Facts
Case law
Decision
Comment
In In the matter of Representation of Publicis Graphics Group Holdings SA,(1) the Royal Court of Jersey ordered an ex parte mandatory interlocutory injunction against a nominee shareholder, who until then had refused to comply with the instructions of the beneficial owner of those shares.
The representor, Publicis Graphics Group Holdings SA, owned 100% of a Jersey company, Publicis Graphics Holdings Limited (Jersey). The representor's shares in Publicis Graphics Jersey were held with 99.8% in its own name as registered owner and the remaining 0.2% held by Mustapha Assad as its nominee. Assad had executed a declaration of trust on January 29 2004 to this effect and had attached to the declaration a blank signed transfer form, which he authorised the representor to complete and use as it saw fit.
Mr Assad and an associate were the only directors of Publicis Graphics Jersey. Between them, they also owned 40% of the shares in the representor itself and Assad was the representor's chief executive officer (CEO) and chairman.
In July 2008 arrangements were made for Assad and his associate to sell their 40% share in the representor to a subsidiary of Publicis Groupe SA, which held the remaining 60% of the shares in the representor. A dispute then arose between the parties as to the sale price. The relationship between Assad (and his associate) and Publicis Groupe SA's representatives deteriorated, leading to Assad's removal from his position as CEO of the representor on January 26 2011 and his subsequent resignation as its chairman.
Following Assad's removal from its board, the representor then requested that he return the original declaration of trust and blank share transfer form in respect of the 0.2% interest in Publicis Graphics Jersey, and that he sign a shareholders' resolution removing himself and his associate as directors of Publicis Graphics Jersey in favour of three others. Assad refused or failed to respond to these requests.
The representor took the view that this refusal or failure to act was designed to put pressure on Publicis Groupe SA in relation to the sale of the 40% stake in the representor. The representor was also concerned that even if Assad did return the share transfer form, he might use his power as a director of Publicis Graphics Jersey to refuse to register it, and that by refusing to attend any shareholders' meeting he could ensure that it would never be quorate (as two shareholders were required).
The representor therefore sought orders ex parte directing the viscount to execute a share transfer form in respect of the shares in Publicis Graphics Jersey held by Assad and a written resolution of the shareholders removing Assad and his associate as its directors.
The court noted that it has the power to grant mandatory orders at an interlocutory stage where the facts are clear and the case is strong, provided that it has received a high degree of assurance that the trial court would in due course affirm that any order was rightly granted. Relevant authorities for this include Blampied v Thomas (Jersey unreported, July 18 1991), Union of Communication Workers v Le Maistre [1992] JLR N 8b, Sterrit Properties Inc v Roker Trustees (Jersey) Ltd [1997] JLR N 12b and Keenan v Timber Tech Limited [1999] JLR N 6c.
As was pointed out in Jersey Produce Marketing Organisation Limited v Hi-Ho Growers Limited [2001] JLR 266, the burden is on the party seeking an interim mandatory injunction, as it requires the other party to act rather than simply to refrain from acting. Therefore, it is often the case that compliance with a mandatory injunction cannot be undone, even if it transpires that it was wrongly granted - the only remedy is a claim for damages.
The court also noted that any such injunction could be granted ex parte.
Despite not having heard from Assad, the court was satisfied that this was an unusually strong case and that he should be compelled to comply with his obligations under the declaration of trust. The court was conscious of the widespread use of nominee shareholder arrangements and the reliance placed upon them, and confirmed that those who have shares held for them by nominees are entitled to be able to deal with their shares as if the shares were actually held in their own name.
The court also pointed out that under Article 24(2) of the Trusts (Jersey) Law 1984, Assad was required to exercise his powers as bare trustee only in the interests of the representor, as sole beneficiary, and in accordance with the terms of the declaration of trust under which he had undertaken to deal with them.
However, the court was not prepared immediately to have the viscount execute the relevant documents on behalf of Assad, because this inherent jurisdiction is available only where the relevant party has refused to comply with an order directing him to do so. Therefore, the court ordered that Assad execute the documents in favour of the representor within seven days, failing which the viscount would do so on his behalf.
This judgment serves as a timely reminder that those who hold assets as a nominee must comply promptly with the directions of the relevant beneficial owner, regardless of any separate dispute between them.
For further information on this topic please contact Robert Dobbyn at Ogier by telephone (+44 1534 504 000), fax (+44 1534 504 444) or email ([email protected]).
Endnotes