Michael Bernand Worwood & Paul Edward Pike v Leisure Merchandising Services Ltd & 8 Ors (2001)
The claimant shareholders had no real prospect of establishing that the defendant chargee had exercised its right to take possession of the shares for the collateral purpose of forcing the claimant's company out of business.
Claimants' appeal from part of a decision of Master Bowman by which he gave summary judgment for the defendants on the ground that none of the claims in the action had any real prospect of success. The claimants were the only directors and shareholders of a company ('CCL') that supplied souvenirs and other goods as a concessionaire at venues such as the Royal Albert Hall. In 1992 the claimants borrowed substantial sums from the second defendant ('NMMI') and charged their shares in CCL to NMMI as security for the loans. In 1993 NMMI enforced its rights as chargee by transferring the shares to nominees for itself. The claimants were subsequently adjudicated bankrupt and could no longer act as directors of CCL. The nominees appointed new directors of CCL, who caused it to cease trading and to go into liquidation. The claimants received nothing out of the liquidation. In due course an associated company of NMMI ('LMS') began an essentially similar trade to that of CCL as a concessionaire at the Royal Albert Hall and elsewhere. The claimants contended that NMMI had exercised its rights as chargee for the improper and collateral purpose of forcing CCL out of business so that its trade could be taken over by LMS without payment. Having taken assignments of various causes of action from the liquidator of CCL and their trustee in bankruptcy they brought derivative and personal claims for losses sustained by them because of NMMI's alleged wrongdoing. NMMI contended that CCL was at all material times hopelessly insolvent and its business beyond rescue. The Master held that none of the claims enjoyed any real prospect of success. The claimants now appealed from the Master's decision insofar as it related to their personal claims.
(1) There was no evidence that the exercise of NMMI's rights as chargee had been motivated by or was a component of the improper purpose which the claimants alleged. All the claimants' complaints related to events that had taken place thereafter. (2) Even if the court had thought that there was a case to be answered on liability the claimants had no real prospect of success regarding quantum, in that the value of their shares, such as it was, could not possibly exceed the amount currently due to NMMI under the loans and by way of costs.