Ketchum International Plc v Group Public Relations Holdings Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE STUART-SMITH,LORD JUSTICE PETER GIBSON,LORD JUSTICE WARD
Judgment Date24 May 1996
Judgment citation (vLex)[1996] EWCA Civ J0524-9
Docket NumberFC3 96/5946/B
CourtCourt of Appeal (Civil Division)
Date24 May 1996
Ketchum International Plc
Plaintiff/Applicant
and
(1) Group Public Relations Holdings Limited
(2) Christopher O'donoghue
(3) Pamela Ann Poe
Defendants/Respondents

[1996] EWCA Civ J0524-9

Before:

Lord Justice Stuart-Smith

Lord Justice Peter Gibson

Lord Justice Ward

FC3 96/5946/B

FC3 96/6093/B

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand

London WC2

MR. GEORGE LEGGATT (Instructed by Clifford Chance, London, EC1A 4JJ) appeared on behalf of the Appellant

ROMIE TAGER QC AND JAMES AYLIFFE (Instructed by Lewis Silkin, London, SW1H ONW) appeared on behalf of the Respondent

LORD JUSTICE STUART-SMITH
1

A Jersey company, EPR (Jersey) Ltd. ("EPRJ") is the owner of all the shares in an English public relations company which until January 1993 was called Group Public Relations plc. Prior to 14 January 1991 all the shares in EPRJ were owned by the First Defendant, Group Public Relations Holdings Ltd. ("Holdings"). The Second Defendant, Christopher O'Donoghue, and the Third Defendant, Pamela Ann Poe, own Holdings in equal shares. On 14 January 1991 by a Share Purchase Agreement the Plaintiff, Ketchum International Inc. ("Ketchum"), a Delaware corporation, agreed to purchase from Holdings 40% of the shares in EPRJ. That Agreement provided that the purchase price was payable in tranches over a 3-year period and was geared to the profits of EPRJ and its subsidiaries after tax during that period. It also provided for both put and call options. By a put option Holdings had the right after the end of that period to require Ketchum to purchase the remaining 60% holding in EPRJ at a price also geared to those profits in that period. It also provided (by clause 8(i)) that EPRJ should not make any distribution by way of dividend without the prior written approval of Ketchum, such consent not to be unreasonably withheld or delayed.

2

In August 1993 EPRJ paid a dividend of just over £800,000 and in October 1993 a dividend of just under £200,000 on each occasion without the approval of Ketchum, although Ketchum received and retained its 40% share of those dividends. In March 1994 Holdings purported to exercise the put option, requiring Ketchum to purchase the 60% holding in EPRJ for some £2.6 million. Those events in 1993 and 1994 led to the commencement of three actions. By the action with which this appeal is directly concerned, called the First Dividend Action, Ketchum claimed against Holdings, Mr. O'Donoghue and Ms. Poe that the payment of the first dividend without its consent was a breach of the Agreement and it claimed damages therefor. The loss was particularised as being that Holdings by that dividend payment "rendered less valuable [Ketchum's] option, and/or have rendered more onerous [Ketchum's] liability pursuant to [Holdings'] option, by the amount of the dividend", that loss being quantified as £483,477. That is 60% of the dividend payment. By an other action, called the Second Dividend Action, Ketchum made a similar claim, mutatis mutandis, in respect of the second dividend, the claimed loss being quantified as £119,673. The third action, called the Put Action, was brought by Holdings against Ketchum and its parent corporation and related to the exercise by Holdings of its put option. The principal issues were the validity of the exercise of that option, and, if it was validly exercised, the price payable by Ketchum.

3

The three actions came before Blackburne J. at the same time, the claims by Ketchum in the First and Second Dividend Actions being treated as counterclaims to Holdings' claim in the Put Action. In the course of the hearing Ketchum discontinued the counterclaim against Mr O'Donoghue and Miss Poe. In his closing address to the Judge, leading counsel then appearing for Ketchum conceded the validity of the exercise of the put option. The Judge on 21 February 1996 in the Put Action determined the price to be paid as a little over £2.4 million and ordered specific performance of the Agreement, directing that completion of the purchase should take place on 3 April 1996. He ordered that Ketchum should pay 80% of the costs until Day 3 of the trial and 75% of the costs thereafter. He refused to order Ketchum to pay interest prior to 28 February 1996. In the First Dividend Action the Judge dismissed with costs Ketchum's claim, holding that it had unreasonably withheld its consent to the first dividend. In the Second Dividend Action, he awarded Ketchum damages as claimed and nearly £24,000 interest, but ordered Holdings to pay only 50% of Ketchum's costs. Ketchum is not appealing against the orders made against it in the Put Action, but Holdings is appealing on the question of interest. In the First Dividend Action Ketchum has exercised its right to appeal and it is seeking the damages which it originally claimed. Holdings is appealing in the Second Dividend Action.

4

The purchase price ordered to be paid in the Put Action, less the damages and interest which were awarded to Ketchum in the Second Dividend Action, a net sum of about £2 1/4 million, has been duly paid by Ketchum to Holdings' solicitors. But by a Notice of Motion dated 28 March 1996 Ketchum applied for an injunction restraining Holdings from removing from the jurisdiction or disposing of or dealing with the proceeds of the sale of the 60% holding in ERPJ up to the value of £585,736, together with interest thereon, pending the outcome of Ketchum's appeal in the First Dividend Action. That maximum sum is made up of the £483,477 damages claimed plus interest. That motion was heard, but dismissed, by the Judge on 3 April and he refused leave to appeal. However he granted an injunction in the terms of the Notice of Motion for a limited period pending an application to this court.

5

The application before us is a summons by which Ketchum seeks precisely the same relief as that which it unsuccessfully sought before the Judge. In other words Ketchum is thereby asking this court, not for leave to appeal from the decision of the Judge and, if leave is granted, the reversal of that decision and the grant of an injunction, but to exercise an original jurisdiction to grant an injunction. If that is wrong and this court holds that an appellate route should have been followed, Mr. Leggatt for Ketchum asks this court to give leave to appeal, to set aside the order of the Judge and to grant the injunction sought.

6

At this point it is convenient to summarise the arguments presented to the Judge and his conclusions.

7

1. Mr Leggatt for Ketchum submitted that a trilogy of cases in 1879 named Wilson v Church(No 1) [1879] 11 Ch D 576, Wilson v Church (No 2) [1879] 12 Ch D 454 and Polini v Gray [1879] 12 Ch D 438 established the principle that when a party is bringing a bona fide appeal as of right, the Court of Appeal ought to ensure that the appeal, if successful, is not nugatory by restraining the hitherto successful party from disposing of its assets. This principle could and should be applied at first instance (see Erinford Properties Ltd. v Cheshire County Council [1974] Ch 261 and Orion Property Trust Ltd. v Du Cane Court Ltd. [1962] 3 AER 466). Blackburne J. distinguished the 1879 cases on the grounds that on their facts they involved competing claims to a fund and did not apply to an action for damages. He said that the Erinford case, which concerned the question whether the Court had jurisdiction to grant a limited injunction preserving the status quo pending an appeal against the court's refusal to grant an interlocutory injunction pending trial, was not relevant.

8

2. Mr Leggatt submitted in the alternative that the principles which apply when the Court grants Mareva relief should be applicable pending an appeal to the Court of Appeal by an unsuccessful plaintiff, provided the relevant conditions are satisfied. The Judge rejected his submission. He said there was no authority for such a proposition and the plaintiff was faced with the formidable difficulty of showing that he had a good arguable case, when the Judge had just held that he did not.

9

3. On the assumption that jurisdiction based on Mareva principles exists the Judge acknowledged that Ketchum might have good arguable grounds for appealing the decision in the first dividend action. But he said:

"I have seen nothing in the evidence to show that Holdings is about to or may take action designed to ensure that any subsequent order of the Court of Appeal will be rendered less effective than would otherwise be the case. Not only is there nothing in evidence that Holdings would seek to render itself judgment-proof, I have seen nothing to indicate that, if Ketchum's appeal were to succeed, those who control Holdings, namely Miss Poe and Mr. O'Donoghue, would not seek to ensure that Holdings would honour the Court's order."

10

He based himself on a dictum of Lord Donaldson MR in Derby & Co. Ltd. v Weldon (Nos 3 & 4) [1990] Ch 65. At p.76 he said:

"The fundamental principle underlying this jurisdiction is that, within the limits of its powers, no court should permit a defendant to take action designed to ensure that subsequent orders of the court are rendered less effective than would otherwise be the case."

11

(See Judgment of Blackburne J. at p.89/15–20.)

12

Before us Mr Leggatt submitted:

1. That this Court had an original jurisdiction to grant the injunction sought. The application is by way of a renewed application and is similar to the renewed application for a stay of execution after refusal by the trial judge.

2. Alternatively if the matter is to be brought before this Court by way of appeal, leave to appeal should be granted.

3...

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