2002/243
ROYAL COURT
(Samedi Division)
20th December 2002
Before: |
M.C. St. J. Birt, Deputy Bailiff, and Jurats Quérée and Bullen. |
Between |
E.M. TV and Merchandising Aktiengesellschaft |
Plaintiff |
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And |
Bayerische Landesbank |
Defendant |
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And |
Speed Investments Limited |
First Party Cited |
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Slec Holdings |
Second Party Cited |
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Mourant & Co Corporate Secretaries Limited |
Third Party Cited |
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And |
JP Morgan Chase Bank |
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Lehman Commercial Paper Inc |
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Dietrich Wolf |
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Dr. Rudolf Hanisch |
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Dr. Thomas Fischer |
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Klaus Diederichs |
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Thomas Bernard |
Intervenors |
Application by the Defendant to lift Injunctions and/or replace with undertakings, given by the Defendant and Intervenors.
Advocate F.B. Robertson, Advocate M.P.G. Lewis and
Advocate M. St.J. O'Connell for the first Plaintiff.
Advocate M.J. Thompson, Advocate T.J. Le Cocq and
Advocate M.S.DO.
Yates for the Defendant and for the Intervenors.
The Parties Cited did not appear and were not represented.
judgment
the deputy bailiff:
1.
This is an
application by JP Morgan Chase Bank, Lehman Commercial Paper Inc, Dr Dietrich
Wolf, Dr Rudolf Hanisch, Dr Thomas Fischer, Klaus DiederichsDiedrichs
and Thomas Bernard for leave to intervene in the current proceedings. It is also an application by the
defendant and the intervenors that I have just
mentioned to vary certain injunctions which were granted ex parte.
2. We begin by summarising the background to this application, although I should add that the application for leave to intervene is not opposed and we therefore grant it.
3.
Speed
Investments Ltd is a company incorporated in Jersey. It owns 75% of SLEC Holdings Ltd -
another Jersey Company. The
remaining 25% of SLEC is owned by Bambino Holdings Ltd, which represents
unrelated 3rd party interests.
SLEC owns directly, or indirectly 100% of various companies in the
Formula 1 Group, which holds the television broadcasting rights to the Formula
1 motor racing series. Speed is
owned as to 22.3% by the plaintiff, whom we
shall call EMTV, which is a German incorporated company whose business includes
the distribution and marketing of television and other rights to sporting and
other events. The remaining 77.7%
of Speed is owned by Formel Eins Beteiligungs GmbH
- (GMBH - 'FEB'),
a German owned company, which is a wholly owned subsidiary of Kirch Beteiligungs GmbHGMBH
& co - 'Kirch'.
4.
When it
made its investment in Speed in March 2001, FEB borrowed a sum of approximately
US$1.57 billion from a number of banks, including the defendant, which is a bank
incorporated in Germany. As part of the arrangements FEB entered
into an agreement to grant the defendant, as
security trustee for the syndicate of lending banks,lenders
a security interest in FEB's shares
in Speed under the Security Interest (Jersey)
Law (1983
("the 1983 Law").
5. As a further part of the arrangements EMTV also entered into a security agreement with the defendant, as security trustee, purporting to grant a security interest over its minority shareholding in Speed in support of FEB's indebtedness to the banks. These two security agreements were in broadly similar form. The share certificates were placed in the possession of the defendant and the security agreement conferred a power of attorney on the defendant to do all such acts and things as might be necessary to give full effect to the agreement and the security. A similar security agreement was entered into by Speed, whereby Speed purported to grant a security interest in its 75% shareholding in SLEC in support of FEB's liability to the banks.
6.
The Kirch group has run into financial difficulties. FEB was placed in provisional
administration earlier this year.
As a result FEB has defaulted on its obligations to the banks. The banks have therefore made a demand on FEB
and on EMTVEMTB, pursuant
to its guarantee of FEB's obligations, such
guarantee being limited to the value of EMTV's shares in Speed. In particular, pursuant to its powerPower
of attorneyAttorney in the
security agreement, the defendant signed a written resolution on behalf of EMTV
and FEB removing certain directors of Speed and appointing Dr Thomas Fischer
and Dr Dietrich Wolf as directors of Speed. We were told that the defendant
subsequently also appointed Mr Diederichs and Mr Bernard as directors.
7. It is of note that under a shareholder's agreement entered into between EMTV and FEB in relation to their shareholdings in Speed, FEB was entitled to appoint four directors and EMTV one director. In effect, therefore, the defendant has appointed four employees or representatives of the banks as directors in place of the previous four FEB nominated directors. The EMTV director, Mr Klatten, remains in place. The new Speed directors have purported to reconstruct the board of SLEC in like manner so that it is also now managed by a majority of appointees of the defendant.
8.
Negotiations
have been taking place between the banks and EMTV following the default by
FEB. In the course of these
negotiations EMTV was advised that it had grounds for contending that the
security agreement, in respect of its shares in Speed,
did not comply with the requirements of
the Security
Interests (Jersey) Law 1983 Law and
was therefore invalid.
9.
Accordingly,
on the 27th
November 2002 EMTV issued an order of justice seeking a declaration
that the security agreement was void and/, or
not effective to create a valid security interest over its shares in Speed. It also sought a declaration that as a
result the purported power of attorney contained in the security agreement was
also invalid as were the actions of the defendant in appointing its nominees to
the board of directors of Speed pursuant to that power of attorney.
10. On 9th December, on an ex parte application, albeit on short
notice to the defendant so that Advocate Thompson was heard briefly, I granted
an injunction restraining the defendant from enforcing its purported security
over EMTV's shares in Speed.
This arose out of concerns that the defendant was going to exercise the
power of sale conferred on it under the security agreement and the 1983 Law
security interest law by selling the
shares in its capacity as the security
trustee, to three banks, namely itself,
Lehman Commercial Paper Inc and JP Morgan Chase Bank. The injunctions which I granted are
referred to as the first injunctions and are in the following terms:
"1. Injunction against the defendant: It is hereby ordered that the defendant shall until further order be restrained, whether by itself or by its directors, officers, employees or agents or in any other way from taking any steps in relation to the purported enforcement of the security agreement, including, without prejudice to the generality of the foregoing taking any steps to exercise the power of sale under the law and or pursuant to clause 9 of the Security Agreement.
2. Injunctions against
the parties cited: Service of
this amended order of justice upon the First Partyparties
Cited shall operate as an immediate interim injunction, restraining it until
further order (whether by itself or by its directors, officers, employees or
agents or in any other way) from registering or otherwise giving effect to any
dealings to any by the Defendant with the
shares in the First Party Cited currently registered in the name of the Plaintiff."
(The first party cited was a reference to Speed.)
I also ordered that the first injunction against the defendant could
be replaced by an undertaking by the defendant in exactly similar terms
provided that the defendant submitted irrevocably to the jurisdiction of this
Court. That subsequently occurred
so that Injunction (1) has now been replaced by an undertaking.
11. On 10th December I was asked to grant further relief because at 11.17.pm., on 9th December a notice convening a meeting of the board of directors of Speed had been sent to all the directors, including Mr Klatten. The meeting was convened for the next day in the offices of the defendant in Germany at 2pm or 15 minutes after the end of the meeting of the directors of SLEC, who had a pre arranged board meeting for that day.
12. The main business referred to in the notice was
the transfer of FEB's shares in Speed into the
names of the three banks referred to earlier. The plaintiff attended upon me shortly
before 1pm Jersey time i.e 2pm German
time. The plaintiff expressed
concern that the effect of registering the banks as majority shareholder would
be to circumvent the effect of the injunction granted the previous day because
the appointment of the directors of Speed was under challenge; registration. Registration of the shares
would enable the banks to assert control of Speed at shareholder level which
would, in turn, enable them to deal with the shares in SLEC. All of this could prejudice EMTV in
relation to its ability to participate in any upside in the value of its shares
as a result of any ultimate realisation of Speed's investment through
SLEC, in Formula 1.
13. In the circumstances, I granted further ex parte relief in the following terms contained in paragraphs 2.2 and 2.3 of the order of justice, which are as follows:
2.2. Further, the First Partyparties
Cited be restrained from permitting Dr Dietrich Wolf, Dr Thomas Fischer, Mr
Klaus Diederichs, Mr Thomas Bernard or any other appointees of the Defendant,
made pursuant to a security agreement to act as Directors or agents of the First
Partyparties Cited for
any purpose, including taking any steps to approve or register any share
transfers in the First Party Cited or dispose of any assets of The First Party
Cited (including its shareholding in the Second Party Cited, SLEC Holdings Ltd)
save that this injunction shall not prevent any of the aforesaid persons from
conducting any of the day to day business of the First Party Cited and that the
First Party Cited, (whether by itself or by its directors, officers, employees
or agents or in any other way) be restrained from registering or otherwise
giving effect to any dealings in its shares or disposing of any of its assets (including
its shareholding in the Second Party Cited).
2.3. The Second Party Cited ( whether by itself or by its directors, officers, employees or agents or in any other way) be restrained from registering or otherwise giving effect to any dealings in its shares or disposing of any of its assets.
These have been referred to as the second injunctions.
14. The next day I was presented with a further
application by the plaintiff. In
particular I was presented with a filefinal
note, subsequently confirmed by affidavit, from Mr Ekard
Martin of Freshfield Buckhaus
Deringer, German lawyers to EMTV, who had attended
the board meeting of Speed the previous day.
15. It is not necessary to recite it in detail. Suffice, suffice to
say that Mr Martin said that he had informed the meeting of the injunction
which I had issued the day before.
This had initially been simply an oral description of what he had been
told on the telephone, but subsequently he received and handed to the chairman
Dr Fischer, albeit it towardsappears toward
the end of the meeting, the text of the injunction which had by then been faxedforwarded
to him by the plaintiff's Jersey advocates.Advocates. It appeared that Dr Fischer had not read
the injunction but had put to the meeting that the share transfer from FEB to
the banks should be approved, subject to legality. Dr Fischer explained that this proviso
was designed to cope with the injunction.
16. On the basis of the information supplied to me, I concluded that the further injunctions as applied for by EMTV should be granted. These were in the following terms and are found at 2.4 and 2.5 of the re-amended order of justice:
"2.4. The Viscount do take, and have exclusive possession, custody and control of such affairs and property of the First Party Cited, as relate to shares issued by it and its own shareholding in the Second Party Cited, subject to third party rights, if any, to possession of share certificates issued by the Second Party Cited, including, for the avoidance of doubt, its own register of members and the Viscount shall have exclusive authority to give instructions on behalf of the First Party Cited in respect of all such matters.
2.5. The Third Party Cited (whether by itself or by its directors, officers, employees or agents or in any other way) be restrained from acting on the instructions of any person other than the Viscount in respect of: (i) any transfer of shares in the First Party Cited; (ii) the making of any entries in the register of members of the First Party Cited; (iii) the shares in the Second Party Cited held by the First Party Cited and (iv) ceding possession, custody or control of the register of members of the first party cited."
These have been referred to as the third injunctions.
17. There the matter rests. The defendant and the intervenors now apply to set aside those injunctions and we
have received a considerable body of evidence by way of affidavit sworn on
behalf of each party. The
defendant, supported by the other banks, submits
strongly that the second and third injunctions go too far and will seriously
inhibit the banksbanks'
prospects of negotiating satisfactory arrangements in relation to Formula 1 and
thereby obtaining repayment in full of their debt.
18. In summary, Mr Thompson's contentions on their behalf were as follows:
(i)
There is
no challenge to the FEB security agreement by FEB or its liquidator. There is without doubt a default. The banks are therefore entitled to
enforce that agreement as against FEB.
That includes exercising the power of sale conferred on the defendant as
security trustee. Indeed, that
power of sale has already been exercised by the security trustee selling the share shares to
itself and the other two banks, referred to above, for a total sum of US$777
million, which is their estimation of the current market value of the FEB
shares in Speed. The purchasers are
therefore entitled to be registered as shareholders. EMTV's only legitimate concern is
to prevent any dealings with its shares in Speed,
pending trial, not FEBFEB's
shares.
(i)
He accepts that it is arguable that there may be technical defects
in what has occurred, although, of course, it that is
not admitted by the Banks.banks. For example, it is said that the use of
the EMTV power of attorney to join in the appointment of the new directors, and
that the use of the same power of attorney to waive EMTV's pre-emption
rights under the Articles of Association are capable of challenge. It is further said that the failure of
the purchasers to agree to be bound by the shareholder's agreement,
which was to protect EMTV's position as a minority shareholder in Speed,
is a breach of the Company's Speed's obligations.
(ii) As to the laterlatter point AdvocateMr Thompson said that the Banksbanks would be willing to agree to be
bound in most respects pending the main action. As to the other points, they were technical objections upon
which the Court could not rule at this stage either. Either way they conferred no right on EMTV
to stop the transfer of the FEB shares.
EMTV was in no financial position to exercise its rights of pre-emption
and the defendant
and the Banksbanks, stepping into the stepsshoes of FEB, had the right to be registered as a shareholder.shareholders.
(iii) It
is vital to the Banks'banks'
interests - and those of EMTV - that
they become the registered shareholders of Speed. It is in the public domain,
he said, that these are important times for
the Formula 1 Group. There is at
present a concorde agreement Concorde Agreement which
comes to an end in 2007.
Negotiations are now beginning for the renewal agreement with the
Federation Internationale des Automobile (FIA), the
Formula 1 racing teams and the car manufacturers. The teams are pressing for considerable
changes which would include greater financial participation in the Formula 1
Group. Some of the car
manufacturers have threatened to withdraw from Formula 1 and set up a rival
racing circuit. The outcome of the
negotiations will therefore be extremely significant for the value of
Speed's shares in Formula 1 and therefore the recovery by the Banksbanks
of their debt from FEB.
(iv) In the absence of the Banksbanks
there is no one to take the lead in respect of the majority of 75% interest,
through SLEC, in the Formula 1 Group. The Kirch
Group is insolvent; EMTV is only a minority shareholder
and is anyway not in a particularly strong financial position. There is therefore a vacuum. The other parties to the negotiations
have made it clear that they are not going to progress matters until they are
satisfied that the three Banksbanks really
are in the driving seat and have a controlling interest in Formula 1 through
their shareholding in Speed. It is
vital, therefore, says AdvocateMr Thompson
that the shares be registered in their name, so that the
negotiations, which are urgently required if the
risk of any break-away is to be contained, make take
place. Although the Court has
ordered a speedy trial of the main issue, -
indeed it is to be heard on the 4th and 5th February, -
matters cannot be delayed until then.
(v) The defendant accepts that nothing must be done
which might prejudice the value of EMTV's minority shareholding in case
EMTV is successful in contending that the security interest is invalid, and it therefore
remains as a minority shareholder.
The defendant has therefore offered undertakings. It began by offering undertakings that
it would not dispose of its shares in SLEC
pending trial or further order of the court.Court. During the course of the hearing the
undertakings were added to; indeed there were some late additions in Advocate
Thompson's reply, so that they are now in the following form, which,
for the avoidance of doubt, we think we should set out. The undertakings are in fact to be given
by the defendant and all the Intervenors.
First,The
original undertakings contained in the letter from Ogier and Le
Masurier of the 12th December, in the following terms, the :
"(1) The relevant parties each undertake not
to agree to or otherwise procure the disposal by Speed Investments Limited of
any shareholding that company holds in SLEC Holdings Limited pending resolution of the action by
the Royal Court of Jersey between EMTV and by Bayerische Landesbank without
further order of the Court save that each of the above reserves their rights to
bring any application to the Royal Court to vary this undertaking"
The second undertaking in that letter is that:
"the same parties each undertake not to agree to or otherwise
procure the registration or otherwise give effect to any dealings in the
shares of SLEC Holdings Limited or to the disposal of any of the assets of SLEC
Holdings Limited otherwise than in the ordinary course of business save again that each of them reserves
their rights to bring any application to the Royal Court to vary this
undertaking. There
is a further reservation which applies to all of the matters.."
The further undertakings are as follows:
"(2) that save with respect to clause 6.2 of the Speed
Shareholders Agreementt undertakings, to abide by all provisions of the
Agreement which remain relevant to the relationship between EMTV and the
majority shareholder,
(3) undertakings not to sell and/or
to transfer or otherwise deal with the Speed Shares formally owedformerly owned by FEB.
(4) Not to change the composition of the Board of Speed and/or to seek to ratify the appointments of Thomas Bernard, Thomas Fischer, Klaus Diederichs and Dr Dietrich Wolf as directors of Speed.
(5) Not to take any steps to remove Mr Bernard Claton (?sp)Werner Klatten as a director of Speed, SLEC or
Formula I Holdings Limited.
(6) Not to effect any changes in the Memorandum and Articles of Association of Speed.
(7) Not to sell, pledge, transfer or
in any other way encumber or alienate Speed ShareholdingSpeed's shareholding in SLEC.
(8) Not to act in conjunction with Bambino Holdings Limited in order to seek to effect any reorganisation or reconstruction of the Formula 1 Group of companies with the purpose of seeking to render the direct shareholding of EMTV in Speed and EMTV's indirect shareholding in SLEC of no or reduced value or having that effect.
(9) Not to take any steps to wind up Speed or, notwithstanding, the terms of the SLEC
Shareholder's Agreement dated 12th May, 2000, to wind up SLEC (except in the case of insolvency in
either case.).
(10) Not to take any steps
with a view to Speed issuing any further shares. ."
As stated they are all the undertakings
are subject
to the qualification that the parties rely on the undertaking provided by EMTV
in support of this its application
for an injunction in the event that they suffer loss or damage as a result of
the making of either the injunction or the undertakings and they also reserve
the right to apply to the Court to require EMTV to fortify theirits
undertaking in damages.
(vi) The defendant strongly denies any intention to
breach the second injunction at the Board Meeting of Speed held on 10th
December. It is said that there was
confusion as to the terms of the injunction and as to the how the courtCourt
could forbid the transfer of the FEB shares when there was no dispute over that
security agreement. The Board
resolution as passed made it absolutely clear that the approval of the transfer
of the FEB shares was conditional upon such transfer not being prohibited by
the second injunction. It now
having been established that the second injunction did indeed prohibit such a
transfer and, it had not
gone ahead. The banks were
international financial institutions of the highest repute and would never
knowingly breach an injunction.
Indeed they wishwished to offer
appropriate undertakings instead of injunctions in the present case.
(vii) As to the balance of convenience the defendant
says that the banks would suffer far more un-compensatable
damage than EMTV. If the
injunctions are maintained there is a real risk that they wouldwill
not be able to realise the full value of the Formula 1 Group and recoup their
loans of approximately $1.6 million.billion. EMTV is not in a financial position to
compensate fromfor its
undertaking in damages to that extent.
On the other hand EMTV is unlikely to suffer loss. The banks wish to get as much value as
possible from Formula 1 which would benefit EMTV just as much as the Banks.banks. In the unlikely event of the lifting of
the injunctions causing EMTV loss it is said that that loss would not be as
great as that of the Banks banks because
EMTV only has a 22.3% interest; and in any event the banks would be
in a position to pay damages.
(viii) Finally Mr Thompson raised certain matters in his skeleton argument alleging a failure to make full and frank disclosure on the part of EMTV when seeking the various injunctions. Suffice it to say that we do not think that there was any material failure in the present case.
19. The Plaintiff's contentions can be
summarised as follows, although. Although a number of other
contentions were originally made however, these
gradually were addressed as the terms of the undertakings which the banks were
willing to offer changed. We will
therefore only deal with the remaining points:
(i)
the defendantsdefendant's
explanation as to the events of a the Board
meeting of Speed on 10th December, was not satisfactory. The text of the injunction was made
available before the close of the meeting; the meeting
should not have continued and even the conditional transfer was a technical
breach of the injunction because it amounted to the taking of a step in
relation to the matter. The
EMTV was therefore entitled to the injunctions in the present form in order to fully
to protect
itself in the light of what had occurred.
(ii) EMTV accepted that the FEB security Agreement
was not as yet under attack and that it could not act as agent for any
liquidator of FEB. The But the registration
of the FEB shares would cause or could cause prejudice to
EMTV. Thus firstlyFirstly
the four directors were appointed using in part the power of attorney under the
EMTV security agreement that . That was challenged if . If EMTV was right,
the appointment of the directors of Speed was invalid. Secondly, the directors were acting in
the interests of the banks rather than Speed,;
thus they were willing to register the transfer of shares without the
transferees signing a deed of adherence to the shareholder agreement between
EMTV and FEB and Speed as required by that Agreement.agreement. This would amount to a breach of
contract on the part of Speed.
Similarly the Directors directors had
not challenged the SLEC security agreement conferring a security interest over
Speed's shares in SLEC, despite the fact that that agreement was in
virtually identical form to the agreement in dispute in these proceedings.
(iii) The reasons given by the Banks as to banks for the
need to be registered shareholders in Speed was not made up.out. It was said that the racing teams, the
manufacturers and the others would not negotiate with them unless they were the
registered shareholders in Speed.
That contention was shown to be wrong by the uncontested evidence that
all parties were going to meet on the 11th December, but that this meeting had
been called off by Mr Bernie EcclestonEcclestone
for unconnected reasons. The Banksbanks
were not registered shareholders of Speed at that time; yet the other
parties were apparently willing to meet them.
(iv) The real reason that the Banks banks wished
to become registered shareholders in Speed was to keep the up- side
in the value of Formula 1. They had
made no secret of their intention to do this. Thus they had fixed the market value of
the FEB shares at $770,000,000. million. If a successful outcome to the current
Formula 1 issues was achieved the Banks banks would
hope to realise a much greater market value. They intended to keep the difference. This could prejudice EMTV in the
following way. If, say, the true
market value of the FEB shares is $1.6 billion then the banks have no claim
against EMTV's shares in Speed as they will be repaid in full. It is only because of the low assessed
market value of the FEB shares in Speed that there
was a claim or such a large claim against EMTV because FEB had not repaid the
amount in full.
(v) Advocate Robertson accepted that these matters
could be dealt with by an action for damages if the banks Banks did
not realise the true market value for the benefit of the debtor but it would be
much more difficult to unravel if the shares had in the meantime been
being registered in the names of the banks.Banks. It would also be very difficult to
calculate the loss because of the uncertainty of today's market value.
Decision.We come now to our decision.
1.
We can well understand why EMTV sought the second and third
injunctions. This was a fast moving
situation with large sums of money at stake. We think that it acted reasonably. However, we do not believe that the
defendant, or the directors, were in contempt of court. We have seen the minutes of the meeting
of Speed on the 10th December, which make it clear that any transfer is indeed
conditional upon its not being prohibited by the injunction. In retrospect it might have been
preferable to take no further action once the exact terms of the injunction had
been drawn to the Board's attention, but we are willing to accept that
there may have been some uncertainty.
20. We
are willing to rely upon undertaking given by financial institutions of the
standing of these banks Banks in the
knowledge that any breach of the undertaking would attract exactly the same
consequences as the breach of an injunction.
21. In our judgment, we must return
to first principles. EMTV is
challenging the security interest over its shares in Speed. It is clearly entitled to the protection
of those shares in the meantime. On
the face of it, a transfer and registration
of completely different shares formerly owned by FEB is not something which
EMTV is entitled to prevent. It is
for FEB to challenge any such transfer.
On the face of it , therefore,
one would not expect there to be grounds to prevent the transfer of shares
other than those in dispute in the litigation in question. However, we accept that,
if it can be shown that EMTV will or may suffer prejudice in the ownership of
its shares by reason of a transfer and registration of the FEB shares,
then the Court may intervene to prohibit such a transfer particularly if such prejudice
could not be remedied by an award in damages. To that extent we reject Advocate
Thompson's submission that EMTV simply lacks the locus standi to maintain the injunctions
and fails on that score alone.
22. So that brings us to the real issue. Has EMTV shown that it may suffer such prejudice
damage as a result of the registration
of the FEB shares? Had the banks
Banks not been willing to give
undertakings in their final form, we think that EMTV would have succeeded. But it It seems
to us that, in the light of the undertakings,
EMTV is now fully protected to the extent that it is entitled to
protection. It is currently a
minority shareholder with the protection, if the agreement in question remains
binding, of a shareholders agreement with the majority shareholder. That position will be maintained pending
trial as a result of the undertakings.
Furthermore the underlying interest of Speed in Formula 1 cannot be
disposed of, nor can the value of Speed's interest in SLEC be
diluted. As to the position of the
directors in Speed that remains capable of challenge, as does the question of
the shareholders agreement.
23. In the meantime, though, thought
by reason of the undertakings, the directors the Directors cannot do
anything to prejudice the value of EMTV's minority shareholding in
Speed. In short, given
the production of the undertakings in their present form, EMTV
has not made out a sufficient case for prohibiting the banksBank
from doing something which, on the face of it, they
are entitled to do. given the production of the
undertakings in their present form. We have not forgotten EMTV's
argument that the transfer will assist the banks'Banks'
alleged strategy to keep the up- side
in the value of the Formula 1 Group.
But, in our judgment the registration
in the share registry is not significant in this context. The significant event is that the
security trustee has sold the FEB shares for $770 million,,000,000
which has fixed what it alleges to be the market
value. The 1983Security
Interest Jersey Law undoubtedly envisages that a sale must be at
of market value and that the debtor is
entitled to any surplus over the amount of the debt. If the security trustee has sold the
shares at less than market value, the
liquidator of FEB may well have a claim in damages.
24. If such a sale has also caused loss to EMTV it
may be advised to bring a claim for damages against the security trustee and
the banks. But
the Banks.
The event that has crystallised such a claim is the sale of
the shares
at the FEB shares in Speed to the banks,Banks
not the formality of registering in the share register of
SpeedShare Register the consequences of
that sale. There is therefore no
reason to prohibit the registration.s. The mere registration will not affect
the legal position of EMTV. In any
event damages would appear to be an adequate remedy and the banksBanks
can be assumed to pay any award.
25. It is for the person who seeks an injunction to
justify its grant or continuation.
It follows that, strictly speaking, what
we have said is sufficient to require the discharge of the injunctions and
their replacement by the undertakings. However it is right that we should say
that we do recognise the importance of the forthcoming negotiations over
Formula 1. Whilst we think that,
for the reasons given by Advocate Robertson, the
significance of the banksBanks becoming
the registered shareholders in Speed may not be quite as great as they submit, we
. We fully
recognise the need for the banksBanks to be
seen to be in charge so that all the other parties may know whom
they are dealing with as majority shareholder of Speed and thereby indirectly
Formula 1.
26. We think therefore that the banks'Banks
wish to be registered as shareholders of Speed is
wholly understandable and should only be interfered with on strong
grounds. We repeat that we consider
EMTV acted reasonably in obtaining the injunctions;,
they also acted reasonably in resisting the application in the light of the
undertakings originally offered. It
was only once the form of the undertakings was clarified this morningover night
that it became increasingly difficult for EMTV to say that it would be
materially prejudiced prejudice in
its capacity as a minority shareholder simply by reason of the registration of
the transfers of the shares, the sale of the FEB shares
having taken place.
27. We therefore discharge injunctions 2.1 to 2.5,
inclusive, upon the undertakings given by the defendants and the Intervenors in
the form lodged with the Greffe.
The injunction originally in paragraph 1 has been replaced by an
undertaking in matching form and that undertaking remains in force. We direct that a copy of the undertakings
should,
and in due course, the Act should be
served on the company's secretaryCompany
Secretary of both Speed and SLEC to that they are aware of the
undertakings. They would therefore
be in contempt of court if they were to assist any other party to breach any of
those undertakings.
1.
We should add, for the sake of completion,
that we were this morning handed a copy of a letter of today's date from
the administratoradministration
of FEB to the defendant giving notice that he may wish to allege that the FEB
security agreement is invalid for the same technical reasons relied upon by
EMTV in relation to its security interest.
28. At the time of preparing this judgment we have
had no way of knowing what if any action FEB may take in connection with any
such claim, but, in our judgment, it is not a matter which enables us to act to
protect EMTV's interestslegitimate interest,
when we are satisfied that those interests are fully protected by the orders we
are making and the undertakings we are accepting.
(Discussion follows with Counsel.)
29. In case FEB decides to ask for Injunctions, it seems to me that it would be better that whoever is dealing with it that they know the position in relation to EMTV. But, as I indicated earlier I would very much hope that if FEB does bring proceedings it can be dealt with constructively by the bank, giving them appropriate undertakings so that the value of the assets will not be diminished and the shares will not be moved on elsewhere.
No Authorities