Blue Side Services SA & Ors v BMF Holdings Limited

The court struck out a Part 8 claim brought by three Marshall Islands companies as legally unintelligible and hopeless and, in any event, an abuse of process. The claim depended on (i) a novel assertion that so-called "Ultimate Account Holders" can direct a shareholder of securitisation issuers; (ii) a contention that forfeiture and sale of partly paid shares in July 2020 vested title in Highbury and subsequently in the Claimants; and (iii) that purported extraordinary general meetings on 27 January 2022 validly changed the boards of the issuers. The judge held that the contractual and trust structure of the securitisations does not permit the implied trust or fiduciary relationship alleged; that earlier findings from the February 2021 judgment established that the purported directors and Highbury had no lawful title to the shares; and that Articles 13(B) and 23(C) did not validate steps taken by corporate interlopers. The claim was dismissed and indemnity costs awarded for wholly unmeritorious conduct.

The claimants, three Marshall Islands companies, issued a Part 8 claim seeking declarations and injunctive relief that they (as "Ultimate Account Holders") held the ultimate beneficial interest in notes and thus could control the Defendant shareholder's voting rights and direct the removal and appointment of directors of four securitisation issuers. The claim alleged (i) that the Defendant had forfeited partly paid shares in July 2020 which were sold to Highbury and thereafter part-transferred to the Claimants; (ii) that the Claimants collectively held a majority of issued share capital; and (iii) that extraordinary general meetings on 27 January 2022 lawfully removed the incumbent nominee directors and appointed new directors.

The Defendant applied under CPR 3.4(2) and the court's inherent jurisdiction to strike out the claim on grounds that it was legally incoherent and an abuse of process and sought indemnity costs. The court considered: whether the alleged status of "Ultimate Account Holders" could justify relating through the securitisation documentation to the Defendant as shareholder; whether the July 2020 forfeiture and transfers could have conferred title given earlier findings; and whether Articles of Association (notably Articles 13(B) and 23(C), and Articles 70 and 71) could validate the steps taken.

• Issues framed: (i) are the Claimants entitled as Ultimate Account Holders to direct the Defendant shareholder; (ii) did Highbury obtain valid title to the shares in July 2020 and could that title pass to the Claimants; (iii) were the resolutions of 27 January 2022 lawful; (iv) whether failure to comply with the court's earlier 19 November 2021 order and related conduct amounted to abuse of process.

The judge reasoned that the securitisation contractual architecture and trust deeds define rights of Noteholders and trustees, and there was no tenable basis to imply fiduciary or trust duties onto the Defendant shareholder or to create novel rights for Ultimate Account Holders to control the shareholder. The February 2021 judgment had already declared that the purported directors were interlopers and that Highbury had never been a lawful shareholder; Articles 13(B) and 23(C) operate in the context of acts by the board and do not validate steps taken by persons with no corporate authority. The alleged EGMs and the 28 January 2022 direction were therefore nullities. The court also found serious concerns about identity, service addresses and the use of others' names, and concluded that the proceedings were abusive. The Part 8 claim was dismissed and indemnity costs awarded; the judge certified that the claim and the adjournment application were totally without merit.

First instance: The Part 8 claim is dismissed. The court concluded the claim was legally unintelligible and hopeless because (i) the Claimants could not show any lawful basis for a trust or fiduciary interest enabling "Ultimate Account Holders" to direct the Defendant shareholder; (ii) earlier findings established that the purported directors and Highbury never had lawful title so any transfers were nullities and Articles 13(B) and 23(C) could not validate acts of corporate interlopers; and (iii) the purported EGMs and investor direction were therefore legal nullities. The claim was also an abuse of process. Indemnity costs were ordered and the claim and adjournment application were certified as totally without merit.