Speed Investments Ltd & Anor v Formula One Holdings Ltd & Anor

Where interdependent corporate documents are executed as part of one transaction, they should be construed together and by reference to one another. A shareholders’ agreement may itself designate directors, and a merely formal departure from the appointment procedure will not necessarily invalidate the appointment where the persons whose consent is required have clearly assented. A party cannot use alleged lack of personal consent to defeat a designation which the governing documents validly make. Rectification requires convincing proof of a prior, outwardly manifested mutual intention and of the precise correction required. Summary judgment is appropriate where the opposing case is more than fanciful but has no real prospect of success.

Speed Investments and SLEC Holdings sought declarations concerning the composition of the board of Formula One Holdings. The dispute turned principally on whether four directors listed as B directors in Part 2 of Schedule 1 to a shareholders’ agreement became B directors when new constitutional documents took effect on 12 May 2000, or remained ordinary directors.

The answer affected the validity of later appointments made by Bambino Holdings and the validity of appointments made by SLEC. Speed applied for summary judgment under CPR 24.2(a)(ii). Bambino argued that the issue required a trial and that the agreement should, if necessary, be rectified.

1. Summary judgment. The claim succeeded. Under Civil Procedure Rules 1998, r 24.2(a)(ii), the question was whether Bambino had a real prospect of successfully defending the claim. Its case had to be better than merely arguable, although the court was not conducting a mini-trial. The evidence and documents made the issue sufficiently clear for summary determination.

2. Construction of the documents. The shareholders’ agreement, the new Articles of Association of FOH and the new Articles of SLEC were interdependent and had to be construed together. The new structure required A and B directors to exist from the outset because the quorum provisions required one of each class. The definitions of the director categories expressly contemplated appointment under the agreement itself as well as under the Articles.

3. Designation of directors. Part 2 of Schedule 1 validly designated the listed directors as A or B directors. The designation applied equally to the four B directors, including Mr Ecclestone and Mr Mullens. Their personal consent was unnecessary because they were already directors; B directors remained directors of the company and were not thereby made representatives of Bambino.

4. Formalities and estoppel. Alternatively, any failure to comply literally with the written appointment procedure in Article 14(A) was overcome by the Duomatic principle. The agreement was signed by the relevant companies and shareholders, and sending it to FOH’s registered office would have been a purely formal step. The judge also considered that Bambino would have been estopped from denying the designation, but the decision rested on construction.

5. Rectification. A rectification claim would require convincing proof of a prior, outwardly manifested mutual intention, a mistake causing the document to depart from that intention, and the precise wording required for correction. Bambino’s evidence did not approach that standard and was contradicted by the contemporaneous drafting evidence. The proposed counterclaim therefore had no real prospect of success.

6. Declarations were made in the terms sought by Speed. Mr Ecclestone and Mr Mullens were B directors, the Argands’ purported appointments were invalid, and Mr Diederichs and Mr Mann were validly appointed as ordinary directors.