Re Baumler (UK) Ltd; Gerrard v Koby
| Jurisdiction | England & Wales |
| Judge | George Bompas QC |
| Judgment Date | 08 July 2004 |
| Neutral Citation | [2004] EWHC 1763 (Ch) |
| Docket Number | Case No: 7321 of 2002 |
| Court | Chancery Division |
| Date | 08 July 2004 |
[2004] EWHC 1763 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
George Bompas Qc Sitting as a Deputy Judge of The Chancery Division
Case No: 7321 of 2002
In The Matter of Baumler (uk) Limited And
In The Matter of The Companies Act 1985
Michael Gadd (instructed by Morgan Cole) for the Petitioner
Richard Snowden QC (instructed by Denton Wilde Sapte) for the First Respondent
Approved Judgment
Hearing dates: 12–14 & 17–20 May 2004
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.
The Deputy Judge:
Introduction
The Company, Baumler (UK) Limited, was acquired in about 1982 by the Petitioner, Mr Michael Gerrard, and the First Respondent, Mr Michael Koby. Mr Gerrard has at all times been the holder and beneficial owner of 490 of the issued shares in the Company's capital, with Mr Koby being the holder and beneficial owner of the remaining 510 issued shares. These shares are all ordinary shares. Mr Gerrard and Mr Koby are, as they have always been, the two directors of the Company.
It is common ground between the parties that the Company was formed on the basis, and —at any rate until 2002 —has been operated on the basis, that financial contributions, managerial control and decision making would be shared between Mr Gerrard and Mr Koby, with unanimity being required for important decisions.
The Company was formed to take on, and still has, the exclusive UK agency for Hans Baumler GmbH, an Austrian clothing manufacturer. The Company's business involves importing Baumler merchandise into the UK and arranging direct sales of such merchandise. Its premises, at Geko House, Kimberley Road, NW6, consist of offices, a warehouse and a showroom arranged over two floors. The showroom is used for displaying and showing future seasons' lines of clothing, while the warehouse can be used for supplying retailers with current lines.
The only detailed material put before me to indicate the substance of the Company's business in recent times is its audited accounts for the year ended 31 March 2003, with the comparative figures for 2002. These show a turnover of approximately £1.55m per annum, with a gross profit of approximately £650,000 and a profit after tax of between £20,000 and £60,000. These accounts did not include a breakdown of the administrative expenses shown in the accounts at between £360,000 and £390,000 per annum. Net current assets were, these two years, in the order of £50,000, with net assets of a little over £100,000. In each of these years a dividend was paid of £50,000 in round terms. Mr Koby, I should add, owes the Company approximately £60,000, as he has since before March 2003. In March 2003 Mr Gerrard owed the Company about half that sum.
Despite the absence of detailed financial information for any earlier periods, it is clear that at the end of the 1990's the Company was not particularly robust. It was in the process of repaying a large debt to Baumler GmbH. And it had incurred expenditure in refitting Geko House.
The Company has only a small staff. There are in all about 8 paid employees, of whom two are Mr Gerrard's two sons, Jason and Russell: these two have worked for the Company since the early 1990's at the latest. Without intending disrespect I shall, for convenience, refer to Mr Gerrard's two sons by their given names.
Since about 1994 Jason has been the general manager of the Company. In recent times it has been Jason who has been running the Company on a day to day basis. Mr Koby's interests lie primarily in the creative and merchandising aspect of the Company's business, and more particularly in that of Favourite Menswear Ltd referred to below. Today his active involvement with the businesses carried on by him with the Gerrard family is confined to selling the two remaining product lines within the latter company, namely a tie cleaning product and a line of men's ties. Mr Gerrard, who in the past had a larger role than Mr Koby in the financial and administrative aspects of the Company's business, is the Company's finance director and has been the financial controller. Nevertheless, when giving evidence he conveyed the clear impression of having recently had little hands-on involvement with the Company's business. Mr Koby and Mr Gerrard share their office at one end of the first floor of Geko House, while Jason has an office at the other end of that floor.
What has given rise to this litigation is a serious rupture between the Gerrards and Mr Koby which followed a series of events relating to Geko House and the adjacent properties.
The Company has two leases of Geko House, each now being for a term ending on 24 March 2014, with rent reviews to market rent in March 2004 and 2009. The leases contain a break clause which permitted termination by the Company (but not the landlord) in March 2004 (but only then, and not before or after); and the operation of the break clause required 6 months' notice, so that in practice the decision whether or not to terminate might have fallen to be made before the reviewed rent had been fixed: the Company would not have had the luxury of knowing the amount of the reviewed rent before having to decide what to do. As it seems to me the break clause did not altogether remove from the Company all business risk associated with the leases; and Mr Koby's criticism of Jason for exaggerating this risk is unfair.
Until mid-2001 the Company's landlord was a company called Sarena Limited, that company being incorporated overseas as a wholly-owned subsidiary of an English company called B&S Displays Ltd. The directors of B&S were an accountant, Mr Stevens, and the Mr Stammers referred to below.
Besides the freehold reversion to Geko House, Sarena owned the freehold of a neighbouring property, Stirling House and Hoopers Cottage, and of a car park which adjoined Geko House. All this property, which I shall refer to as "the Property", appears to be ripe for development. Over the period from 1999 to mid-2001 the Company had the opportunity to purchase Sarena's interest in this Property. In the event it was purchased in the middle of 2001 by interests of a Mr Howard Ronson, a long-standing friend of Mr Koby's, the actual purchaser being an Isle of Man incorporated company called Vermeer Properties Ltd, and the price paid being £1,350,000.
Mr Ronson is a wealthy businessman who lives in Monaco. In his business he is assisted by a Mr Ivor Freeman and a Mr Henderson-Williams. Like Mr Koby, he is now in his early 60's. Mr Koby and Mr Ronson have known each other since they were boys. Mr Ronson's business is, or at any rate includes, international property development. Typically the development projects will be multi-million pound ones. His business and property is conducted and held through a variety of vehicles. He explained when giving evidence that there are hundreds of trusts and companies, and that he does not know how they are all organised.
One company which came to be within his interests was Vermeer. Its share capital was owned by trustees of a Jersey trust known as NV Realty Trust. As mentioned, it was this company which purchased the Property. In the language of Mr Freeman when writing to Mr Koby in September 2001:
"Howard was trying to save you tax. This was proposed by putting the project into an offshore corporation owned by Howard's trust".
In heads of agreement of July 2001, a document which was given to Mr Koby by Mr Freeman in July 2001 and on which Mr Koby's Solicitors (Messrs Denton Wilde Sapte) advised Mr Koby in August 2001, the position was summarised as follows:
"[Mr Ronson] has caused to be formed a corporation in the Isle of Man, named Vermeer Properties Ltd … [Vermeer] is wholly owned by NV Trust, a Discretionary Trust settled by [Mr Ronson] in Jersey (hereafter NV). NV Trust has funded all the expenditure of [Vermeer]. [Vermeer] has acquired properties in London at a price of £1,350,000. In addition there are costs of acquisition and redevelopment which is the intention for the property…."
A year after Vermeer's purchase of the Property, the Property was transferred by Vermeer to another entity within Mr Ronson's interests, HRO Luxembourg Investments Sarl. This was in September 2002. Mr Ronson could not say why this transfer took place, save that he thought it was in connection with a reorganisation of the way in which his interests were structured following the birth of his twin daughters in February 2002. He agreed that he remains the Company's landlord through various family trusts.
In relation to the material events since March 2001 I do not consider it necessary to be concerned with the precise connection between Mr Ronson on the one hand and NV Realty Trust or Vermeer on the other. It is sufficient for present purposes to note that as regards dealings with the Property these entities have acted in accordance with Mr Ronson's wishes, whether or not Mr Ronson has a right to insist upon them doing so.
This is likely to have been a profitable purchase for Mr Ronson. Stirling House has since been sold undeveloped for £975,000. The rear part of the Property has been on the market at £1,700,000 as an undeveloped site. True, at Geko House the situation remains unresolved. But the value of the freehold reversion must be several hundred thousand pounds at the least; indeed Mr Gerrard put the value at £1.4 million subject to the Company's leases.
I shall have to set out at some length the events which led up to and followed Vermeer's purchase of the Property. However Mr Gerrard and...
To continue reading
Request your trial
-
VB Football Assets (Petitioner) v Blackpool Football Club (Properties) Ltd (formerly Segesta Ltd) and Others
...196 Paragraph 6.271 of Minority Shareholders; Re London School of Electronics [1985] BCLC 273 at 279 ff; Re Baumler (UK) Ltd [2005] 1 BCLC 92 at [180] to 197 [1985] BCLC 273 at 279. 198 Paragraph 6.272 of Minority Shareholders; Re London School of Electronics [1985] BCLC 273 at 280. 199 [19......
- Mega Education Systems Sdn Bhd v Ozone Glass Design Sdn Bhd
-
Shepherd v Williamson and Another
...See also Re Neath Rugby Ltd (No 2), Hawes v. Cuddy & Ors [2009] 2 BCLC 427 and the summary of the authorities in Re Baumler (UK) Ltd [2005] 1 BCLC 92. 109 A petitioner's own misconduct may be relevant to the grant of relief: see Re RA Noble & Sons (Clothing) Ltd [1983] BCLC 273 and Re Londo......
-
Macom GmbH v Christian Mark Randall Bozeat
...appear and was not represented The following cases are referred to in the judgment: Re Audas Group Ltd [2019] EWHC 2304 (Ch) Re Baumler (UK) Ltd, Gerrard v Koby [2004] EWHC 1763 (Ch) Re Braid Group (Holdings) Ltd, Gray v Braid Group (Holdings) Ltd [2015] CSOH 146 Re Coroin, McKillen v Mis......