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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Abouraya v Sigmund & Ors [2014] EWHC 277 (Ch) (13 February 2014) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2014/277.html Cite as: [2014] EWHC 277 (Ch) |
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CHANCERY DIVISION
DERIVATIVE CLAIM
Rolls Building Fetter Lane London, EC4A 1NL |
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B e f o r e :
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MR WALEED ABOURAYA (suing on behalf of himself and all other shareholders in the Second Defendant other than the First Defendant) |
Claimant |
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- and - |
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(1) MS ANJA SIGMUND (2) TRIANGLE METALS & MINERALS TRADING LIMITED (a company incorporated in Hong Kong) (3) TRIANGLE METALS & MINERALS LIMITED |
Defendants |
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David di Mambro and Henry Day (instructed by Kidd Rapinet LLP) for the First Defendant
Hearing date: 30 January 2014
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Crown Copyright ©
Mr Justice David Richards :
Introduction
"If permission is not given for me to continue these derivative proceedings, Triangle UK will be left without any means of recovering money which properly belongs to it. As I have explained in paragraph 7 above, I am already engaged (with my company, MEBPC) in litigation against Triangle UK in order to recover sums of money loaned to it which it now refuses to acknowledge or repay. Unless Anja is forced to restore sums which she has misappropriated to Triangle UK, Triangle UK is likely to be unable to meet any judgment against it in favour of me or MEBPC in the [QB action]."
Again, at paragraph 68, he states:
"I wish to compel her to reimburse Triangle UK the monies which ought now to be in Triangle UK's coffers as quickly as possible. This would enable Triangle UK to pay its debtors – including (in the event that judgment is entered against it in the [QB action]) MEBPC and me."
I should here say that there is no evidence of any other claims against Triangle UK, still less any evidence of any debts going unpaid.
Relevant legal principles
"…the plaintiff ought at least to be required before proceeding with his action to establish a prima facie case (i) that the company is entitled to the relief claimed, and (ii) that the action falls within the proper boundaries of the exception to the rule in Foss v Harbottle."
As summarised by the Court of Appeal at p.211, the exception arises:
"where what has been done amounts to fraud and the wrongdoers are themselves in control of the company. In this case the rule is relaxed in favour of the aggrieved minority, who are allowed to bring a minority shareholder's action on behalf of themselves and all others. The reason for this is that, if they were denied that right, their grievance could never reach the court because the wrongdoers themselves, being in control, would not allow the company to sue."
"…a minority shareholder who has no other remedy may sue where directors use their powers, intentionally or unintentionally, fraudulently or negligently, in a manner which benefits themselves at the expense of the company." (p.414D)
"Essentially, the term encompasses situations such as…where the majority are endeavouring directly or indirectly to appropriate to themselves money, property or advantages which belong to the company or in which other shareholders are entitled to participate…"
At para 4.11, the Law Commission stated:
""Fraud" does not, however, cover the situation where the wrongdoers do not themselves benefit. Thus it does not include mere negligence on the part of the directors, so that a derivative action cannot be brought against directors who mismanage a company and cause it loss, even if they have control."
"There can be no doubt about the 12 voteless purchasers being a minority; there can be no doubt about the advantage to the council of having the action discontinued; there can be no doubt about the injury to the applicant and the rest of the minority, both as shareholders and as purchasers, of that discontinuance; and I feel little doubt that the council has used its voting power not in order to promote the best interests of the company but in order to bring advantage to itself and disadvantage to the minority. Furthermore, that disadvantage is no trivial matter, but represents a radical alteration in the basis on which the council sold the flats to the minority."
The judge appreciated the difference between the minority's rights as shareholders and their rights as purchasers of flats but he considered, first, that the injury to the rights as shareholders sufficed in itself and, secondly, that their rights as shareholders formed such an integral part of the scheme as a whole as to make it unreal to consider those rights independently of their rights as purchasers: see p.16B.
"[74] As I have said, the question is simply a question of the plaintiff's standing to sue. This would have been obvious when the procedure was for the proposed plaintiff to apply to the court for leave to use the company's name. On a question of standing, the court must ask itself whether the plaintiff has a legitimate interest in the relief claimed sufficient to justify him in bringing proceedings to obtain it. The answer in the case of person wishing to bring a multiple derivative action is plainly 'Yes'. Any depletion of a subsidiary's assets causes indirect loss to its parent company and its shareholders. In either case the loss is merely reflective loss mirroring the loss directly sustained by the subsidiary and as such it is not recoverable by the parent company or its shareholders for the reasons stated in Johnson v Gore Wood & Co [2001] 1 BCLC 313, [2002] 2 AC 1. But this is a matter of legal policy. It is not because the law does not recognise the loss as a real loss; it is because if creditors are not to be prejudiced the loss must be recouped by the subsidiary and not recovered by its shareholders. It is impossible to understand how a person who has sustained a real, albeit reflective, loss which is legally recoverable only by a subsidiary can be said to have no legitimate or sufficient interest to bring proceedings on behalf of the subsidiary.
[75] This is not to allow economic interests to prevail over legal rights. The reflective loss which a shareholder suffers if the assets of his company are depleted is recognised by the law even if it is not directly recoverable by him. In the same way the reflective loss which a shareholder suffers if the assets of his company's subsidiary are depleted is recognised loss even if it is not directly recoverable by him. The very same reasons which justify the single derivative action also justify the multiple derivative action. To put the same point another way, if wrongdoers must not be allowed to defraud a parent company with impunity, they must not be allowed to defraud its subsidiary with impunity."
Facts
"Accordingly, please start the required procedures to transfer all the shares in the company to yourself, and you would become the sole owner of the company, which should be done before the start of the new fiscal year according to the UK fiscal year system…..
We just need to finalise all related payments and loans already provided for the company, to be paid back to me, within the time frame of transferring the shares to you.
Please organise with Nanis the required documents that need to be signed from my side, and also any required procedures.
Would appreciate much starting working on this issue with immediate effect."
The defendant responded on 13 December 2010, saying "I will proceed as per below message."
"I, Mohamed Waleed Abouraya, born 17.07.1962 herewith undertake to transfer my ownership of one share (certificate #4 Mohamed Walid Abouraya) for $1 to Anja Hannelore Sigmund."
The second letter stated:
"Further to our correspondence regarding transfer of share, please find attached my original share certificate #4 which I undertake to transfer for $1 to Anja Hannelore Sigmund."
The claimant signed these letters and sent them, together with the relevant share certificate, to Sovereign Secretaries.
"I, Mohamed Waleed Abouraya, born 17.07.1962
Herewith declare the transfer of my ownership of one share (certificate #4) for $1 in Triangle Metals & Minerals Trading Ltd, registered address [which is stated] to Anja Hannelore Sigmund, born 18.11.1966 (PP#C8WNCK405).
This transfer is legally binding and comes into effect as of today 14.12.2010 "
"I am not sure what else is hidden, or what other stories I am not aware of, but I am sure that you would agree that I have to take all precautions, just in case I find other unpleasant surprises, or find the Glaser family are fabricating a court case and find the court putting their hands on the money in HSBC London.
Having said that, we have to move the money out of HSBC London account immediately, so I need you to transfer all the money in the account to my personal account in Geneva with BNP for a start.
I will also need to have the details of the outstanding loans that were given Trgl from my side, so it would be shown in the official documents that part of this money transfer to my personal account is to settle these loans."
"Then for the balance amount in HSBC, we would need to do a final settlement, i.e. deducting all costs, settling outstanding money due to me and also adding the cash amounts you have been providing to be refunded to you. I would proceed with the detailed account once I have time but for the moment there is no way I could provide this given the fact that I am entirely overworked and trying to keep the company going despite what is going on…"
"Waleed would list all his costs and expenses which he deems are refundable to him, and so would I; this to be done by end of June; whenever he was providing cash, I advised him that all amounts are recorded, which has always been done."
"In relation to the sum owed by Triangle to Mr Abouraya, our client is currently working with an accountant to prepare a list of amounts owed. These calculations will be provided as soon as possible."
"However, various further sums of money are owed either to Mr Abouraya or to MEBPC by Triangle UK. The details of these sums are set out at Schedule 1 to this letter. The total amount known to date is $517,185. However accountants for MEBPC and Mr Abouraya are still in the process of finalising this calculation, so this figure may yet be increased. It may also grow further on proper disclosure of relevant information by you. In this regard, my client reserves his position entirely."
The letter went on to demand repayment of the sums which they said were due. Further sums allegedly due were detailed in a letter from the claimant's solicitors dated 17 October 2011. The amounts now claimed in the QB action are less than the total claimed in those letters, and whether or not Triangle UK is indebted to the claimant or his company is of course the matter to be decided in the QB action.
Allegations in the present proceedings
"Feed back from the Russians, as if the business with the Russians would be done or not, which I guess will be clear within the coming few days, right? So we need to wait and see if this is going to be part of Trgl, or you will decide to do it in a different way, as I am not sure what your intentions will be, and you may choose to work with them directly, or to do it on your own, but frankly speaking, I am not sure at all of what you will eventually decide to do with them."
Application of the relevant legal principles to the present case