Patrick McKillen (Petitioner) v Misland (Cyprus) Investments Ltd (A Company Registered in Cyprus) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice David Richards,THE HONOURABLE MR JUSTICE DAVID RICHARDS |
| Judgment Date | 10 August 2012 |
| Neutral Citation | [2012] EWHC 2343 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 8690 of 2011 |
| Date | 10 August 2012 |
In the Matter of Coroin Limited
And In the Matter of the Companies Act 2006
and
[2012] EWHC 2343 (Ch)
The Honourable Mr Justice David Richards
Case No: 8690 of 2011
Claim No. HC 11 C03437
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
The Rolls Building
7 Rolls Building
Fetter Lane
London EC4A 1NL
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR PHILIP MARSHALL QC, MR RICHARD HILL QC, MR GREGORY DENTON-COX and MS RUTH DEN BESTEN (instructed by Herbert Smith LLP) appeared for the Petitioner/Claimant.
MR KENNETH MACLEAN QC, MR EDMUND NOURSE, MR SA'AD HOSSAIN and MISS EMMA JONES (instructed by Weil, Gotshal & Manges) appeared for Misland (Cyprus) Investments Limited, Ellerman Corporation Limited, B. Overseas Limited and Maybourne Finance Limited.
MR STEPHEN AULD QC, MR MICHAEL FEALY and MR MICHAEL d'ARCY (instructed by Quinn Emanuel Urquhart & Sullivan LLP) appeared for Derek Quinlan.
MR JOE SMOUHA QC and MR EDWARD DAVIES (instructed by Ashurst LLP) appeared for Richard Faber, Michael Seal and Rigel Mowatt.
LORD GRABINER QC and MR. EDMUND NOURSE (instructed by Weil, Gotshal & Manges) appeared for Sir David Barclay and Sir Frederick Barclay.
MR ROBIN DICKER QC and MR WILLIAM WILLSON (instructed by Hogan Lovells International LLP) appeared for National Asset Loan Management Limited.
MR NIGEL DOUGHERTY (instructed by DLA Piper UK LLP) appeared for Coroin Limited
Hearing dates: 19–23, 26–30 March, 2–4, 18,20, 23–27,30 April and 1,10,11,14,21–25 and 29 May 2012
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
At the heart of this case lies a battle for control of three of London's leading hotels – Claridge's, The Connaught and The Berkeley.
The contenders for control are Patrick McKillen and Sir David and Sir Frederick Barclay. Mr McKillen is the last man standing of a consortium of investors who purchased the hotels in 2004. He has a 36.2 % shareholding in Coroin Limited (the company) which heads the group of companies owning the hotels. The Barclay brothers have extensive and diversified business interests, including hotels and in particular the Ritz Hotel in London. In January 2011, a company controlled by them acquired indirectly a 24.78% interest in the company, which has since increased to 28.36%.
The remaining shares are owned by Derek Quinlan, also a member of the original consortium but now in severe financial difficulties. His shares are fully charged to secure debts now held by companies controlled by the Barclay brothers.
The Barclay brothers have made no secret of their aim to obtain control of the company. There is nothing wrong in this aim, provided that unlawful means or means which are unfairly prejudicial to the interests of other shareholders are not used to achieve it.
Mr McKillen alleges that the Barclay brothers or companies controlled by them have used unlawful or unfairly prejudicial means, comprising principally breaches of contract by shareholders and breaches of duty by directors of the company appointed by them.
These allegations form the basis of two sets of proceedings brought by Mr McKillen, which are the subject of this judgment. The first is a petition under section 994 of the Companies Act 2006, alleging that the affairs of the company have been conducted in a manner unfairly prejudicial to Mr McKillen's interests as a member of the company. The principal remedy which he seeks is an order that the shares held by companies associated with the Barclay brothers be sold to him. This would give him control of the company. The second is a claim for damages in tort for conspiracy to cause him loss by the same unlawful means as are alleged in the petition and for inducing breaches of contract.
The allegations made by Mr McKillen fall into two broad categories, although they are all said to form part of a scheme to obtain control of the company. First, he alleges that there have been breaches of pre-emption provisions contained in a shareholder agreement and the articles of association of the company. Shares or interests in shares have been sold or disposed of to the Barclay brothers or their interests without first being offered to the other shareholders. This allegation relates principally to arrangements and agreements made by the Barclay interests with Derek Quinlan. It was initially also part of Mr McKillen's case that the purchase by the Barclay interests of the company holding the 24.78 % interest triggered the pre-emption provisions. However, this claim, which turned on the proper meaning of the pre-emption provisions, was decided against Mr McKillen as a preliminary issue, the Court of Appeal at [2012] EWCA Civ 179 affirming my decision at first instance at [2011] EWHC 3466 (Ch). Mr McKillen has amended his petition to plead an alternative case that an express contractual duty of good faith in the shareholders agreement nonetheless required the shares in question to be offered to the other shareholders.
There is a further element to Mr McKillen's case on the pre-emption provisions. He says that charges given by Mr Quinlan on his shares to secure personal borrowings have become enforceable, thus triggering a power vested in the directors to require them to be offered for sale to the other shareholders, but the directors have failed to exercise the power.
The second broad category of allegations comprises allegations of breach of duty against the directors appointed by the Barclay interests. There are a number of such alleged breaches, all said to be motivated by a desire to advance the interests of the Barclay brothers and their associated companies rather than the company itself. In particular, they relate to the company's dealings with the National Asset Management Agency ("NAMA"), an Irish state-owned entity to which I refer below.
Mr McKillen had also raised a case that the assignment in September 2011 of the company's bank debts by NAMA to a company owned by the Barclay brothers was invalidated by breaches of the relevant facilities agreement, specifically an obligation of prior notice to and consultation with the company and a restriction on permitted assignees. NAMA was joined as a respondent to the petition and submitted to the jurisdiction of this court for the purpose of determining these allegations. It denied any breach of the relevant provisions but in any event it asserted that those provisions did not apply to an assignment of the debts by NAMA. This too was tried as a preliminary issue. The Court of Appeal at [2012] EWCA Civ 864, reversing my decision at [2012] EWHC 129 (Ch), held in NAMA's favour. The Court of Appeal refused permission to appeal but Mr McKillen has applied to the Supreme Court for permission. The position is therefore that Mr McKillen cannot rely on his case that the assignment of the debts to NAMA involved a breach of the facilities agreement, unless the Supreme Court gives permission to appeal and allows his appeal.
The principal issues which therefore arise may be summarised under these headings:
i) Were the pre-emption provisions triggered by the agreements made between Mr Quinlan and the Barclay brothers and their interests?
ii) Allied to issue (i), did Mr Quinlan and Sir David Barclay make on 15 January 2011 the oral agreement alleged by Mr McKillen?
iii) Were the pre-emption provisions triggered by charges over Mr Quinlan's shares becoming enforceable?
iv) If shares had been offered to Mr McKillen under the pre-emption provisions, would he have been able to finance their purchase?
v) Did the directors of the company appointed by the Barclay interests commit the breaches of duty alleged against them?
vi) Was Sir David Barclay a shadow director of the company?
vii) Has Mr McKillen established a case of unfairly prejudicial conduct under section 994 of the Companies Act 2006?
viii) The tort claim.
The structure which I have adopted for this judgment is first to set out the background and some general points. The facts are complex and often crowded into relatively short periods. I do not think there is any alternative to a chronological account of the facts. While it is long and detailed, a large volume of the more peripheral facts are omitted. The picture was a good deal more hectic for the main participants than appears from the chronology, because there were dealings with many other parties which in the end got nowhere and did not contribute to the story relevant to this case.
In the chronological section I make findings on many of the disputes of fact, but I deal with the principal factual issues in the sections which follow. Those sections, which are addressed to the main issues set out above, deal also with relevant legal principles.
For convenience, the following is a summary table of contents.
Background
| Content | Paragraphs |
| Introduction |
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