[1997]-1-W.L.R.-4

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The Weekly Law Reports 10 January 1997

|1997|

D

[COURT OF APPEAL]

*KET CHU M INTER NATI ONAL PLC. v. GR OU P PUBLICRELATIONS HOLDINGS LTD. AND OTHERS

1996 May 9; 24 Stuart-Smith, Peter Gibson and Ward L.JJ. B

Court of Appeal (Civil Division) — Jurisdiction — Interlocutory relief- — Application to restrain defendant from dealing with assets pendingappeal — Refusal at first instance — Renewed application — WhetherCourt of Appeal having jurisdiction to determine

The first defendant owned the shares of a company. The C plaintiff purchased 40 per cent, of the shares under an agreement providing for a put option, under which the plaintiff could berequired to purchase the remaining shares, and providing also

that the company should not pay dividends without the plainti ffsapproval. The plaintiff claimed damages against the defendant for breach of the agreement, and the action was tried together withanother in which the defendant claimed enforcement of theoption. The judge dismissed the plaintiffs claim and alloweddefendant's. The plaintiff applied for an injunction restraining thedefendant from dealing with part of the proceeds of sale ofthe shares, pending the plaintiffs appeal. The judge refused theapplication, which the plaintiff renewed before the Court of

. Appeal.

On the renewed application:— Held, refusing the application, that the Court of Appeal had E

an original jurisdiction, concurrent with the jurisdiction of a first

instance court, to grant the injunction sought but the plaintiff didnot have a sufficiently good arguable appeal to justify grantingthe injunction (post, pp. 1 ID , 12G, 14A, A-B) .

Wilson v. Church (1879) 11 Ch.D. 576, C.A. applied.Per curiam. The court's jurisdiction to restrain a successful

party from disposing of assets, pending an appeal, is not limited ._,to cases concerned with the preservation of a fund or property *"the subject of the action, but is based on the wider principle that

justice requires that the court should be able to take steps toensure that its judgments are not rendered valueless by anunjustifiable disposal of assets (post, pp. 10F, 14A-B).

Decision of Blackburne J. affirmed.

GThe following cases are referred to in the judgment of Stuart-Smith L.J.:

British Bakeries (Midlands) Ltd. v. Michael Testier & Co. Ltd. [1986]1 E.G.L.R. 64

Bromley Park Garden Estates Ltd. v. Moss [1982] 1 W.L.R. 1019; [1982] 2 AllE.R. 890, C.A.

Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1990] Ch. 65; [1989] 2 W.L.R. H

412; [1989] 1 All E.R. 1002, C.A. Erinford Properties Ltd. v. Cheshire County Council [1974] Ch. 261; [1974]

2 W.L.R. 749; [1974] 2 All E.R. 448 Ninemia Maritime Corporation v. Trave Schiffahrtsgesellschaft m.b.H. und Co.

KG. [1983] 1 W.L.R. 1412; [1984] 1 All E.R. 398, C.A.

Orion Property Trust Ltd. v. Du Cane Court Ltd. [1962] 1 W.L.R. 1085; [1962]3 All E.R. 466

Polini v. Gray (1879) 12 Ch.D. 438, C.A.

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1 W.L.R. Ketchum Pic. v. Group Public Relations Ltd. (C.A.)

A Reg- v. Secretary of State for the Home Department, Ex parte Muboyayi [1992]Q.B. 244; [1991] 3 W.L.R. 442; [1991] 4 All E.R. 72, C.A.

Wilson v. Church (1879) 11 Ch.D. 576, C.A.Wilson v. Church (No. 2) (1879) 12 Ch.D. 454, C.A.

No additional cases were cited in argument.

APPLICATION

By a summons dated 23 April 1996 the plaintiff, Ketchum InternationalPic, applied to the Court of Appeal for an order restraining the firstdefendant, Group Public Relations Holdings Ltd., from removing fromthe jurisdiction or disposing of or dealing with the proceeds of sale of thedefendant 's shareholding in another company up to the value of £ 585,736until after the determination of the plaintiffs appeal in the action.

The facts are stated in the judgment of Stuart-Smith L.J.

George Leggatt for the plaintiff.

Romie Tager Q. C. and James Ayliffe for the defendant.

Cur. adv. vult.

D24 May. The following judgments were handed down.

STUART-SMITH L.J. A Jersey company, E.P.R. (Jersey) Ltd.("E.P.R.J."), is the owner of all the shares in an English public relationscompany which until January 1993 was called Group Public Relations

g Pic. Prior to 14 January 1991 all the shares in E.P.R.J. were owned by thefirst defendant, Group Public Relations Holdings Ltd. ("Holdings"). The

second defendant, Christopher O'Donoghue, and the third defendant,Pamela Ann Poe, own Holdings in equal shares. On 14 January 1991 by ashare purchase agreement the plaintiff, Ketchum International Inc.("Ketchum"), a Delaware corporation, agreed to purchase from Holdings40 per cent, of the shares in E.P.R.J. That agreement provided that the

F purchase price was payable in tranches over a three-year period and wasgeared to the profits of E.P.R.J. and its subsidiaries after tax during that period. It also provided for both put and call options. By a put optionHoldings had the right, after the end of that period, to require Ketchumto purchase the remaining 60 per cent, holding in E.P.R.J. at a price alsogeared to those profits in that period. It also provided, by clause 8(i), that

^ E.P.R.J. should not make any distribution by way of dividend without the

prior written approval of Ketchum, such consent not to be unreasonablywithheld or delayed.

In August 1993 E.P.R.J. paid a dividend of just over £ 800,000 and inOctober 1993 a dividend of just under £ 200,000, on each occasion withoutthe approval of Ketchum, although Ketchum received and retained its40 per cent, share of those dividends. In March 1994 Holdings purported

H to exercise the put option, requiring Ketchum to purchase the 60 per cent.holding in E.P.R.J. for some £ 2-6m. Those events in 1993 and 1994 led tothe commencement of three actions. By the action with which this appealis directly concerned ("the first dividend action") Ketchum claimed againstHoldings, Mr. O'Donoghue and Miss Poe.that the payment of the first

dividend without its consent was a breach of the agreement, and it claimeddamages therefor. The loss was particularised as being that Holdings bythat dividend payment "rendered less valuable [Ketchum's] option, and/or

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have rendered more onerous [Ketchum's] liability pursuant to [Holdings'] Aoption, by the amount of the dividend," that loss being quantified as£ 483,477. That is 60 per cent, of the dividend payment. By another action("the second dividend action") Ketchum made a similar claim, mutatismutandis, in respect of the second dividend, the claimed loss beingquantified as £ 119,673. The third action ("the put action") was brought

by Holdings against Ketchum and its parent corporation and related tothe exercise by Holdings of its put option. The principal issues were the °validity of the exercise of that option and, if it was validly exercised, the

price payable by Ketchum.The three actions came before Blackburne J. at the same time, the

claims by Ketchum in the first and second dividend actions being treatedas counterclaims to Holdings's claim in the put action. In the courseof the hearing Ketchum discontinued the counterlcaim against QMr. O'Donoghue and Miss Poe. In his closing address to the judge,leading counsel then appearing for Ketchum conceded the validity of theexercise of the put option. In the put action the judge on 21 February

1996 determined the price to be paid as a little over £ 2-4m. and orderedspecific performance of the agreement, directing that completion of the purchase should take place on 3 April 1996. He ordered that Ketchumshould pay 80 per cent, of the costs until day 3 of the trial and 75 per E)cent, of the costs thereafter. He refused to order Ketchum to pay interest prior to 28 February 1996. In the first dividend action the judge dismissedwith costs Ketchum's claim, holding that it had unreasonably withheld itsconsent to the first dividend. In the second dividend action he awardedKetchum damages as claimed and nearly £ 24,000 interest, but orderedHoldings to pay only 50 per cent, of Ketchum's costs. Ketchum is not £appealing against the orders made against it in the put action, butHoldings is appealing on the question of interest. In the first dividendaction Ketchum has exercised its right to appeal and it is seeking thedamages which it originally claimed. Holdings is appealing in the seconddividend action.

The purchase price ordered to be paid in the put action, less thedamages and interest which were awarded to Ketchum in the second Fdividend action, a net sum of about £ 2m., has been duly paid by Ketchumto Holdings's solicitors. But by a notice of motion dated 28 March 1996Ketchum applied for an injunction restraining Holdings from removingfrom the jurisdiction or disposing of or dealing with the proceeds of thesale of the 60 per cent, holding in E.R.P.J. up the value of £ 585,736,together with interest thereon, pending the outcome of Ketchum's appeal Q

in the first dividend action. That maximum sum is made up of the£ 483,477 damages claimed plus interest. That motion was heard, butdismissed, by the judge on 3 April 1996 and he refused leave to appeal.However he granted an injunction in the terms of the notice of motion fora limited period, pending an application to this court.

The application before us is a summons by which Ketchum seeks precisely the same relief as that which it unsuccessfully sought before the H judge. In other words, Ketchum is thereby asking this court, not for leaveto appeal from the decision of the judge and, if leave is granted, thereversal of that decision and the grant of an injunction, but to exercise anoriginal jurisdiction to grant an injunction. If that is wrong and this court

holds that an appellate route should have been followed, Mr. Leggatt, forKetchum, asks this court to give leave to appeal, to set aside the order ofthe judge and to grant the injunction sought.

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1 W.L.R. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) SmifliLj!

A At this point it is convenient to summarise the arguments presented tothe judge and his conclusions.

(1) Mr. Leggatt submitted that a trilogy of cases in 1879, namely,Wilson v. Church (1879) 11 Ch.D. 576; Wilson v. Church (No. 2) (1879)12 Ch.D. 454 and Polini v. Gray (1879) 12 Ch.D. 438 established the

principle that, when a party is bringing a bona fide appeal as of right, theCourt of Appeal ought to ensure that the appeal, if successful, is not° nugatory by restraining the hitherto successful party from disposing of its

assets. This principle could and should be applied at first instance: see Erinford Properties Ltd. v. Cheshire County Council [1974] Ch. 261 andOrion Property Trust Ltd. .v. Du Cane Court Ltd. [1962] 1 W.L.R. 1085.Blackburne J. distinguished the 1879 cases on the ground that on theirfacts they involved competing claims to a fund and did not apply to an

Q action for damages. He said that the Erinford case, which concerned thequestion whether the court had jurisdiction to grant a limited injunction

preserving the status quo, pending an appeal against the court's refusal togrant an interlocutory injunction, pending trial, was not relevant.

(2) Mr. Leggatt submitted, in the alternative, that the principles whichapply when the court grants Mareva relief should be applicable, pendingan appeal to the Court of Appeal by an unsuccessful plaintiff, provided

D the relevant conditions are satisfied. The judge rejected his submission. Hesaid there was no authority for such a proposition, and the plaintiff wasfaced with the formidable difficulty of showing that he had a goodarguable case when the judge had just held that he did not.

(3) On the assumption that jurisdiction based on Mareva principlesexists, the judge acknowledged that Ketchum might have good arguable

g grounds for appealing the decision in the first dividend action. But hesaid:

"I have seen nothing in the evidence to show that Holdings is aboutto or may take action designed to ensure that any subsequent orderof the Court of Appeal will be rendered less effective than wouldotherwise be the case. Not only is there nothing in evidence thatHoldings would seek to render itself judgment-proof, I have seennothing to indicate that, if Ketchum's appeal were to succeed, thosewho control Holdings, namely, Miss Poe and Mr. O'Donoghue,would not seek to ensure that Holdings would honour the court'sorder."

He based himself on a dictum of Lord Donaldson M.R. in Derby & Co.

G Ltd. v. Weldon (Nos. 3 and 4) [1990] Ch. 65, 76:

"The fundamental principle underlying this jurisdiction is that,within the limits of its powers, no court should permit a defendant totake action designed to ensure that subsequent orders of the court arerendered less effective than would otherwise be the case."

Before us Mr. Leggatt submitted that (1) this court had an originalH jurisdiction to grant the injunction sought; the application was by way of

a renewed application and was similar to the renewed application for astay of execution after refusal by the trial judge; (2) alternatively, if thematter was to be brought before this court by way of appeal, leave toappeal should be granted; (3) the jurisdiction arose when there was a bona

fide appeal as of right or, alternatively, when there was a good arguableappeal, and, in the absence of injunctive relief, the appeal was likely to berendered nugatory; (4) (a) there was a good arguable appeal and the judge

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SmShLJ. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) |1997|

accepted this; (b) the judge posed too high a test in requiring an intention Aon the part of the defendant to make itself judgment-proof, it wassufficient if the defendant's actions had the consequence that the judgmentwould not be met; (c) on the facts this likelihood was established and the

judge in reaching a contrary conclusion took into account irrelevantmatters.

Mr. Tager on the other hand submitted that (1) the judge was right todistinguish the Wilson v. Church line of cases on the grounds that he did; "(2) Mareva relief was not appropriate where the plaintiff had failed at firstinstance and therefore ex hypothesi did not have a good arguable case;(3) in any event the court had no original jurisdiction to entertain thisapplication; it must be brought by way of appeal and leave should not begranted; (4) if the question was whether Ketchum did have a goodarguable appeal, it did not; (5) the judge was right to hold that there was Qno risk of dissipation of assets; this was a finding of fact based in partupon the judge's assessment of the witnesses and this court should notinterfere.

Does this court have an original jurisdiction to grant an injunction inthe terms sought and, if so, in what circumstances should it be exercised?Mr. Leggatt submitted that in principle courts should be able to take stepsto ensure that their judgments are not rendered valueless by an unjustifiable Ddispostion of assets. The High Court has power to grant injunctions undersection 37 of the Supreme Court Act 1981 in any case in which it appears

just and convenient to do so. This jurisdiction is exercisable by the Courtof Appeal by reason of section 15 of that Act and R.S.C., Ord. 59,r. 10(1) and this court has power to grant injunctions in any proceedingsinstituted in any cause or matter pending before the Court of Appeal; gOrd. 59, r. 10(9). There is no reason in principle why this jurisdictionshould not be exercised in favour of a plaintiff who has lost in the court below if there is a real risk that as a successful appellant his right ofappeal is rendered nugatory. He submitted that there is no difference in principle between granting an injunction in such circumstances andgranting a stay of execution to an unsuccessful defendant who wishes toappeal. In each case justice requires that a successful party be prevented Ffrom reaping the fruits of his success until the Court of Appeal has beenable to decide, if there is a real likelihood that the appeal might otherwise be rendered nugatory.

In Wilson v. Church, 11 Ch.D. 576 the plaintiff brought an action, on behalf of himself and all other holders of Bolivian bonds issued inconnection with the construction of a railway, against the trustees for the ^

bondholders, seeking a declaration that a trust fund of a large amount inthe hands of the trustees should be returned to the bondholders and notapplied to the payment of the work on the railway. The plaintiff failed before Fry J. but succeeded on appeal. Based on prior authority it wassaid that Fry J., having dismissed the action, had no jurisdiction torestrain the trustees from paying the money out until the determination ofthe appeal. On this assumption the Court of Appeal granted the injunction Hsought, pending determination of the appeal to it. When the trustees lostin the Court of Appeal they sought a similar injunction to restrain disposalfrom the trust to the bondholders, pending appeal to the House of Lordswhich at that time they enjoyed without leave. The court, 12 Ch.D. 454

again granted the injunction. Cotton L.J. said, at p. 458:"But then there comes the question whether or no that part of theorder which directs payment to the bondholders should be stayed.

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1 W.L.R. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) SmithL.j"

A I will state my opinion that when a party is appealing, exercising hisundoubted right of appeal, this court ought to see that the appeal, ifsuccessful, is not nugatory; and, acting on that principle, when therewas an appeal to this court from the judgment of Fry J. dismissingthe plaintiffs action altogether, and it was urged therefore that thiscourt had no jurisdiction to stay the execution of the order, we were

of opinion that we ought to stay the execution of a judgment inB another action made by Fry J., ordering the fund to be dealt with—

that is to say, by granting an injunction against the trustees to restrainthem from parting with any portion of the fund in their hands till theappeal was disposed of. That possibly was rather novel, but it wasright, in my opinion, to make that order to prevent the appeal, ifsuccessful, from being nugatory. Acting on the same principle, I am

Q of opinion that we ought to take care that if the House of Lordsshould reverse our decision (and we must recognise that it may bereversed), the appeal ought not to be rendered nugatory."

Brett L.J. said, at p. 459:

"This is an application to the discretion of the court, but I thinkthat Mr. Benjamin has laid down the proper rule of conduct for the

D exercise of the judicial discretion, that where the right of appealexists, and, the question is whether the fund shall be paid out ofcourt, the court as a general rule ought to exercise its best discretionin a way so as not to prevent the appeal, if successful, from beingnugatory."

James L.J. dissented on the facts, but not, I think, on the principle.E In so far as dicta in that case suggest that it is enough that the appeal

is bona fide and not brought for some improper purpose such as delay or

exerting pressure on the other party, that, in my opinion, is inconsistentwith what was said in Polini v. Gray, 12 Ch.D. 438. In that case S. claimedthat she was next of kin of a testator and was entitled under his will. Shefailed at first instance and in the Court of Appeal but intended to appeal.

p The Court of Appeal granted an injunction staying disposal of the fund pending appeal to the House of Lords. I think it may well be right thatJessel M.R. based his judgment on the rule of court that gave the court

jurisdiction to make, "any order for the detention, preservation . . . of any property being the subject of such action." But Cotton L.J. seems to have put it on a broader basis. He said, at p. 446:

P "I see no difference in principle between staying the distribution of a

fund to which the court has held the plaintiff not to be entitled, andstaying the execution of an order by which the court has decided thata plaintiff is entitled to a fund. In that case, as in this case, the court, pending an appeal to the House of Lords, suspends what it hasdeclared to be the right of one of the litigant parties. On what principle does it do so? It does so on this ground, that when there is

H an appeal about to be prosecuted the litigation is to be considered asnot at an end, and that being so, if there is a reasonable ground ofappeal, and if not making the order to stay the execution of thedecree or the distribution of the fund would make the appealnugatory, that is to say, would deprive the appellant, if successful, ofthe results of the appeal, then it is the duty of the court to interfereand suspend the right of the party who, so far as the litigation hasgone, has established his rights. That applies, in my opinion, just as

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smi* L.J. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) [1997]

much to the case, where the action has been dismissed, as to the case Awhere a decreee has been made establishing the plaintiffs title."

In Orion Property Trust Ltd. v. Du Cane Court Ltd. [1962] 1 W.L.R.1085 Pennycuick J. followed the judgment of Cotton L.J. which I havecited and held that the court of first instance had jurisdiction to make an

order restraining the issue of shares, pending an appeal, even though theaction seeking such relief had failed. And, in the Erinford case [1974] Ch. B261, Megarry J. applied the same principle to an interlocutory injunction,which he had refused, but granted it for a limited time so that applicationcould be made to the Court of Appeal to extend it. He said, at p. 268:

"There will, of course, be many cases where it would be wrong togrant an injunction pending appeal, as where any appeal would befrivolous, or to grant the injunction would inflict greater hardship Qthan it would avoid, and so on. But subject to that, the principle isto be found in the leading judgment of Cotton L.J. in Wilson v.Church (No. 2), 12 Ch.D. 454, where, speaking of an appeal from the

Court of Appeal to the House of Lords, he said, at p. 458, 'when a party is appealing, exercising his undoubted right of appeal, this courtought to see that the appeal, if successful, is not nugatory.' That wasthe principle which Pennycuick J. applied in the Orion case [1962] D1 W.L.R. 1085; and although the cases had not then been cited tome, it was on that principle, and not because I felt any real doubtsabout my judgment on the motion, that I granted Mr. Newsom thelimited injunction pending appeal that he sought. This is not a casein which damages seem to me to be a suitable alternative. . . .Although the type of injunction that I have granted is not a stay of gexecution, it achieves for the application or action which fails thesame sort of result as a stay of execution achieves for the application

or action which succeeds. In each case the successful party is prevented from reaping the fruits of his success until the Court ofAppeal has been able to decide the appeal."

In my judgment, this jurisdiction is not limited, as the judge thought, Fto cases concerned with the preservation of a fund or property the subjectof the action, but is based on the wider principle enunciated byCotton L.J. that justice requires that the court should be able to take stepsto ensure that its judgments are not rendered valueless by an unjustifiabledisposal of assets. Moreover, I cannot see any reason in principle why theconsiderations which are applicable when the court is considering the

grant of a Mareva injunction should not be applied in favour of a plaintiff, ^even if he has lost in the court below, though the question will not be"Does he have a good arguable case?" but "Does he have a good arguableappeal?" This is likely to be a more difficult test to satisfy, and, if the caseturns upon questions of fact which the judge has resolved against the plaintiff, may well be insuperable. This threshold must be at least as highas that which has to be satisfied when the court considers whether or not Hto grant leave to appeal where that is required.

The analogy with a stay of execution is appropriate. Where anunsuccessful defendant has to obtain leave to appeal and seeks a stay ofexecution, for example, in a possession action, this court will normallygrant a stay if it grants leave to appeal, since otherwise a successful appeal

will be of no effect. Where leave is not required to appeal the substantive judgment, as in this case, injunctive relief of the type sought should not

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1 W.L.R. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) smithTj]

A be granted unless leave to appeal would be granted, had it been required.In my opinion the judge was in error in thinking that he did not have

jurisdiction to make the order sought.But this still leaves the question whether Ketchum is able to renew its

application before this court, or is required to appeal for which it needsleave to appeal. Mr. Tager points out that it is unfair that an unsuccessful plaintiff, having failed to obtain an injunction before the trial judge,should have a second bite at the cherry without the hurdle of leave, wherethis court is being asked to exercise its discretion afresh without the wellknown fetter on interfering with the trial judge's exercise of discretion.Leave to appeal is now required from the grant or refusal of aninterlocutory injunction. And, as Mr. Tager points out, a trial judge whohas heard the action and dismissed it may be in a much better position to

C determine whether such relief should be granted. I see the force ofMr. Tager's submission. On the other hand, Ord. 59, r. 10(9) expresslyseems to contemplate an original jurisdiction, and this undoubtedly existsin the case of applications for a stay of execution. Ord. 59, r. 14(4)

requires that where an application can be made either to the court belowor to the Court of Appeal, it must in the first instance be made to the

TJ court below, save in special circumstances. Not without considerablehesitation I have come to the conclusion that the. court has concurrentoriginal jurisdiction in such a case as this similar to that exercised wherea stay of execution is sought, and that the matter does not have to beraised by way of appeal. If I am wrong, in the circumstances of this caseI would grant leave to appeal. I do not envisage that this court will beinundated with renewed applications; it is only in exceptional cases thatfacts will justify an application to the judge, and I think an appellant whohas a right of appeal may well be reluctant to risk being told by this court

that in its opinion there is no good arguable appeal on the substantiveappeal. Furthermore, this court will not interfere with relevant findings offact which the trial judge has made based in part on his assessment of thewitnesses, and, in so far as the grant of injunctive relief is a matter of

F discretion, is unlikely to differ from the trial judge, save on well established principles. The only matter on which this court may, as a rule, be in a better position to decide than the trial judge, is whether the plaintiff has agood arguable appeal.

I turn then to consider the question whether Ketchum has shown thatit has a good arguable appeal. Mr. Leggatt initially took, his stand on

G what he claimed was the judge's view of this. In his judgment the judgesaid:

"Whilst I am modest enough to acknowledge that my decision inthe first dividend action may be upset on appeal and that Ketchummay be able to demonstrate that there are good arguable reasons forindicating why that should happen."

HIn my judgment, the judge is doing no more than assuming that there may

be such grounds because he then went on to refuse relief on the groundthat he did not think that Holdings intended to make itself judgment- proof. He never really analysed the strength of the grounds of appeal.

Mr. Tager submits that if the grounds of appeal are considered, the prospects for Ketchum are poor and would not justify granting leave toappeal, if that was required.

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SmSh L.J. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) [1997]

The first ground of appeal raises a point of law which, in the field of Alandlord and tenant relating to the question of unreasonable withholdingof consent, is very similar to clause 8(1) of the share purchase agreementin this case, and has been determined against Ketchum by the Court ofAppeal in Bromley Park Garden Estates Ltd. v. Moss [1982] 1 W.L.R.1019 and British Bakeries (Midlands) Ltd. v. Michael Tester & Co. Ltd.

[1986] 1 E.G.L.R. 64. I agree with Mr. Tager that it is most unlikely thatleave to appeal to the House of Lords would be granted, or the effect ofthose decisions, which have not been criticised, overruled.

The second ground of appeal is (i) that the judge failed to have regardto the correct test, namely, whether no reasonable shareholder inKetchum's position would have withheld its consent to the dividend; and(ii) the judge failed to hold or take account of the fact that, in decidingwhether to give its consent to the first dividend, Ketchum was entitled to Chave regard to its own interests unless the detriment caused to Holdings by withholding consent was wholly disproportionate to the advantagegained by Ketchum. Again, I agree with Mr. Tager that there is little

prospect in this ground. It seems to me the judge had regard to the correcttest and did take into account the point made in ground 2(ii).

Mr. Leggatt's principal criticism of the judge's decision was that £>Ketchum was not objecting to any dividend being paid, but only to oneof £ 800,000 proposed; that it was entitled to take the view that it wasunfair that the price it had to pay for the shares was inflated by interestthat was earned on accumulated and undistributed profits during the earn-out period, and it did not acquire a corresponding asset when it acquiredthe shares. Mr. Leggatt said that the judge should have held, but failed to p

hold, that this was a reasonable ground for withholding consent to thefirst dividend. But to my mind Mr. Tager has a formidable answer to

these points. First, he says that it is clear from the correspondence, andthe judge so held, that Ketchum was objecting to any dividend, howevermodest. Secondly, he says that the judge did have regard to the allegedunfairness and, indeed, this was the reason why he held in Ketchum'sfavour on the second dividend. The judge carefully analysed this report Fand decided that the dividing point came at the £ 800,000 dividend. Wecannot, of course, in this hearing decide whether this submission is correct.But since Ketchum eventually appears to have accepted that some dividendwas payable, the question was one of quantum and the judge assessedthis, having regard to the evidence and submissions made to him inrelation to both the unfairness point and the cash requirements of the G

company. I have come to the conclusion that Ketchum's prospects ofappeal are not sufficiently good to justify grant of the relief sought.

All the other grounds appear to me to be challenges to the judge'sfindings of fact which were based, in part at least, on his assessment ofthe witnesses who gave evidence before him. While it is not an insuperabletask to persuade this court to interfere with such findings, it is obviously pja difficult one.

That is sufficient to dispose of the application in Holdings's favour.But since we have heard considerable argument upon the point of whetherthere was a serious risk that Holdings would dispose of its assets beforethe hearing of Ketchum's appeal, and since I have come to the conclusionthat the judge was in error on this point, I shall state my reasons as brieflyas possible.

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1 W.L.R. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) SmithT"!

A In my judgment, the judge misdirected himself by relying on the passage already quoted from Derby & Co. Ltd. v. Weldon (Nos. 3 and 4)[1990] Ch. 65, 76 for the proposition that the plaintiff must show that thedefendant intends to deal with his assets for the purpose of ensuring thata judgment will not be met. It is sufficient if there is a real risk that the

judgment in favour of the plaintiff will remain unsatisfied if injunctive

relief is refused: see Ninemia Maritime Corporation v. Trave Schiffahrts-B gesellschaft m.b.H. und Co. [1983] 1 W.L.R. 1412, 1422 and Reg. v.

Secretary of State for the Home Department, Ex parte Muboyayi [1992]Q.B. 244, 257H, where Lord Donaldson M.R. clarified what he had saidin Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) by explaining that in thiscontext "designed" does not mean "intended" but "having the consequencethat." The judge's finding was that he had

C"seen nothing to indicate that, if Ketchum's appeal were to succeed,those who control Holdings, namely Miss Poe and Mr. O'Donoghue,would not seek to ensure that Holdings would honour the court's

order."

]-) I find this difficult to reconcile with the expressed opposition to the grantof injunctive relief on the basis that it will frustrate long laid plans by Mr. O'Donoghue and Miss Poe as to use by them of the moneywhich implicitly, if not expressly, indicates that they will seek to effecta distribution of the money to themselves.

The judge appears to have given three, or possibly four, grounds for p reaching his conclusion. The first was the favourable view which he had

formed of Miss Poe and Mr. O'Donoghue from seeing them in the witness box. But, for my part, I cannot see how this has any bearing on their

intentions of keeping the proceeds of the sale of the shares within the jurisdiction, a question which was not in issue at the trial and to whichthey have given no undertaking or evidence contrary to that to whichI have referred. In the absence of injunctive relief the money will clearly

I7 go out of the jurisdiction to Jersey, and I am not persuaded that there isany legal restraint on its distribution to the shareholders. Secondly, the

judge referred to the fact that throughout Holdings had been represented by well known and extremely competent solicitors and counsel. I doubtwhether the judge really intended to advance this as a reason; but if hedid, it is plainly irrelevant. Thirdly, the judge pointed to the fact that

G Mr. O'Donoghue is now living in this country. Again, I cannot see that

this is relevant. There is nothing to prevent Holdings taking the moneyout of the jurisdiction to Jersey, where it is registered, and judgmentagainst Holdings would not be enforceable against the shareholders.Finally, the judge observed that it "merely happens" that Holdings hassold the retained shares and received the proceeds of sale in this country.

J-J But, with respect, I do not think this is anything to the point. Prior totrial, Holdings's only assets were the shares; it could not dispose of thesesince it was seeking to enforce the put option; there was therefore noquestion of Ketchum seeking Mareva relief before trial. But if the solequestions in the action had been those which arose in the dividend actions,and Holdings had cash assets within the jurisdiction and there was a real

risk that these cash assets would be removed, it might well have been aclassic case for Mareva relief. That, in effect, is the situation which now

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I S L.J. Ketchum Pic. v. Group Public Relations Ltd. (C.A.) |1997|

exists. Had I been satisfied that Ketchum had a sufficiently good arguableappeal, I would have granted the relief sought. As it is, in my judgment,the application should be dismissed.

PETER GIBSON L.J. I agree.

WARD L.J. I also agree.

Application refused.

Solicitors: Clifford Chance; Lewis Silkin.

B. O. A.

B

C

D[CHANCERY DIVISION]

*MID KENT HOLDINGS PLC. v. GENERAL UTILITIES PLC.

[Ch. 1996 M. No. 2174]

1996 April 23, 24, 25; 30 Knox J. E

Fair Trading — Undertakings to Secretary of State — Enforcement — Defendant undertaking to divest interest in plaintiff water enterpriseand not to acquire further interest- — Defendant subsequently entering

joint venture to acquire interest in plaintiff—Plaintiff seekingdeclaration that defendant in breach of undertaking — Whetherundertaking enforceable by plaintiff—Whether plaintiff entitled to Fdeclaration — Fair Trading Act 1973 (c. 41), ss. 65, 93, 93A (asinserted by Companies Act 1989 (c. 40), s. 148)

In July 1990 the Monopolies and Mergers Commissionreported that the defendant water enterprise's 29 per cent, holdingin the plaintiff water enterprise's issued share capital provided anability materially to influence the plaintiffs policy within section65(3) of the Fair Trading Act 1973,' that therefore a merger Gsituation qualifying for investigation under section 29 of theWater Act 19892 had been created, and that that might beexpected to operate against the public interest by reducing thenumber of independently controlled water enterprises so as to prejudice the ability of the Director General of Water Services tomake comparisons between water enterprises for the purpose ofcarrying out his statutory functions. The commission recom- ._.mended that the defendants should divest themselves of some ofthe plaintiffs' shares. The defendants gave to the Secretary ofState for Trade and Industry undertakings to reduce their holdingin the plaintiffs' shares to not more than 19-5 per cent, by

' Fair Trading Act 1973, s. 65: see post, p. 17B-F.

S. 93: see post, p. 26C-E.

S. 93A: see post, p. 27B-D.2 Water Act 1989, s. 29: see post, p. 17G-H.

[1997]-1-W.L.R.-4

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