Reeves v Sprecher & Ors

Questions concerning a company’s internal management, including the right to bring derivative proceedings, will ordinarily be determined by the courts of the place of incorporation. That remains so where the shareholder lives in England, unless exceptional circumstances justify another forum. A party who participated in choosing an offshore incorporation cannot readily repudiate that choice when a dispute arises.

Summary judgment is inappropriate where the outcome depends on disputed facts, including the precise limits of the rule protecting employees or directors from personal liability for inducing their employer’s breach of contract. A threatened breach causing no loss does not ordinarily support a claim for damages, although injunctive relief may be available. Whether an agreement amounts to a partnership may depend on facts which cannot properly be resolved summarily.

Craig Reeves brought claims against Peter Sprecher, Bina Sanghvi and companies in the Platinum group arising from the breakdown of a business relationship and alleged attempts to remove him from the business and dilute his interest in an offshore company.

He sought permission to continue derivative claims on behalf of Platinum Trading Management Ltd, incorporated in Nevis, and permission to amend his pleadings concerning the company’s management, alleged breaches of contract, conspiracy, partnership and an account of payments and benefits. The defendants sought summary judgment or strike-out relief on several claims.

The principal issues were whether Nevis was the appropriate forum for disputes concerning the internal management of the company; whether the contractual and tort claims had a real prospect of success; whether the alleged threats had caused actionable loss; and whether the pleaded relationship might constitute a partnership.

1. The court refused permission to continue the derivative claims on behalf of Platinum Trading Management Ltd. Under Konameneni v Rolls Royce (India) Ltd [2002] 1 WLR 1269, the courts of the place of incorporation will almost invariably be the appropriate forum for issues concerning the existence of a shareholder’s right to sue on behalf of the company. Nevis had an established judicial system capable of providing a fair trial, and the relevant board decisions, share issues and company activities would occur there.

2. The claimant’s residence, the existence of related English claims and litigation expenditure were relevant but insufficient. The scale of the present litigation did not justify giving those factors the weight given to comparable considerations in The Spiliada [1987] 1 AC 460. The claimant had also participated in choosing Nevis as the place of incorporation and could not readily repudiate that choice when the relationship deteriorated.

3. The proposed amendments concerning the application of company assets and access to company information were refused for the same forum reason. The court also declined to determine whether a shareholder’s claim to restrain an improper share allotment was personal or derivative.

4. Summary judgment was entered on the pleaded claims concerning threatened dilution. No shares had been issued, the evidence of an actionable threat was thin, and no loss had been pleaded. The pressure allegedly exerted to procure a transfer of existing shares might amount to a breach of good faith, but it had caused no loss and no injunction was sought. That part of the claim was struck out under CPR 3.4(2)(a).

5. The court declined to give summary judgment on the inducing-breach and related conspiracy claim arising from the disciplinary process. The limits of the rule in Said v Butt [1920] 3 KB 497 were unsuitable for determination before the necessary factual findings. If the defendants knowingly participated in a process based on false allegations, questions of good faith and the scope of their authority would arise.

6. The conspiracy claim based solely on threatened contractual breaches was struck out or dismissed. The tort requires loss, although the court may in an appropriate case restrain a potential conspiracy by injunction. No such injunction was claimed here.

7. The proposed partnership amendment was allowed. The pleaded agreement might extend beyond a mere shareholders’ agreement, and whether the parties carried on business in common with a view to profit depended on facts for trial. An account amendment was also allowed because all payments and benefits, including the promissory note and use of the flat, were potentially relevant to the account.