In Re Coroin Limited

This was a first instance Companies Court hearing of a s.994 petition and a tort claim concerning control of the Maybourne hotels group. The petitioner alleged (i) breaches of pre-emption provisions in the shareholders' agreement and the articles, (ii) a binding oral sale agreement reached on 15 January 2011 between Mr Quinlan and the Barclays, (iii) enforceability of charges over Mr Quinlan's shares which would trigger pre-emption rights, and (iv) breaches of directors' duties (including alleged shadow directorship) together with an associated tort claim. The court held that:

• the alleged oral agreement of 15 January 2011 was not established and the only binding agreement of that period was the written exclusivity agreement and later the 17 February 2011 conditional sale;
• the relevant charges over Mr Quinlan’s shares had not become enforceable and, in any event, transfers contemplated by the 17 February 2011 agreement were expressly conditional on compliance with the shareholders' pre-emption provisions;
• the petitioner failed to show any conduct of the company’s affairs or acts or omissions of the company which were unfairly prejudicial to him; and
• most allegations of breaches of directors’ duties failed on the evidence; the court found only that two directors should have disclosed a potential conflict arising from negotiations by a Barclay vehicle to acquire the NAMA debt, but that non-disclosure caused no loss or prejudice to the petitioner.

The petition concerned an intra-shareholder contest for control of Coroin Limited, the holding company of Claridge’s, The Connaught and The Berkeley. The petitioner, Mr Patrick McKillen (36.2% shareholder), alleged that Sir David and Sir Frederick Barclay and companies associated with them employed unlawful and unfair means to secure control, principally by purchases and arrangements concerning the 24.78% Misland stake and rights in shares owned or charged to Derek Quinlan (another shareholder in severe financial difficulty).

The litigation comprised:

• a petition under s.994 Companies Act 2006 seeking remedies including an order for the sale of Barclay-associated shares to the petitioner; and
• a claim for tortious conspiracy and inducing breach of contract.

Main issues framed and decided included:

• whether pre-emption provisions were triggered by sales/arrangements involving Misland, Mr Quinlan and others;
• whether an oral agreement was made on 15 January 2011 (allegedly obliging Mr Quinlan to transfer rights over his shares to the Barclays);
• whether charges over Mr Quinlan’s shares had become enforceable so as to empower the directors to treat the shares as offered for sale under clause 6 of the shareholders agreement;
• whether the petitioner could have financed purchase of any shares offered under pre-emption; and
• whether directors appointed by the Barclays breached duties (including whether Sir David was a shadow director) and whether any such breach caused unfair prejudice.

The judge’s reasoning (chronological factual findings followed by legal analysis) identified that the hotels’ enterprise value was high but the group was materially over‑geared and the single practical issue was how to reduce debt held by NAMA. The court made extensive factual findings: the only binding agreements in the January–February 2011 period were (a) the written exclusivity agreement signed on 15 January 2011 and (b) the tripartite agreement with Al Mirqab and the Barclays of 12 February 2011; the asserted secret oral sale on 15 January was not proved. Legal conclusions included that (i) clause 6 pre-emption provisions require a proprietary or equitable interest to be transferred before they are triggered and conditional sale agreements expressly conditioned on compliance with pre-emption do not themselves trigger it; (ii) the relevant charges were not in fact enforceable on the evidence and contractual wording; (iii) directors’ alleged breaches largely did not succeed on the evidence; and (iv) the single finding of non-disclosure of a conflict (the Barclays’ vehicle negotiating to buy NAMA debt) caused no prejudice. The petition and the tort claim therefore failed and were dismissed.

The petition under section 994 and the related tort claim are dismissed. The court found no binding secret agreement on 15 January 2011, the pre-emption provisions were not triggered (charges over Mr Quinlan’s shares were not enforceable and conditional sale agreements were expressly conditional on compliance with pre-emption), and allegations of directors’ breaches were not made out except for non-disclosure of a potential conflict which caused no prejudice. Accordingly the petitioner has not established unfairly prejudicial conduct and the claims fail.