Stanley International Betting Ltd v 1. Stanleybet Uk Investments Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Stuart Isaacs QC |
| Judgment Date | 12 July 2011 |
| Neutral Citation | [2011] EWHC 1732 (Ch) |
| Court | Chancery Division |
| Date | 12 July 2011 |
[2011] EWHC 1732 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Stuart Isaacs QC (Sitting as a Deputy Judge of the High Court)
Mr Jamie Riley (instructed by DLA Piper) for the Applicant
Ms Lexa Hilliard QC and Ms Tina Kyriakides (instructed by Davis Arnold Cooper) for the Respondents
Hearing date: 24 June 2011
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
There are two applications before the court. The first is an application dated 16 June 2011 for an administration order in respect of Stanley UK Investments Limited (formerly known as Stanleybet Holdings Limited) ("SUKI"); and for the appointment as administrators of Ms Kerry Bailey and Mr Matthew Gibson of PKF (UK) LLP ("PKF"). The application is made by Stanley International Betting Limited ("SIB"), for which Mr Jamie Riley appears. The 2 nd to 4 th respondents, for whom Ms Lexa Hilliard QC and Ms Tina Kyriakides appear, support the application for the administration order. However, they oppose the appointment of Ms Bailey and Mr Gibson as administrators and instead seek the appointment as administrators of Messrs Nick Wood and Kevin Hellard of Grant Thornton LLP ("GT").
The 3 rd and 4 th respondents are the personal representatives (and children) of the late Lord Steinberg of Belfast, who passed away in November 2009. The 2 nd respondent ("LS") is a company wholly owned by the Estate. For convenience, I shall refer to the 2 nd to 4 th respondents collectively as "the Estate" except where it is necessary to distinguish LS from Lord Steinberg's estate.
The second application is made by the Estate against Stanleybet Overseas Investments Limited ("SOI"), SIB, SUKI and others by an application notice issued on 23 June 2011 and is for an injunction essentially to restrain the holding of any board or other meeting of SOI at which it might be resolved to place SOI into administration. SOI is wholly owned by SUKI. In the circumstances referred to below, this application fell away and it was unnecessary to make any order on it, except in relation to the costs of the application.
At the conclusion of the hearing of the applications on 24 June 2011, the parties agreed that in view of the urgency of the matter I should give my decision then and provide my written reasons for that decision subsequently.
My decision was that an administration order should be made with effect from 4.15pm that day and that the administrators should be Ms Bailey and Mr Gibson.
I also determined at the conclusion of the hearing, for the reasons given at the time, that the costs of the application for the administration order would be in the administration; and that SIB should pay the costs of the injunction application.
On 28 June 2011, I received by email written submissions from Ms Kyriakides asking that I "clarify" whether it was my intention to make the costs order on the injunction application against SIB alone and, if it was, to reconsider it such that the order should be made not only against SIB but also against two of the other defendants to it, namely Giovanni Garrisi and John Samuel Whittaker, the directors on the SUKI board nominated by SIB pursuant to the shareholders agreement referred to below. SIB made written submissions in response seeking to uphold the costs order originally made. The parties agreed that I should deal with those matters on paper without the need for any further hearing.
I should record at the outset that, prior to the hearing, I indicated to the parties that I was acquainted socially with Ms Bailey and invited them to state whether they objected to my hearing the applications. However, both parties informed me in writing through their counsel that they had no objection to my hearing the applications.
Background
SUKI is a joint venture vehicle of SIB and LS pursuant to a shareholders agreement dated 30 July 2007 between SIB, LS and Lord Steinberg. SUKI was set up to acquire shares in of a Polish gaming company, Star Typ Sport Zaklady Wzajemne Spolka z.o.o ("STS"). There is now a situation of deadlock in SUKI both between the shareholders and at board level.
On the same date, SIB and SUKI entered into a services agreement under which SIB agreed to provide accounting and general management services to SUKI in return for the payment of a fee. Clause 4.3 of the services agreement gave either party the right to terminate it forthwith in any of the circumstances set out in those provisions.
The shareholders agreement was supplemented by a letter agreement dated 2 August 2007.
SUKI and SOI each have a one-third direct shareholding in STS. (SOI was used to acquire the additional one-third shareholding because Polish gaming laws prevented SUKI holding more than a one-third direct shareholding in STS). The remaining shares in STS are owned as to 32.33% by individual shareholders in Poland and as to 1% by Stanleybet STS Investments Ltd, itself a wholly owned subsidiary of SUKI.
Under a facility agreement made on 2 August 2007 between Barclays Bank plc ("Barclays") and SUKI, SUKI borrowed €25 million in order to acquire shares in STS. The loan was guaranteed by Lord Steinberg under a deed of charge of the same date, in return for a fee payable to Lord Steinberg which represented two-thirds of the differential between the cost to SUKI of borrowing from Barclays on an unsecured as opposed to a secured basis.
My attention was drawn to a number of the provisions of the shareholders agreement of which the Estate now alleges that SIB is in breach. In particular, clause 8.3.4 required one-half of any excess outstanding to Barclays over the maximum amount outstanding at each anniversary date of the loan stated in clause 8.3.3 to be paid or provided by SIB to SUKI in order to reduce the loan; and clause 8.5 made provision for the payment of Lord Steinberg's fee referred to above.
On 26 October 2009, SIB and STS entered into an agreement whereby SIB granted STS a software licence to use certain technology which would allow it to receive and use the results of various virtual sporting events. By clause 4.2.4 of the agreement, SIB is entitled to terminate it at any time on giving notice to STS if amongst other things STS has a petition presented for the appointment of an administrator, administrative receiver, receiver or liquidator or such person is appointed over all or any of STS' assets.
From about late 2009 or early 2010, discussions took place between the shareholders about the future of SUKI which focused on SIB taking over the business of SUKI but with the Estate having an ongoing involvement in SUKI. The sticking point appears to have been the Estate's reluctance to provide funding for working capital against a background of concern about the worsening performance of STS, which provided SUKI's income by way of dividends on its shareholding in STS. Discussions continued over the summer of 2010 but no agreement was reached
On 10 May 2011, SIB issued a claim form against the Estate in claim no. HC11C01475 with accompanying Particulars of Claim seeking amongst other things a declaration that SIB is not liable to make payments to the Estate. The Estate served a Defence and Part 20 Claim for amongst other things damages for breach of the shareholders agreement. On 16 June 2011, SIB served its Reply and Defence to the Part 20 Claim. That action is proceeding in the Chancery Division of the High Court. It is noteworthy that the allegations made by the Estate in the action do not include a number of serious allegations previously made in correspondence from its solicitors.
On 17 June 2011, the application for an administration order came before Henderson J, who amongst other things adjourned the application to be heard as an application by order and who, in the face of opposition from the Estate, appointed Ms Bailey and Mr Gibson as interim managers to manage the affairs, business and property of SUKI pending the determination of the application. There was a short further hearing before Henderson J on 21 June 2011 to clarify his order made on 17 June.
It was clear from the report of Ms Bailey and Mr Gibson dated 16 June 2011 in support of the application for the administration order that SUKI was bound to go into administration. It was clear, for the reasons set out in the report, that SUKI was unable to pay its debts as they fell due and that the making of an administration order would be likely amongst other things either to achieve SUKI's rescue as a going concern or else achieve a better result for the creditors as a whole than would be likely on a winding up. In paragraph 4.1 of the report, the proposed administrators stated their belief that it might be possible to achieve SUKI's rescue as a going concern by brokering a compromise between the shareholders or else to achieve a better result for the creditors as a whole. Paragraph 5 of the report set out the proposed administration strategy which included the sale of SUKI's shareholding in STS following a period of marketing and consideration being given to placing SOI into administration in order to recover for SUKI an inter-company receivable due from SOI.
On 17 June 2011, the board of SOI sought to convene a meeting for the purpose of determining whether to place SOI into administration. That led to the...
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