Mr Peter Eckerle and Others v Wickeder Westfalenstahl GmbH and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 23 January 2013 |
| Neutral Citation | [2013] EWHC 68 (Ch) |
| Docket Number | Case No: 6638/2012 |
| Court | Chancery Division |
| Date | 23 January 2013 |
[2013] EWHC 68 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
The Rolls Building
Fetter Lane
EC4A 1NL
Mr Justice Norris
Case No: 6638/2012
Stephen Horan (instructed by asb Law LLP) for the Claimants
Daniel Lightman (instructed by Orrick Herrington & Sutcliffe (Europe) LLP) for the FirstDefendants
Hearing date: 15 November 2012
DNick Holding plc ("DNick") was incorporated in England as a public company: but it was managed and operated from Germany and its shares were only listed for trading on German exchanges. Under the rules of those exchanges all transactions were in dematerialised form.
In April 2011 DNick sold one of its subsidiaries and shortly thereafter announced its intention to make a dividend distribution to DNick's shareholders.
However, at the AGM held on 30 June 2011 the proposed dividend distribution was rejected by a majority of the shareholders' votes. The majority votes were cast by Wickeder Westfalenstahl GmbH ("Wickeder") (which exercised 24.89% of the votes) and by Lustre Beteiligungs UG ("Lustre") (which exercised 25.88% of the votes). Lustre was owned by the Chief Executive Officer of Wickeder ("Dr Platt") and acted in concert. Acting in concert, Wickeder and Lustre also removed all of the incumbent directors of DNick and installed their own team.
Shortly thereafter Wickeder acquired from third parties or had transferred to it by Lustre sufficient shares to be able to exercise 75.005% of the votes, enough to secure the passing of a special resolution.
On 31 May 2012 the new board announced its intention to propose at the AGM the cancellation of the listing of DNick's shares on all German exchanges and the company's re-registration as a private limited company. The intimation of such a proposal had an impact upon the marketability of DNick's shares (and the implementation of that proposal is likely to make that impact permanent). On 30 May 2012 DNick's shares had been quoted on German exchanges at 9 Euros per share: but following the announcement they fell to 7.69 Euros and have since fallen to 7.60 Euros.
The AGM on 26 July 2012 was attended by those holding 83.71% of the votes. Wickeder (holding 75.005% of the votes) secured the implementation of the board's proposals.
Mr Eckerle, Mr Bertheux and Mr Hallensleben ("the Claimants") claim to be minority shareholders of DNick (holding between themselves some 6% of DNick's issued shares). It is their account of events which I have set out above and which (for the purpose of this application) I take to be true.
In August 2012 the Claimants commenced Part 8 Proceedings in the Companies Court alleging that their aggregate holding of DNick's shares gave them standing to apply under section 98 of the Companies Act 2006 ("the 2006 Act") for the cancellation of the resolution for the re-registration of DNick as a private company. In those proceedings they seek (amongst other relief):-
(a) An order for the cancellation of the resolution unless Wickeder offers to purchase their shares at a fair price; alternatively
(b) An order that DNick should purchase their shares at a fair price and for its share capital to be reduced accordingly.
Section 97 of the 2006 Act provides:-
"(1) A public company may be re-registered as a private limited company if —
(a) a special resolution that it should be so re-registered is passed
(b) the conditions specified below are met…
(2) The conditions are that —
(a) Where no application under section 98 for cancellation of the resolution has been made —
i) Having regard to the number of members who consented to or voted in favour of the resolution, no such application may be made, or
ii) The period within such an application could be made has expired…"
Section 98 of the 2006 Act provides:-
"(1) Where a special resolution by a public company to be re-registered as a private limited company has been passed, an application to the court for the cancellation of the resolution may be made —
(a) by the holders of not less in the aggregate than 5% in nominal value of the company's issued share capital…
(b) If the company is not limited by shares, by not less than 5% of its members; or
(c) by not less than 50 of the company's members;
but not by a person who has consented to or voted in favour of the resolution…….
(3) On the hearing of the application the court shall make an order either cancelling or confirming the resolution.
(4) The court may —
(a)…
(b) if it thinks fit adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court for the purchase of the interests of dissentient members…
(5) The court's order may, if the court thinks fit —
(a) provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company's share capital…"
Wickeder applies to strike out the Claim Form pursuant to CPR 3.4(2)(a) as disclosing no reasonable grounds for bringing the claim; or alternatively for summary judgment under CPR 24. CPR 3.4(2) requires the court to consider whether "the statement of case" discloses any reasonable ground for bringing or defending the claim. Part 24 requires the court to consider not only "the statement of case" but also the evidence that has been or may be adduced to prove the facts asserted in the statement of case, in order to assess whether "that claimant has no real prospect of succeeding on the claim".
In my judgment the summary disposal of this case must be approached by reference to the considerations set out in CPR 24 as elucidated by the well-known authorities. This is a straightforward exercise in the instant case since there is no substantial dispute on the facts: the dispute is about the construction of the provisions of section 98 that I have cited.
Wickeder advances 2 arguments:-
(a) The Claimants do not qualify as "holders of not less than 5% in aggregate of the company's issued share capital" and so have no standing to apply and no capacity to be "dissentient members".
(b) The entity in whose name their interests are registered in fact voted in favour of the resolution and is therefore itself disqualified from seeking the relief which the Claimants now seek.
The following may be taken as common ground (or correct in law) for the purposes of this application:-
(a) There are 5,671,318 issued ordinary shares in DNick.
(b) DNick's share register records only 2 registered shareholders: Dr Platt holding 1 share and the Bank of New York Depository (Nominees) Ltd ("BNY") holding the balance.
(c) BNY acts as the common depository agent of the issued shares in DNick, holding those shares on trust for the holders of accounts with Clearstream according to their respective holdings of "Clearstream Interests" ("CIs").
(d) Clearstream is the clearing and settlement division of Deutsche Börse, through which trades on the relevant exchange between Clearstream account holders are transacted electronically. The Clearstream account holders must themselves be banks or financial institutions and cannot be individuals.
(e) What is actually traded on Deutsche Börse are not the shares in DNick but CIs (representing the underlying ownership rights in DNick shares).
(f) The actual trades themselves are trades between the registered Clearstream account holders and are conducted on behalf of the customers of those account holders, who are the end investors.
(g) When paragraph 2 of the Claim Form pleads that the Claimants "have an aggregate shareholding of 7.2% in nominal value of the issued shares in [DNick]" that is not literally true. The literal truth is that the Claimants hold the ultimate economic interests in underlying securities amounting to a specified percentage of the shares held by BNY on trust for the Clearstream account holders whose customers the Claimants are.
(h) Under Article 79.2 of DNick's Articles "each person who is a CI Holder at the relevant CI Record Date" can either direct the registered holder of the share how to exercise the vote attaching to the relevant underlying share or to appoint a proxy to do so (who might be the end investor). For this purpose it is important to be able to identify the CI Holder: this is done by DNick recognising the electronic register operated by Clearstream to record the results of transactions on the Deutsche Börse between Clearstream account holders (see Article 60.3). (I should record that Mr Horan ran a primary case that the reference to "CI Holder" was a reference to the owner of the ultimate economic interest in the relevant DNick shares i.e. the Claimants. But I do not consider that to be a sustainable position. Reading the definitions of "CI" and CI Holder" (used in the Articles) together, a "CI Holder" means "the holder of [an interest in the shares in the capital of the Company traded and settled through Clearstream]": they are identified (according to the definition of "CI Register") on "the electronic register of CI Holders …maintained by Clearstream". The only interests traded and settled through Clearstream are the interests of Clearstream account holders. Only the banks and financial institutions which are Clearstream account holders, and between whom those trades are conducted and settled on the exchange, and whose trades are recorded on the electronic register, fit this description).
(i) This recognition of the identity of the account holders (not the identity of the ultimate holders of the economic interests) does not, however, mean that DNick recognises beneficial interests. Article 10 provides that:-
"Except as required by law or pursuant to the provisions of these Articles, no person...
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