Ronald Dennis (Petitioner) v Tag Group Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Registrar Briggs |
| Judgment Date | 10 April 2017 |
| Neutral Citation | [2017] EWHC 919 (Ch) |
| Docket Number | Case No: CR-2016-007381 |
| Date | 10 April 2017 |
[2017] EWHC 919 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr. Registrar Briggs
Case No: CR-2016-007381
David Chivers QC and Ben Shaw (instructed by Herbert Smith Freehills LLP) for the Petitioner
John Brisby QC and Tom Gentleman (instructed by Cleary Gottlieb Steen & Hamilton LLP for the First Respondent
John Brisby QC and Tom Gentleman (instructed by Hogan Lovells International LLP) for Second Respondent.
Hearing dates: 5 April 2017
Introduction
The question for the Court is whether the First and Second Respondents, who are resident outside the jurisdiction, have submitted to the jurisdiction of England and Wales by participating in and resisting an injunction application.
The background
The petitioner, Mr Dennis, is a 25% shareholder, director, employee, and was until November 2016 the Chief Executive Officer and Chairman, of the Third Respondent, McLaren Technology Group Limited ("McLaren") which is a company incorporated in England and Wales. The First Respondent, TAG Group Limited ("TAG") is a company incorporated in Jersey. The Second Respondent, Bahrain Mumtalakat Holding Company B.S.C ("BMH") is incorporated in the kingdom of Bahrain. BMH manages the commercial assets and investments for the government of the Kingdom of Bahrain. Together TAG and BMH hold 75% of the McLaren issued share capital.
On 20 October 2016 Shaikh Mohammed Bin Essa Al-Khalifa, a nominee board member representing BMH, gave notice of a board meeting to be held on 4 November 2016. Two resolutions were tabled for discussion. The first, to place Mr Dennis on garden leave for a period of 12 months; the second to give an interim executive committee delegated authority to manage McLaren. It appears from the correspondence that there was a meeting of the board on 4 November 2016. Mr Dennis did not attend, but in any event it was adjourned to 11 November at 9:30 AM. Mr Dennis claims he has suffered unfair prejudice as a result of the resolutions to be passed (and now passed) and relies on purported breaches of the Companies Act 2006, articles of association, shareholder agreement and service agreement to support his petition.
On 8 November 2016 solicitors acting for Mr Dennis, Herbert Smith Freehills, wrote "It is obvious that the reputational and other damage to the company of the proposals being adopted cannot adequately be compensated in damages. Accordingly, we are instructed to seek an undertaking from [the Respondents] that they will not pass resolutions [placing Mr Dennis on garden leave and appointing the interim committee]." The letter ended "We would be grateful if [the Respondents] could provide details of solicitors in London who are authorised to accept service on their behalves." Solicitors acting for McLaren wrote on 9 November that that they were instructed to accept service.
Solicitors acting for TAG responded on the same day, "As we have not had sight of a claim form or any other documents, we are not presently instructed to accept service. We will take instructions on service once we have had an opportunity to consider your client's claim form, application and papers in support". The letter ended "all our client's rights, including as to jurisdiction and costs, are reserved." Hogan Lovells responded on behalf of BMH in similar terms "Given that you have not provided any such documents we are not instructed to accept service presently. Once you have provided further details of your application and claim, we will take instructions on accepting service." The letter from Hogan Lovells also ended "all our client's rights, including as to jurisdiction and seek costs on an indemnity basis, are fully reserved" (sic). The next day, 10 November 2016, Herbert Smith Freehills wrote to the solicitors acting for the First and Second Respondents noting that neither of those firms were instructed to accept service on behalf of their clients, but stating that they would be supplied with the relevant documents in draft as soon as possible on 10 November should they wish to receive them. The letter informed the first and second Respondents that Mr Dennis would proceed to make an application for urgent injunctive relief as the requested undertakings had not been provided. Solicitors acting for TAG wrote, "we confirm that we wish to receive copies of all the documents immediately when they are available." The letter went on to say, "If the documents cannot be provided by 9:30 AM this morning, please provide, by that time, an explanation of the legal basis on which your client intends to seek an injunction against our client. This is necessary so that our client can consider what if any, representations it may wish to make at the hearing." The letter finished by reserving rights "including as to jurisdiction and costs". Hogan Lovells e-mailed, having seen the letter sent by solicitors acting for the First Respondent, in similar terms, asking for "all documents for the application today" but not reserving the second Respondent's position as to jurisdiction.
Mr Dennis issued the threatened application for injunctive relief seeking to restrain the Respondents from placing him on garden leave and delegating the authority of the board to the interim committee. The application came before Mr Justice Newey on 10 November 2016. Leading counsel attended for TAG and BMH. At the hearing, Mr Dennis gave an undertaking to issue a petition pursuant to section 994 of the Companies Act 2006 immediately. TAG and BMH gave an undertaking to the Court to use their best endeavours to procure a further adjournment of the board meeting until not before 5:30pm on 11 November. Solicitors acting for TAG and BMH asked for the draft petition that evening. Herbert Smith Freehills thought it unnecessary to send the draft petition in circumstances where they had been ordered to file the petition immediately, but nevertheless complied with the request, attaching the draft to an e-mail timed at 17.59. The petition was filed at Court and sent to the solicitors acting for the Respondents by email sent at 12:55 on 11 November 2016. On the same day Mr Registrar Baister gave standard directions for the petition ordering that it be served on or before 4pm on 25 November 2016. The Respondents then served and filed witness evidence in respect of the injunction early on 11 November and Mr Dennis served a witness statement prior to the hearing before the Chancellor. The CEO of TAG, Mr Mansour Ojjeh provided the following evidence in response to the injunction application:
"I believe that Mr Dennis' aggressive and autocratic management style has caused conflict with sponsors and other stakeholders. One of my concerns relates to Mr Dennis' management of MTGL, including, in particular, concerns about inappropriate overtime payments to him of more than £500,000 to which he was not entitled. In addition, Mr Dennis does not have the support of shareholders and has refused to step down from his role…."
It is a reasonable reading of the witness statement that the claims made by Mr Dennis in the petition for breaches of the Companies Act 2006, the service agreement and shareholder agreement were answered by providing (i) reasons for the resolutions including breaches of the 2013 service agreement (ii) the ability of others to manage McLaren during the period of important negotiations with third parties and (iii) evidence as to the operation of the shareholder agreement and Aligned Shareholders' Agreement.
The Chancellor of the High Court heard the contested injunctive proceedings later on 11 November 2016. Mr Brisby QC submitted that damages were an adequate remedy and accordingly no injunction should be granted. That was not his only submission; he submitted, in accordance with the witness statement I have mentioned above, that Mr Dennis had been in breach of his service agreement, the articles of association, had acted autocratically and that he was not fit to be CEO of McLaren. Having submitted that damages were an adequate remedy Mr Brisby QC continued "My Lord, one might understand the application if my clients were men of straw, because then there would be a concern that if he was removed now the damage would occur to the company and there would be no monetary compensation available. My Lord, that is why we major on that point."
The Chancellor gave an extempore judgment:
"The approach to the grant of an injunction to restrain the dismissal or suspension of a director requires the Court to consider, as with other injunctions, whether the claimant has first demonstrated that he has a serious case to be tried for a permanent injunction for the substantive relief that he seeks. The Court then considers whether the damages would be an adequate remedy and then whether the injunction should be granted on the balance of convenience……… I am reluctant to decide today for good and all whether there is a serious case to be tried, because I do accept Mr Chivers' submission that the context may be all important…….. I am going to assume for the purposes of argument today that Mr Chivers will be able to show that he has a serious case to be tried……. I turn instead to decide whether damages are an adequate remedy. What is said here is that because damage to the company may be so great that damages would not be an adequate remedy. The damages may be unquantifiable, because the company may be put in the hands of what is described as an inexperienced executive committee and it is put so high as to say that the removal of Mr Dennis will inflict serious financial and reputational damage on the company….. In my...
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