Court of Appeal dismisses appeal in top hotels dispute
In its judgment handed down on 3 July 2013 the Court of Appeal (Arden, Moore-Bick and Rimer LJJ) has unanimously dismissed the appeal brought by Mr Paddy McKillen against the judgment of David Richards J dated 10 August 2012. In that judgment David Richards J dismissed Mr McKillen’s challenge to the acquisition of control by companies associated with the Barclay Brothers of Coroin Limited, the company which indirectly owns and controls Claridges, the Connaught and the Berkeley hotels. As Arden LJ stated, Mr McKillen was seeking through the litigation to become the majority shareholder in Coroin. The successful defence to Mr McKillen’s appeal was led in the Court of Appeal, as it had been at trial, by Kenneth MacLean QC, with 2 teams from the Chambers of Lord Grabiner QC at One Essex Court (Sa'ad Hossain QC, Edmund Nourse, and Emma Jones for the Barclay interests, Stephen Auld QC, Michael Fealy and Michael D’Arcy for Mr Quinlan).
Mr McKillen contended on appeal that he had been the victim of unfairly prejudicial conduct on the part of Coroin and that the Barclay interests had unlawfully acquired control over Coroin in breach of his pre-emption rights contained in Coroin’s articles of association. Mr McKillen also contended that the Barclay interests had acted in breach of an express duty of good faith contained in the Coroin shareholders’ agreement.
As Arden LJ pointed out, the fundamental legal issue was whether Mr McKillen had satisfied the cumulative requirements for relief in section 994(1) of the Companies Act 2006, namely whether there had been an act or omission of Coroin Limited which was unfairly prejudicial to Mr McKillen in his capacity as a shareholder in Coroin Limited.
Mr McKillen contended that the arrangements made by the Barclay interests which had resulted in their acquiring control over Coroin had transferred, or had the practical effect of transferring, a proprietary interest in shares in Coroin to the Barclay interests in breach of the pre-emption provision in Coroin’s articles. After considering the relevant authorities including the decisions of the House of Lords and the Court of Appeal in Hunter v Hunter each member of the Court of Appeal rejected Mr McKillen’s interpretation of Coroin’s articles and his case that the Barclay interests had contravened Coroin’s articles by acquiring or attempting to acquire a proprietary interest in Coroin’s shares. The Court also rejected Mr McKillen’s case that the Barclay interests and the other shareholder had acted otherwise than in good faith. Mr McKillen’s appeal accordingly failed because he was unable to establish any of the requirements for relief under section 994 CA 2006.
The Court of Appeal’s unanimous judgment represents a resounding defeat for Mr McKillen in his challenge to the Barclay interests’ acquisition of control over the hotel companies. Both the Court of Appeal’s judgment and the Judge’s ‘meticulous and clear’ judgment will repay close scrutiny for its treatment of the section 994 jurisdiction and pre-emption rights in the context of disputes about control over companies.
Kenneth MacLean QC, Sa'ad Hossain QC, Edmund Nourse, Emma Jones instructed by Weil Gotshal
Stephen Auld QC, Michael Fealy, Michael d'Arcy instructed by Quinn Emanuel
Full text of the Judgment available here