for the development of this mineral exploration licence. It is a company incorporated in England and Wales. Until a boardroom coup in June 2008 Mr Iesini was a director of the company, together with (among others) Mr Barnes and Ms Janine Walker. His brother, Mr Giacobbe Iesini (the second Claimant) was also a director of the company from about March 2006 until the boardroom coup. Westrip contracted with Rimbal on the terms of two licences, referred to respectively as the “2002 licence” and the “2004 licence”. The shareholders of Rimbal at the time were Mr Barnes and Ms Walker (but Ms Walker held her single share as Mr Barnes' nominee). Under the terms of the 2002 licence:
i) Westrip was to control the management and implementation of the Scheme for the development of the licensed areas (or “tenements”);
ii) Rimbal assigned to Westrip all of its present and future rights to all profits arising from any exploitation of mineral deposits within the tenement;
iii) If Westrip paid £2.5 million, 51 per cent of Rimbal's shares would be transferred to Westrip (although it is difficult to see how Rimbal itself could have procured the transfer of its own shares);
iv) The term of the 2002 licence was 2 years from May 2002; and
v) The agreement was governed by English law.
The 2004 licence was in the same terms, except that the period of the licence was 3 years from July 2004.
In fact Westrip made no payment under the terms of either licence, so no shares in Rimbal were transferred.
In 2006 Rimbal acquired (or “pegged”) another exploration licence for a different area of Greenland. This licence was originally number 2005/17. In 2007 the area covered by the 2005/17 mineral exploitation licence was subdivided into “The Northern Licence” (also known as the “Kvanefjeldt Licence”) which is Licence No 2005/28, and “The Southern Licence” which is Licence No 2005/29. The application for subdivision was made in January 2007 and granted on 1 May 2007.
In 2006 Westrip had agreed in principle with Mr Barnes and Ms Walker for the purchase of their shares in Rimbal. It was envisaged that the consideration for the purchase would be the allotment of redeemable preference shares in Westrip. An EGM of the members of Westrip took place on 10 June 2006. One of the matters discussed was the proposal to allot £2.5 million of redeemable preference shares. The minutes of the meeting recorded:
“These shares are being allotted to Greg [Barnes] and Janine Walker in consideration of transferring Rimbal to Westrip as a wholly owned subsidiary. The transaction will be contemporaneous with the sale of a separate licence to Uranium Resources and issue of shares in the ultimate public quoted company seeking to acquire Uranium Resources. The Members' and company interests will be protected at all times by funds and shares being held in escrow…
With Greg and Janine Walker exclude[d] from voting, the proposal was agreed by more than 76% and therefore special resolution was passed…”
The formal resolution stated:
“The following resolution was passed: 1. To issue 2,500,000 redeemable preference shares without voting, dividend or winding up rights.”
At the time, however, Westrip's articles of association did not allow for the issue of redeemable preference shares.
By this time Westrip had agreed terms for a joint venture to exploit the Northern Licence with an Australian company called Greenland Minerals and Energy Ltd (always referred to as “GGG” which is its Australian stock exchange acronym). The essential terms of the joint venture were that Westrip would sell a 61 per cent share in the Northern Licence in return for AU$3 million and the issue of 30 million shares in GGG.
On 18 January 2007 the board of Westrip met. It was reported that Mr Barnes had agreed to sell Rimbal for £500,000 in cash and £2 million in “non-coupon redeemable preference shares”. The board resolved to present the agreement to an EGM. The EGM took place on 25 January 2007. A number of resolutions were placed before the meeting as ordinary resolutions. Among those which were passed was a resolution:
“that the ordinary shares of Rimbal Pty Ltd be acquired on the terms set out in Annex 3 and it is further resolved that Simon Stafford-Michael have the authority to negotiate the final wording of the contract and execute all such documents necessary for the closure of such transaction.”
Annex 3 recorded that the consideration for the purchase was to be £500,000 and the allotment of 2 million redeemable non interest non convertible bearing preference shares. The other terms of acquisition were contained in heads of terms which were supplied to the EGM.
On 28 February 2007 Westrip entered into two more or less identical agreements; one with Mr Barnes and Ms Walker and the other with Ms Walker alone. These agreements are at the heart of the dispute. It is necessary to set out their terms which I do by reference to the agreement between Westrip and Mr Barnes and Ms Walker. The agreement (the “SSA”) began with a number of recitals. It referred to the 2002 Licence; it recited that Rimbal had granted Ms Walker a 50 per cent interest in Exploration Licence 2001/08 which she had “rolled over” into Horrocks Enterprises Pty Ltd (“Horrocks”) a company all of whose issued shares she owned. Recital F said:
“Although Exploration Licence 2005/17 was granted in the name of [Rimbal], [Rimbal] holds it on trust for [Westrip]. [Westrip] paid for this Exploration Licence to be pegged and has met the minimum expenditure requirements to ensure that this Exploration Licence is maintained in good standing.”
The recitals continued by saying (among other things) that Ms Walker was to enter into an agreement on substantially the same terms to sell her shares in Horrocks. Clause 2 of the SSA contained the agreement for sale and purchase. The Purchase Consideration was defined by the schedule to the SSA as £1,250,000 in cash or 1,250,000 redeemable shares of £1 each in the capital of Westrip. The terms of the Redeemable Shares were also set out in the schedule. Clause 3 set out a number of conditions which had to be satisfied before the Settlement Date. In the first instance the Settlement Date was 14 March 2007 (although this was later extended). The vendor and purchaser were to negotiate in good faith and agree the form of certain company documents. These included a notice convening an EGM proposing a special resolution to adopt certain articles of association permitting the allotment and issue of redeemable preference shares on the terms set out in the schedule to the SSA; and a resolution adopting those articles. Westrip's directors were to resolve to convene the EGM; and to send the relevant documents to those who were entitled to receive them. Westrip was to hold the EGM and the special resolution adopting the articles was to have been passed. Westrip was to send a copy of the special resolution and the articles to...
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