Stobart Group Ltd v William Andrew Tinkler
| Jurisdiction | England & Wales |
| Judge | Russen |
| Judgment Date | 15 February 2019 |
| Neutral Citation | [2019] EWHC 258 (Comm) |
| Docket Number | Case No: LM-2018-000113 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 February 2019 |
[2019] EWHC 258 (Comm)
HH JUDGE Russen QC
(Sitting as a Judge of the High Court)
Case No: LM-2018-000113
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS
LONDON CIRCUIT COMMERCIAL COURT (QBD)
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
Richard Leiper QC and Daniel Isenberg (instructed by Rosenblatt Limited) for the Claimant
John Taylor QC, Alex Barden and Giles Robertson (instructed by K&L Gates) for the Defendant
Hearing dates: 12 th to 16 th, 19 th to 23 rd, and 29 th November 2018
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.
HH JUDGE Russen QC
INDEX
[The references are to initial paragraph numbers.]
| (1) Section 1: Introduction | [1] |
| a. A Thumbnail Sketch of the Dispute | [4] |
| b. The Parties | [10] |
| c. The Issues in More Detail | [21] |
| d. The Proceedings | [33] |
| (2) Section 2: Matters to be Determined | [38] |
| a. Context | [38] |
| b. The Issues | [49] |
| (3) Section 3: Key Events | [54] |
| a. The Main Participants | [55] |
| b. Significant Events | [76] |
| i. September 2017 to February 2018 | [99] |
| ii. Mid-April to mid-July 2018 | [199] |
| (4) Section 4: Legal Principles | [375] |
| a. Company Law | [376] |
| i. The Company's Articles | [376] |
| ii. Directors' Duties: General Considerations | [382] |
| iii. Relevant Fiduciary Duties | [389] |
| iv. The Duty to Act in Good Faith in the Company's Best Interests | [390] |
| v. The Duty to Avoid Potential Conflicts of Interest | [398] |
| vi. The Duty to Exercise Independent Judgment | [402] |
| vii. The Duty to Act for Proper Purposes | [426] |
| viii. Consequences of Motivation by an Improper Purpose | [453] |
| ix. The “Sufficient Information Duty” | [489] |
| x. Potential Relief from a Breach of Duty | [494] |
| b. Employment Law | [501] |
| i. The Service Agreement | [501] |
| ii. Contractual Interpretation | [514] |
| iii. Remedy | [534] |
| c. Conspiracy | [544] |
| (5) Section 5: Findings | [574] |
| a. Context | [574] |
| b. The 10 Issues In Turn | [615] |
| (6) Section 6: Decision | [947] |
SECTION 1: INTRODUCTION
This is my judgment following an expedited trial over 11 days in November 2018, at which the Claimant (“ the Company”) was represented by Mr Richard Leiper QC and Mr Daniel Isenberg and the Defendant (“ Mr Tinkler”) by Mr John Taylor QC, Mr Alex Barden and Mr Giles Robertson. I am grateful to counsel and their respective teams of instructing solicitors for their considerable effort in getting the case ready for trial within 6 months of its commencement. No small part of that was their clear distillation of the issues to be decided from a dense mix of events making up the internal travails faced by the Company's main board of directors during 2018.
Despite its length, this judgment does not attempt to capture every aspect of the exchanges – both between what I might describe as the rival camps and within each camp and the latter often, though not always, revealed to the opposing one only after disclosure in these proceedings – but, instead, only those which are relevant to the determination of the issues identified below. Those material ones are numerous and convoluted enough, and the legal principles with which each side seeks to arm itself are sufficiently well contested, for this judgment to have become quite unwieldy without it being expanded further to cover incidental matters. My level best attempt to act upon the parties' spirit of expedition, which the nature of the dispute obviously encourages, is a further reason why I have not attempted to address every matter that was raised at trial or, more pertinently, within the parties' voluminous written submissions with their extensive citation of authority.
Therefore, in an effort to lend it greater comprehensibility, I have broken down this judgment into the sections indicated by the above Index. The definitional terms used below I have highlighted in bold.
(a) A Thumbnail Sketch of the Dispute
This litigation raises some elementary principles of corporate governance. They have been prompted by what I might describe, at least on the Company's case, as a previous state of insurrection within its board of directors. Although the Company says that the unrest and the uncertainty caused by it were resolved, properly and effectively, by steps taken in the summer of 2018 to remove Mr Tinkler from the board, he maintains that his struggle for a presence on the board is not over. His counterclaim in these proceedings extends to an order for his reinstatement to it.
It is not easy to summarise, for the purposes of introducing the issues between the parties, the detailed facts giving rise to them. More often than not the relevant events are interconnected and, by the summer of 2018, can be regarded as involving thrust and counter-thrust between the rival camps. I set out the material ones in Section 3(b) below. Reduced to basics, the essential questions stem from what became a confrontation between the majority on the company's main board, on the one hand, and, on the other, a dissenting director who has generated support from shareholders which is (or certainly was at the relevant time, as crystallised by the commencement of proceedings) sufficient, by simple majority vote, to influence the composition of the board.
Whether that support was secured or encouraged by fair means or foul is a matter to be determined by the court as the answer could influence the steps that the majority on the board might properly have taken in response and, perhaps, the nature of the relief the court is prepared to grant even if it concludes their own actions are not beyond reproach. The fact that Mr Tinkler not only owed duties to the company as a director but also as an employee under his Service Contract with the Company (as represented and spoken for by the majority) also has a significant bearing upon this aspect of the case.
As will appear below, the steps taken by the majority included a decision to approve a transfer of shares (which had been disenfranchised from voting pending their transfer out of the corporate treasury) whose revived voting rights operated, in the event, to reduce the impact of Mr Tinkler's shareholder support; though it is important to note at the outset that the majority maintain their decision was not simply responsive to his dissenting actions. The imminence of the Company's AGM (at which those shareholders backing the minority director and indeed all shareholders with voting rights might express their views upon the composition of the board) and one particular market announcement made by the Company before that meeting (which focussed upon certain actions of Mr Tinkler) are other very significant facts.
Like the act of transfer of shares out of the Company's treasury to the trustee of an employees' benefit trust, who then voted them in favour of the majority at the AGM, the terms of that public announcement have led Mr Tinkler to utter his own cry of “foul” against the majority. Indeed, his general position is that these steps by the majority were neither truly responsive nor reasonable ones but instead formed some of the final pieces in a plan to entrench their own position and secure his removal from office which, he says, they had decided upon some months previously. Against that, the majority say that this ignores what they say was Mr Tinkler's earlier decision in principle to stand down from the board and that, from his discussions with key shareholders which they understood would be about his orderly departure, he undertook a volte-face that carried with it a plot for a boardroom coup.
That, then, is a thumbnail sketch of the litigation in which I now give judgment.
(b) The Parties
The Company is incorporated in Guernsey and listed on the London Stock Exchange. With other companies in its group (“ the Group”) its business provides infrastructure and support services. Those services involve them owning and managing a range of key infrastructure sites (held by the Infrastructure Division) and, through the three core Operating Divisions of Aviation, Energy, and, thirdly, Rail and Civils (the latter meaning civil engineering projects), providing support services to other businesses in those sectors. The Aviation Division includes London Southend Airport (“ LSA”) and, until recently, also included Carlisle Lake District Airport (which has now been moved into its separate Infrastructure Division).
The Company is a FTSE 250 company whose market capitalisation over the period under scrutiny in this judgment has fluctuated between just over £1 billion and in excess of £800 million. At the year end of 28 February 2018 the Company had revenues totalling approximately £242 million on which it made a profit before tax of over £117m, though this reflected its disposal of investments including a profit of £123.9m profit on a partial disposal of its shareholding in Eddie Stobart Limited (“ ESL”). The Company's 2018 Annual Report stated that the Group then employed a total of 1,584 employees, though in evidence the CEO said it was now more like 1,700.
The Company's name reflects its earlier acquisition of the well-known road haulage company, ESL, though its sale of shares in that company in 2014 (when it relinquished its majority stake) and again by the disposal in 2017 means that the Group now retains, through its Investment Division, a minority 12.5% stake in ESL. The Company owns the “Eddie Stobart” brand which it licenses to ESL.
At the beginning of 2018 the Company's main Board of Directors (“ the Board”) comprised Mr Iain Ferguson CBE (“ Mr Ferguson”, the...
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