Ventura Capital GP Ltd (Acting for and on behalf of Ventura Capital LP Fund IV) v DnaNudge Ltd
| Jurisdiction | England & Wales |
| Judge | Hodge |
| Judgment Date | 21 March 2023 |
| Neutral Citation | [2023] EWHC 704 (Ch) |
| Docket Number | Case No: CR-2022-0019052 |
| Court | Chancery Division |
[2023] EWHC 704 (Ch)
HIS HONOUR JUDGE Hodge KC
sitting as a Judge of the High Court
Case No: CR-2022-0019052
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF: DnaNudge Limited
AND
IN THE MATTER OF: the Companies Act 2006
Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr Timothy Collingwood KC (instructed by Fladgate LLP) appeared on behalf of the Claimants.
Mr Andrew Thornton KC (instructed by Dorsey & Whitney (Europe) LLP) appeared on behalf of the Defendant.
JUDGMENT APPROVED
JUDGE Hodge KC:
This is my extemporary ruling on the issue of costs following the handing down of my written judgment on Wednesday, 8 March, following a hearing that occupied one-and-a-half days of court time in January. The substantive judgment bears the Neutral Citation Number [2023] EWHC 437 (Ch).
For the reasons set out in that judgment, I declared that a purported conversion of all of the issued Series A Preferred Shares in the defendant company into ordinary shares, on or about 7 June 2022, by way of a conversion notice signed by an investor majority, dated 26 May 2022, was invalid, void and of no effect.
In light of that declaration, I ordered that the defendant's register of members should be rectified by striking out each of the claimants and Sumitomo Mitsui Trust Bank (“SMTB”) as the holders of Ordinary Shares and inserting the name of each of the claimants and SMTB as the holder of, respectively, 21,003 (in the case of the first claimant) and 3,023 (in the case of the second claimant) and 851 (in the case of SMTB) Series A Preferred Shares in the defendant company.
I further ordered that that rectification should take effect as from 7 June 2022 (or such earlier date as the defendant purported to enter the claimant and SMTB as the holder of Ordinary Shares instead of Series A Preferred Shares. By paragraph 5 of my order, I directed that there should be a further hearing on a date to be fixed to resolve all matters consequential upon the foregoing, including costs and any application for permission to appeal. This is that further consequentials hearing.
Mr Timothy Collingwood KC again appears for the claimants and Mr Andrew Thornton KC again appears for the defendant. This hearing is proceeding remotely by the Teams video platform.
I have received oral submissions from both counsel as to the incidence of costs and this extemporary ruling is confined to the issue of costs in principle. Submissions on detailed quantification and assessment will follow.
For the defendant, Mr Thornton accepts that he lost on the issue of the true construction of the articles, but he submits that the claimant failed on its claim under s. 633 of the Companies Act 2006, which gave the claimants, in the circumstances of the present case, the right to apply to the court to have the variation of class rights attached to the Preferred Shares cancelled. Mr Thornton points out that the need for that application arose only in the hypothetical situation that Mr Thornton succeeded in establishing that there had been a variation or abrogation of class rights, as was his primary submission, but, contrary to his further primary submission, that article 10.1 yielded to article 9.2 (a), so that the share conversion had been effective notwithstanding the variation or abrogation of the special rights attached to the Preferred Shares. It would only have been in that hypothetical situation that s. 630 and s. 633 were engaged at all. In that event, it would be necessary for the claimants to show not only that they had suffered prejudice as a result of the variation, but also that such prejudice was unfair. I held that, had that scenario arisen, I would have found that the variation was not unfair and, therefore, the claim under s. 633 of the 2006 Act would have failed.
Thus, whilst it was strictly unnecessary for me to do so, and it did not affect the ultimate outcome of the claim, I expressed myself not satisfied that the claimants had made out their alternative claim of unfair prejudice for the purposes of s. 633. However, for the reasons I gave in my written judgment relating to the true construction of the articles and the interrelationship between articles 9.2 (a) and 10.1, I granted the declaration that the conversion of the Preferred Shares into Ordinary Shares was invalid, void and of no effect.
Mr Thornton, as I say, accepts that, having lost on the issue of construction of the articles, the defendant should pay the claimants' costs of the claim. He does not seek an issues-based costs order. What he seeks is a disallowance of part of the costs incurred by the claimants in pursuing the claim, to reflect their failure on one aspect of the claim, namely that under s. 633. Mr Thornton invites the court to discount the costs by 50 per cent to reflect the claimants' failure on that aspect of the claim. He points out that the inclusion of a claim under s. 633 was significant in litigation terms because, under s. 633 (3) of the 2006 Act, if an application under s. 633 is...
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