Summary

The High Court determined that it had jurisdiction to hear a claim brought by an English company against its Turkish parent concerning the validity of amendments to its articles of association and of notices served by the parent under the Companies Act 2006 s.303 and s.305. The claim fell within Regulation 1215/2012 art.24 and, by serving a counterclaim that went beyond the claim, the parent had submitted to the jurisdiction of the English court.

Facts

The court was required to determine three applications in proceedings concerning the ownership of the assets and the management of the first claimant English company (C1).

C1 was a wholly-owned subsidiary of the sixth defendant Turkish company (D6). Both were part of a large Turkish-based conglomerate. Pending an investigation into allegations against the group, the Turkish court had appointed interim trustees, including the first to fifth defendants, to replace the board of D6. D6 served notices under the Companies Act 2006 s.303 and s.305 requiring the directors to call a general meeting of C1 to pass a resolution replacing its directors, which included the second claimant (C2), with the first, second and third defendants. The claimants sought declarations that the notices were ineffective on the basis that the resolution could not be passed without C2's consent ("the company law claim"), and an injunction to restrain the trustees from holding themselves out as having authority to act for or bind D6 as a shareholder of C1 ("the authority claim"). The claimants obtained an interim injunction to prevent the meeting. The injunction was continued by consent and the claimants undertook not to dispose of C1's funds other than in the ordinary course of business, and to procure the transfer of its share capital to its solicitor's client account. D6 served a defence, and counterclaimed that changes made to C1's articles of association giving C2 additional rights were invalid. Both pleadings were stated to be without prejudice to a challenge by D6 to the English court's jurisdiction. The claimants then gave notice that they wished to transfer C1's share capital to an investment account.

The three applications were (1) D6's challenge to the English court's jurisdiction; (2) the claimants' application to strike out D6's acknowledgement of service, defence and counterclaim on the basis that the trustees had no authority to act on its behalf; (3) D6's application for an order preventing the transfer of C1's share capital to the investment account.

Held

(1)(a) The Jurisdiction challenge: Regulation 1215/2012 art.24 - It was not disputed that the company law claim fell within art.24 so as to confer jurisdiction on the English courts. That claim was concerned with the interpretation of and validity of amendments to C1's articles of association and directly affected the validity of the s.303 and s.305 notices. That was equally the case in relation to the authority claim, which related directly to the validity of the notices and to decisions of an organ of an English company and its constitution. The two claims were inextricably linked. It was not possible to determine whether the notices were valid without also considering whether the shareholder by whom they had been served had had capacity to do so and, in turn, whether those who had served the notices on behalf of the shareholder had authority to cause the shareholder to do so. To separate the issues and hold that the authority claim was out with art.24(2) would lead to a situation in which it was not possible to determine whether a foreign person who served a notice under the Act in relation to an English company, which had consequences in relation to the validity of decisions of the organs of the company, had proper authority or capacity to do so. The principal subject matter of the proceedings fell within art.24(2) (see para.44 of judgment).

(1)(b) The jurisdiction challenge: submission to the jurisdiction - The counterclaim was an unequivocal submission to the jurisdiction. It went beyond the company law claim, raising new issues about the articles of association and consisting of a step consistent only with the acceptance of the rules under which the court operated. The statement that it was not intended to waive the jurisdictional challenge was incompatible with the relief sought. Given the content of the counterclaim, the mere repetition of that rubric could not render it equivocal. The application to restrain the transfer of the share capital was not, however, an unequivocal waiver of the right to challenge the jurisdiction. It flowed from the claimants' undertakings and was the only way that the defendants could enforce them (paras 55-56).

(2) Strike out - The claimant's strike out application was struck out. The question of the trustees' authority was inherent in the claim and was already dealt with in the pleadings. It would be a nonsense if, having brought D6 before the court, the claimants could contend that its acknowledgement of service and defence could be struck out as an abuse of process arising from the very lack of authority relied on in the claim. Although the counterclaim went further than the claim, the question of whether D6 was competent to bring it was based on the same authority issue that was at the heart of the proceedings. Finally, the statement of case on the strike out application expanded on the pleadings and, were it to be heard, there would have to be full disclosure and a substantial trial. The overriding objective would not be furthered if the authority issue was determined separately (paras 66-68, 71).

(3) Transfer of share capital - The proposed transfer to the investment account fell within the terms of the "ordinary course of business" undertaking because it enabled a proper return on the capital while preserving its liquidity. C1 had been earning substantial interest on its capital before the dispute arose, and there was nothing to suggest that doing so was other than in the ordinary course of business (para.88).

Judgment accordingly