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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Representation of Ferguson and Anor re AMWS Limited [2023] JRC 250 (14 December 2023) URL: http://www.bailii.org/je/cases/UR/2023/2023_250.html Cite as: [2023] JRC 250 |
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Companies - application for the winding up of a company - decision
Before : |
A. R. Binnington, Esq., Commissioner, and Jurats Averty and Entwistle |
Between |
(1) Tara Ferguson (2) Alia Haskouri |
Representors |
And |
(1) Bespoke Limited (2) Aston Martin Lagonda Limited |
Respondents |
IN THE MATTER OF THE REPRESENTATION OF TARA FERGUSON AND ALIA HASKOURI
AND IN THE MATTER OF AMWS LIMITED
AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991
Advocate J. D. Garrood for the Representors.
Advocate J. W. Angus for the First Respondent.
Advocate J. D. Kelleher for the Second Respondent.
judgment
the COMMISSIONER:
1. The Court sat on 8 and 9 November 2023 to hear an application by the Representors for the winding-up of a Jersey registered company, AMWS Limited ("the Company") pursuant to Article 155 of the Companies (Jersey) Law 1991 ("the 1991 Law"). The evidence of each party was given by way of affidavit and the deponents were not cross-examined. We reserved our decision, which we now give. The application was supported by the First Respondent and opposed by the Second Respondent.
2. The Company is a joint venture company incorporated for the purpose of facilitating the conduct of a business of an authorised dealer and repairer of Aston Martin cars, as well as operator of a business known as the Aston Martin Heritage business, through a wholly owned UK subsidiary, AMW Limited ("AMW"). The Company has an authorised share capital of £10,000 divided into shares of £1 each. It has two shareholders, the English registered company, Aston Martin Lagonda Limited ("AML") and the Jersey registered company Bespoke Limited ("Bespoke"), each of which holds 500 ordinary shares representing 50% each of the issued shares in the Company. AML is in turn owned by Aston Martin Lagonda Global Holdings PLC, whilst Bespoke is a wholly-owned subsidiary of Pegasus Automotive Group Holding Company W.L.L. ("the Pegasus Automotive Group") which is in turn ultimately owned by the Al Roumi Group. The Pegasus Automotive Group are official dealers of Aston Martin, Rolls Royce, and Koenigsegg vehicles in the UAE, Kuwait, Switzerland and the United Kingdom.
3. The Company has two professional directors, namely the Representors, who are employed by the JTC Group, a global professional services business. The First Representor is also a director on the board of Bespoke but we were told by the Representors that, for the purposes of maintaining independence and impartiality as a director of the Company, she is not involved in any decision-making at Bespoke that conflicts with her separate obligations as a director of the Company.
4. Aston Martin as a brand is well-known as a British luxury and performance car producer. The precise corporate structure has changed over time.
5. In 2007, the Ford Motor Company sold Aston Martin to a consortium of two international investment houses, Investment Dar and Adeem Investment. On 19 July 2007, the long-established Aston Martin plant in Newport Pagnell rolled out the last of the nearly 13,000 cars made there since 1955, with production then being concentrated at their facility at Gaydon, Warwickshire. The Newport Pagnell plant was then converted and became the home of the Aston Martin Works classic car department, focusing on heritage sales, service, spares and restoration operations.
6. Following discussions between the CEO of Aston Martin and the majority shareholders, a decision was made to separate the Aston Martin Works business, then a department of Aston Martin operating out of the Newport Pagnell site, into a standalone company. AMW was then incorporated in December 2009.
7. In around 2011, a new business plan for AMW sought to expand the business, beyond the workshop function, into a full dealership. Pegasus Automotive Group, with its own established international dealership network, was invited to invest cash into the AMW business in return for a controlling interest. Accordingly, on 25 April 2011 a business sale agreement was entered between AML, AMW and the Company in which AMW would acquire the "works business" and related assets from AML. AMW issued 100 ordinary shares to the Company. The Company issued 40% of its shares to AML and the remaining 60% of the shares were issued to Bespoke for an aggregate price of £6 million.
8. In 2012, Investment Dar sold a 37.5% stake in Aston Martin to the Italian private equity fund, Investindustrial. As part of a streamlining of the ownership structure of the Aston Martin business, at the request of Investindustrial (then owning 39% in AML), the Al Roumi Group agreed to assist the restructure by arranging for the sale of a 10% stake in the Company to AML for a nominal consideration of £100. Following the sale of the 10% stake, AML and Bespoke became equal 50% shareholders in the Company.
9. The board of directors of AMW is comprised of six directors, three being appointed by AML and three being appointed by Bespoke. This appears to be by way of an informal agreement between AML and Bespoke, there being no provision in AMW's Articles requiring this. We should also note that despite the structure being in effect a joint venture between AML and Bespoke we have seen no evidence of a formal joint venture agreement between the shareholders in the Company.
10. On 7 December 2016, AML and AMW entered into an agreement for the production of the first of what were known as the "continuation models", being new vehicles constructed in accordance with historic designs. Under the agreement, AMW was engaged to engineer, build and sell 26 limited edition vehicles to the design specification of the 1963 Aston Martin DB4 GT.
11. Following support for the project by both AML and Bespoke, in 2017/2018, 26 of the first limited edition production of Aston Martin DB4 GT (1963 model) were made, modelled on an original master DB4 GT taken from the private collection of Mr Al Roumi. These reproduction vehicles were produced by AMW and used a chassis supplied under contract by RML Group. That business turned out to be highly profitable. In the case of the Zagato continuation model, this had a chassis supplied by AML and was offered to purchasers of new Aston Martin vehicles and therefore came as part of a pair.
12. By 2017, Aston Martin returned its first annual pre-tax profit since 2010. In an AMW board meeting held on 20 April 2018, an executive committee was established to direct future proposals for continuation models. Tabled at the meeting was a new operational model for AMW, which set out the business plan for new cars, classic cars and continuation models. The business plan provided for the DB4 GT to be the 2017/2018 continuation model, the DB4 GT Zagato as the 2019 continuation model and the DB5 as the notional 2020 continuation model.
13. In October 2018, Aston Martin made its debut on the London Stock Exchange as Aston Martin Lagonda Global Holdings PLC. Shortly thereafter in mid-2019, Aston Martin was warning of changing market conditions leading to a half year loss.
14. The Representors contend that as at the date of incorporation of the Company, it was the intention of both Bespoke and AML that the business of AMW would be run for their mutual benefit, and that the net profits of AMW would be distributed up to the Company by AMW and thereafter paid to AML and Bespoke by way of equal dividends.
15. The Company and AMW are both solvent and, prior to the breakdown of the relationship between Bespoke and AML, the business of AMW was conducted very profitably.
16. The Company has no source of income other than dividends from AMW, but has no creditors, save for professional fees. By reference to the historical conduct of AML and Bespoke, the Representors, as directors of the Company, assert that they have had a genuine and legitimate expectation that any liabilities of the Company would be met by AML and Bespoke, either as shareholders or on their own accounts.
17. There appears to be a consensus between the parties that the Company was formed to hold the shares of AMW for the purposes of acting as a "buffer" (a term used by each of the parties but not formally defined) between the Aston Martin and the Al Roumi Group investors.
18. In February 2021, Bespoke raised a series of complaints against AML in relation to the operation of AMW, including allegations of misappropriation, breach of duty and a failure in general management. Bespoke alleged that unilateral adjustments and/or re-allocations of revenue and/or profits of AMW, had been made by AML and substantial unauthorised cash transfers had been made from AMW to AML, at the direction of AML, which were asserted to have materially affected AMW's cash flow and financial position. On 1 March 2021, AML's director of Product Planning & Strategy and secretary of the Product Committee, Karen Gibson, wrote to AMW to confirm that "after careful deliberation the AML PC has decided that no new Continuation models are foreseen in the current planning period".
19. One of Bespoke's principal complaints was in relation to the appropriate profit split between AML and AMW (and as a consequence the amount of profit to be distributed to the Company and its equal shareholders). That complaint related to how much of the sales price should be allocated to the continuation model and the modern equivalent Aston Martin model where these cars were sold as a pair. The 2019 AMW accounts record a profit of £17.6 million on sales of the DB4GT Zagato. Bespoke asserted that the profit on the DB4GT Zagato programme should be £36.39m.
20. The Representors say that the lack of any resolution of these complaints led directly and indirectly to:
(i) the ending of the Aston Martin continuation programme of AMW and the consequent loss of substantial revenue earned by AMW;
(ii) the risk of a significant reduction in the market value of AMW;
(iii) the failure of the Board of AMW to sign the 2020 financial statements and all later financial statements, and a general breakdown in the business relationship between AML and Bespoke.
21. AMW is now in breach, and continues to be in breach, of its duties to file its accounts with Companies House. Attempts to reach an agreement at board level of AMW on filing qualified accounts have failed. This impasse in relation to filing the 2020 and 2021 accounts has led to AMW missing a further deadline to file its 2022 accounts by 30 September 2023. By email dated 1 November 2023, AMW was notified by Companies House that if no progress was made by the end of December 2023 to deliver the outstanding documents, they would commence dissolution action to remove the company from the Companies House Register.
22. Bespoke had first drawn the attention of the Company's directors to its complaints as to the conduct of the affairs of AMW and the interactions between AML and AMW, in particular in respect of accounting matters, in January 2022. The directors of the Company said that they were unable to make any informed assessment as to the veracity and accuracy of the complaints by Bespoke, and sought to engage a professional forensic accountancy firm, Teneo Financial Advisory Limited (formerly PwC Advisory) ("Teneo"), to review the accounts of AMW. The appointment of Teneo was delayed in order to give AML and Bespoke time to resolve their dispute by engaging in alternative dispute resolution ("ADR"). Initial settlement discussions failed, and a subsequent mediation proposed by AML also failed. These processes delayed the appointment of an expert by the Company.
23. In an email to the First Representor of 4 May 2022, Mr Michael Marecki ("Mr Marecki"), Vice President, General Counsel and Company Secretary at AML, made it clear that he was unhappy with the proposed scope of the expert appointment. He was also adamant that the Company's involvement in resolving the accounts issue was not welcome. The suggestion from Mr Marecki was to resolve the accounts issue directly between the AML and Bespoke appointed directors of AMW by preparing an appropriately worded letter of representation to the auditors, EY. Mr Marecki further noted "any proposed wording relating to the accounts is a matter between the AML and Bespoke appointed directors on the Board of AMW and does not require any input from JTC". Further, Mr Marecki complained that it "now appears to have morphed into an all-encompassing enquiry regarding the merits of Bespoke's claims".
24. In an email of 6 May 2022 to the First Representor, Mr Abdullah Zidan ("Mr Zidan"), a Bespoke-appointed director of AMW, explained that he did not agree that a letter of representation would resolve the accounts issue. Mr Zidan also made it clear that he did not agree with an analysis made by EY in relation to the application of accounting principles relevant to resolving the accounts issue. In relation to the appointment of the expert, Mr Zidan explained "before the Bespoke-appointed directors of AMW are prepared to approve the AMW financial accounts for the year ending 31 December 2020 they will require either the AMW management team, or alternatively AML, to provide them with the information set out in the blank table contained in the email I sent to Mat Davey on 24 January 2022".
25. By email dated 12 May 2022, the First Representor responded to the concerns of Mr Marecki and noted that she had no objection to him setting out in detail the issues to be investigated by Teneo. She also noted that the primary aim of the expert was the gathering of independent information in relation to the material allegations that might affect the value of its shares in AMW.
26. On 17 May 2022, Mr Marecki proposed a mediation between Bespoke and AML. In relation to the accounts issue, Mr Marecki also made it clear in his email of that date, that he did not think that the expert process was necessary to resolve the issue.
27. The First Representor subsequently sought the views of Mr Marecki on proceeding with the appointment of Teneo and, on 1 June 2022, he stated that the mediation was intended to replace the idea of appointing an expert. In relation to the accounts issue, Mr Marecki noted that he had separately emailed Mr Zidan to resolve the issue "as between the AMW directors, without involving JTC at every turn".
28. By an email dated 13 June 2022, the First Representor stated that the view of the Company on the accounts issue was that all material revenues and expenses should be properly recorded in the accounts of AMW to ensure that they represented a true and fair view. She also noted the opposing views of AML and Bespoke on the issue, and suggested that the appointment of an expert and subsequent report would be instrumental in resolving any issue that was the subject of the mediation.
29. On 24 June 2022, Mr Marecki again made it clear that an expert appointment was, in his view, not necessary to resolve the accounts issue, and also asserted that it was a bilateral issue to be determined by AML and Bespoke. By the end of June, it was apparent to the First Representor that the mediation was not proceeding with sufficient urgency and accordingly she wrote to the parties to confirm that the appointment of Teneo would proceed.
30. The response from Mr Marecki on 30 June 2022 made reference to broader issues between AML and the Al Roumi Group being the subject of mediation as the reason the Company had not been invited to participate. His email also set out further information on the accounts dispute and also reiterated that the appointment of an expert would not have a purpose. On 15 July 2022, Mr Marecki confirmed his view that an expert report was not required to resolve the accounts issue. Mr Marecki at this time did not set out proposed amendments to the scope of the appointment of Teneo to focus on the accounts issue.
31. Teneo were appointed on 1 August 2022, being two and half months after the mediation was proposed by Mr Marecki on 17 May 2022, and seven months after the First Representor's initial proposal on 31 January 2022 for the appointment of an expert. In response to an email that the First Representor sent to Bespoke and AML on 9 August 2022, confirming the appointment of Teneo and the scope of their appointment, on 10 August 2022 Mr Marecki asserted that the purpose of the appointment of the expert had not been addressed and again made the point that the expert process was not required on the accounts issue.
32. AML had asserted that the misappropriation allegation by Bespoke could be explained by the way revenue from sales of the vehicles had been split, being sold in pairs of continuation model and current model. The First Representor was of the view that it was not unreasonable to suggest that if this was correct then at least part of the dispute should have been easily resolved by a review of the sales documentation, particularly as the number of cars produced and sold were very limited. However, the relevant raw data was not made available by AML.
33. In relation to the inter-company loans, AML contended that the inter-company loans were not cash transfers, but rather the balances arose from AML collecting receipts from sales of vehicles which had yet to be reimbursed to AMW at the time of producing the balance sheet. Again, the First Representor expressed the view that it was not unreasonable to suggest that this issue should have been readily resolved by a review of the relevant accounts for AML. However, to conduct an independent audit of the AML sales information would require AML's consent for access to their confidential and proprietary information, which had not been granted.
34. In relation to the alleged loss in value of AMW, AML suggested the valuation of AMW outlined by Bespoke was too high, but required information as to how the valuation was determined before responding.
35. Unfortunately, in the absence of full disclosure from AML, a final report could not be issued. It had been expected by the Representors that if the Teneo report rejected Bespoke's complaints, the status quo would prevail. However, if the Teneo report revealed culpable conduct by AML in the management of AMW, the Company could take action, whether to preserve the value of its assets or otherwise. As Teneo could not provide a final report, the Representors, as directors of the Company, found themselves unable to make an informed assessment as to Bespoke's complaints, and in their view the Company could no longer operate as a "buffer".
36. The Representors now say that the Company is deadlocked in the sense that its shareholders are unable to reach any agreement, each having lost trust and confidence in the other.
37. The Representors further say that they are unable to make any decision in respect of the future conduct of the affairs of the Company's wholly owned subsidiary and its business and, in their view, there continues to be a risk of potentially serious misconduct having taken place, to the financial detriment of the Company and its shareholders.
38. Article 155 of the Companies (Jersey) Law 1991 (the "Law") provides:
39. In the Royal Court decision in Financial Technology Ventures (II) Q LP & Ors v ETFS Capital Limited & Graham Tuckwell [2021] JRC 025, the Court recognised that there is no exhaustive list of circumstances in which a winding up order could be made on a just and equitable basis under Article 155(1)(a) of the Law, although it did acknowledge (at paragraph 49 of the judgment) the following traditional categories set out in Hollington on Shareholders' Rights (9th Edition) at 10-11:
40. It is accepted by the parties that the Representors are relying only on categories (1), (2) and (5).
41. Although the above categories are a useful guide to cases involving a 'just and equitable' winding up, the Royal Court has acknowledged that the phrase is to be given a flexible meaning and that it would depend on the circumstances of each individual case. Thus, in its decision in Re Green Equity Limited [2013] JRC 169A, the Court, referring to the decision in Jean v Murfitt [1996] JRC 237 said (at paragraph 10):
42. The breadth of the remedy is perhaps best illustrated by an oft-cited passage from the judgment of Lord Wilberforce in Ebrahimi v Westbourne Galleries Limited and Others [1973] AC 360, where his Lordship said, at page 379:
43. The issues for determination identified by the parties included:
(i) whether there is deadlock within the sense described by Lord Briggs in Chu v Lau [2020] UKPC 24, that is either:
(a) a functional deadlock, in which there is an inability of members to co-operate in the management of a company's affairs that leads to an inability of the company to function at board or shareholder level; or
(b) where a company is a corporate quasi-partnership, in which an irretrievable breakdown in trust and confidence between participating members in an analogy with the same grounds as would justify the dissolution of a true partnership; or
(ii) whether the Company has lost its substratum.
44. The First Respondent added a third issue for determination, namely whether, should the Court conclude that the board of the Company is deadlocked and/or that the Company has lost its substratum, there are nonetheless grounds for withholding the relief sought by the Representors.
45. The Second Respondent added a fourth issue for determination, namely whether on an application for winding up on a just and equitable basis, the Court will have regard to whether an order for winding up is necessary, or whether there is an alternative course.
46. It is clear that loss of substratum as a ground for the winding up of a company on the just and equitable basis requires something more than a mere difficulty or even impossibility in achieving part of its objects. The issue must relate to a matter which is fundamental to its existence. This requirement was considered by the Royal Court in Re Leveraged Income Fund Limited [2002] JRC 209 where Birt, Deputy Bailiff, noted (at paragraph 11):
47. In EVIC v Greater Europe [2012] JRC 146, Commissioner Clyde-Smith stated (at paragraph 73):
48. In the present case, the Company was not established to carry out a business as such, its function being, as we discuss further below, to act as a buffer between the shareholders or between the shareholders and AMW. The Representors say that as a result of the breakdown in the relationship between AML and Bespoke the Company can no longer fulfil that role.
49. The issue of what constitutes a deadlock for the purposes of winding up on the just and equitable ground was considered in Bisson v Barker [2008] JRC 193. In Bisson, the Court (J A Clyde-Smith, Commissioner) cited with approval (at para 16) commentary in Applications to Wind up Companies, 2nd edition, by Derek French at paragraph 7.10.2, the relevant passage cited by the Court reading as follows:
50. In the section cited by the Court, the author refers to three further judicial attempts at defining deadlock:
51. Advocate Kelleher, for the Second Respondent, suggested that the question for the Court is whether there is a deadlock in relation to the management of the company that is sought to be wound up (i.e. the "subject company"). Disputes that have arisen in relation to another company were, he said, not relevant where the winding up is sought on the ground of functional deadlock.
52. In support of this contention, he referred us to paragraph 23 of the Privy Council decision (on appeal from the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands)) in Chu v Lau [2020] UKPC 24, in which Lord Briggs explained that:
53. There is clearly no deadlock as between the directors of the Company.
54. In relation to the board of AMW, it would appear that they are capable of taking some decisions, examples of which are: a) in late 2022, agreeing a way forward in relation to consortium relief for AMW, despite some initial misgivings by Bespoke; b) on 29 March 2023, approving the 2023 budget and c) in August 2023, agreeing to extend the lease for AMW's Newport Pagnell site.
55. Where, however, the directors of AMW are unable to agree is in relation to the signing and filing of the accounts for 2020, 2021 and 2022. This is a matter of the utmost seriousness given that Companies House has indicated that if the accounts are not filed by 31 December 2023, then they will commence dissolution action to remove AMW from the Companies House Register.
56. AML submitted that whilst a breakdown of trust and confidence may justify a winding up this would only be the case where the company in question was a quasi-partnership.
57. They referred to Chu v Lau (supra) where Lord Briggs explained (at [15]):
58. AML further pointed out that clearly not all companies may be characterised as quasi-partnerships. They referred us to the passage from the judgment of Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd (supra) to which we have already referred which, they submitted, suggested that a loss of trust and confidence will only be a basis for winding up a company on the just and equitable ground where there are special circumstances which justify the court in super-imposing equitable principles on to the shareholders' business relationship.
59. In our view there are a number of factors which could support the structure being regarded as a corporate quasi-partnership:
(i) The genesis of the relationship and, in particular, the fact that Bespoke was prepared to relinquish for £100 10% of the shares in the Company that had given it a majority shareholding.
(ii) The lack of any shareholders' agreement or bespoke articles for the resolution of disputes at either the Company level or in AMW.
(iii) The (apparently informal) agreement that at the AMW level each party would nominate three directors, which had the potential to result in an impasse if the two parties did not agree.
60. These factors tend to suggest that the relationship at its outset was based on a significant degree of trust and confidence such as one might see in a partnership between individuals. They would also support the Representors' contention that the Company was intended to be more than a mere conduit for dividends, being a dispute resolution mechanism relying on the decisions of independent professional (and regulated) directors to resolve any issues that might arise in the underlying trading entity. This latter point leads us to consider the role of the Company within the structure and in particular its role as a "buffer".
61. The parties have made a number of references to the Company acting as a "buffer", albeit without any precise definition of what this means. Examples include:
(i) "There is a consensus between the parties that the Company was formed to hold the shares of AMW for the purposes of acting as a buffer between Aston Martin and the Al Roumi group of investors." (Representors' skeleton argument, paragraph 36);
(ii) "The Company is no longer able to act as a buffer between its shareholders." (First Representor's first affidavit, paragraph 112);
(iii) "The basic, core function of AMWS as a holding company was intended to be, and is, as follows: i) to act as an intermediary between its shareholders (the Joint Venture partners, AML and Bespoke); and ii) to act as a buffer between the shareholders and the day-to-day operation of AMW." (First Respondent's skeleton argument, paragraph 2.5(d));
(iv) "One of the core functions of AMWS is to resolve disputes between its shareholders, Bespoke and AML, in relation to its underlying company, AMW. All parties agree that AMWS acts as a buffer or intermediary between its shareholders and AMW." (First Respondent's skeleton argument, paragraph 3.4);
(v) "The Company's purpose was to act as a buffer between the shareholders and AMW." (Second affidavit of Abdullah Zidan, paragraph 2.2);
(vi) "It appears that the management of AMWS continues to operate, and act as a "buffer" between AMW and the shareholders (which is the purpose for which AMWS was established, on the evidence of both Ms Ferguson and Mr Marecki)." (Second Respondent's skeleton argument, paragraph 49);
(vii) "In the response that I sent on behalf of AML on 26 January 2022 I explained that the Company should take no actions and should allow AML and Bespoke to engage constructively with each other to resolve the issue. This was in keeping with the company's purpose to act as a buffer between the shareholders and AMW." (First affidavit of Michael Marecki, paragraph 37).
62. It is not uncommon for a Jersey company to be inserted in a structure between an operating company and its ultimate owners. This may, for example, provide a degree of confidentiality in respect of the ownership of the operating company, although this could be achieved by a corporate entity acting simply as a nominee shareholder, rather than holding the shares on its own balance sheet, as is the case with the Company. The structure that was created, with the Company holding the shares of AMW on its own balance sheet, suggests that the directors of the Company were to have a role to play other than merely acting as nominees for the shareholders. This is supported by some of the comments to which we have referred. In addition, the interposition of the Company was likely to prevent either of the ultimate shareholders bringing an application for a just and equitable winding up of AMW and would at the very least hinder any attempt by one of the shareholders to bring a claim for unfair prejudice in respect of their interest in AMW. This may have acted as an incentive to the shareholders to use the Company to resolve any disagreements that might arise between them. However, the consequence of this would be that the directors of the Company could not ignore issues arising in the management of AMW that might negatively impact the value of the Company's shareholding in it.
63. We have already referred to the allegations that have been made by Bespoke against AML which include allegations of misappropriation, breach of duty and a failure in general management. The Company's attempt to investigate these allegations failed, it would appear, principally as a result of AML's refusal to provide information that AML say is confidential and proprietary to AML. This in turn has led the Bespoke directors to refuse to approve the accounts of AMW without an appropriately worded qualification. That requirement has resulted in protracted correspondence between Bespoke and AML in relation to the wording.
64. Advocate Kelleher took us through the relevant exchanges at some length and suggested that whilst AML had made genuine efforts to agree the wording, the efforts of Bespoke were "feigned" rather than genuine. He also suggested that the various forms of wording suggested by Bespoke were tendentious and aggressive in the light of the fact that the accounts would be public documents.
65. It is not for this Court to determine the issues that have arisen within AMW. It is apparent to us that had AML been more cooperative with the Representors and the Teneo investigation then the dispute might well have been capable of resolution. Equally, we have some sympathy with the suggestion by the Second Respondent that the First Respondent's demands made it unlikely that agreement would be reached in relation to the terms of a disclosure notice in the accounts. Wherever the fault may lie, these are symptoms of a breakdown of trust and confidence between the ultimate shareholders.
66. The present case is somewhat unusual in that, when considering whether a just and equitable winding up is to be ordered, the Courts have in the main been dealing with issues that have arisen either within the board of the company which is sought to be wound up or at the level of its shareholders. Here, the issue has arisen in an underlying company, although it reflects a breakdown in the relationship between the Company's shareholders.
67. We have reached the following conclusions in relation to those of the traditional categories referred to in Financial Technology Ventures (II) Q LP & Ors v ETFS Capital Limited & Graham Tuckwell (Supra) to which we have been referred:
(i) Deadlock: there is no deadlock at the level of the Company in the sense that the directors are perfectly capable of making decisions. Furthermore, at the AMW level the directors appear to be capable of taking routine decisions and any deadlock that there is appears to be confined to the issue of what wording, if any, should be placed in the notes to the accounts in order for agreement to be reached to have them filed. However, if the word "deadlock" is to be used in the sense of an "impasse", it would appear that the directors of the Company have reached an impasse in that they appear to be wholly unable to resolve the serious dispute that has arisen between their shareholders and thus between the two blocks of directors in the underlying company who represent the two shareholders. Unless resolved this risks AMW being struck off the Register of Companies or its value being significantly diminished.
(ii) Loss of substratum: The impasse to which we have referred could also be characterised as a loss of substratum in that it would seem that the main purpose of the Company was its function as a "buffer", acting as a dispute resolution mechanism between the shareholders. The directors of the Company are now wholly unable to resolve the current dispute. It is clear to us that the Company cannot currently function as a dispute resolution mechanism (that was tried via the Teneo appointment but failed). Were the directors of the Company to remove the board of AMW and appoint their own representatives, the new board would be in precisely the same position as both the Representors and Teneo in that without the cooperation of AML they would not be in a position to decide whether or not Bespoke's complaints were valid. The interposition of the Company between the beneficial owners and the trading entity is now hindering the ability of the shareholders to resort to remedies that shareholders would ordinarily have, such as an unfair prejudice claim or a just and equitable winding up of AMW. The continued existence of the Company is therefore acting as a block, rather than an aid, to a resolution of the issues between the shareholders. If the Company is removed from the structure, then the shareholders would be in a position to pursue those remedies in the English Courts.
(iii) Breakdown of trust and confidence: It is clear to us that there has been a breakdown of trust and confidence between the members of the Company, and this has manifested itself in the dispute between the two groups of board members nominated by the shareholders. Despite the use of a corporate structure, the dispute has the hallmarks of a breakdown in the relationship between partners in a joint venture partnership.
68. We are mindful of the words of Bailhache, Bailiff, in Jean v Murfitt (Supra) that the phrase "just and equitable" has to be given a flexible interpretation. Furthermore, whilst the traditional categorisation of cases in which a just and equitable winding up has been ordered in previous cases, referred to by the Royal Court in Financial Technology Ventures (II) Q LP & Ors v ETFS Capital Limited & Graham Tuckwell (supra), may be a useful exercise, it should not be regarded as limiting the ability of the Court to make an order where appropriate.
69. To address the traditional classification, although the board of the Company may not be "deadlocked", it has, in the view of its directors and in our view, reached an impasse. Furthermore, that impasse relates to the very purpose for which the Company was formed, namely, to assist in the resolution of disputes between its members. To that extent it could be said to have lost its substratum. Finally, it is clear from the evidence that we have heard, that there has been a significant breakdown in trust and confidence between the two parties to the joint venture which has affected the ability of the board of AMW to take major decisions and is likely to diminish the value of the Company's investment, if it has not already done so.
70. We recognise that an order under Article 155 of the Law is a drastic remedy, and the Court must carefully balance the competing arguments. A significant factor in some cases is that the making of an order may deprive investors of their investment. That is not the case here, as the Company itself does not trade and thus if the order sought is made the investment represented by the shares held by the Company in AMW will simply pass to Bespoke and AML. The parties confirmed that no adverse tax issues arise in the event that the order is made. A factor of which we take note is that if the Company remains in place the likelihood of the dispute leading to a diminution in the value of the investment in AMW is a real one, potentially even resulting in AMW being struck off the Companies House Register. The availability of alternative remedies, if the Company remains in place is, in our view, extremely limited and, as we have already noted, the Company's continued existence acts as a bar to some of those remedies.
71. In the circumstances we have reached the conclusion that it is just and equitable that the Company be wound up pursuant to Article 155 of the Law.
72. We invite the parties to address us as to the terms of the consequential orders.