Global Gaming Ventures (Group) Ltd & Anor v Global Gaming Ventures (Holdings) Ltd & Anor, Court of Appeal - Civil Division, January 30, 2018, [2018] EWCA Civ 68

Resolution Date:January 30, 2018
Issuing Organization:Civil Division
Actores:Global Gaming Ventures (Group) Ltd & Anor v Global Gaming Ventures (Holdings) Ltd & Anor

Neutral Citation Number: [2018] EWCA Civ 68

Case No: A3/2017/2608





[2017] EWHC 2381 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 30 January 2018

Before :





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Between :

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Mr Philip Marshall QC and Ms Ruth Den Besten (instructed by Dechert LLP) for the Appellants

Mr George Bompas QC and Ms Sarah Harman (instructed by Fladgate LLP) for the Second Respondent

Hearing date : 27 November 2017

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Lord Justice Patten :

  1. This is an appeal from an order of Arnold J dated 20 September 2017 dismissing with costs the application by the appellants for disclosure of various categories of documents and other information relating to the operation and financing of a casino at Victoria Gate in Leeds (``the Casino'').

  2. At the time of the hearing before the judge the Casino was operating under a gaming licence held by Global Gaming Ventures (Leeds) Limited (``Leeds'') which was the ultimate subsidiary of the first appellant, Global Gaming Ventures (Group) Limited (``Group''). Group is owned and controlled by the second appellant, Mr Wollenberg. Group is a 75 per cent shareholder in the first respondent, Global Gaming Ventures (Holdings) Limited (``Holdings''). The remaining 25 per cent is owned by Mr Herd, the second respondent. At the time of the hearing Holdings owned and controlled Global Gaming Ventures (Developments) Limited (``Developments'') of which Leeds is a wholly owned subsidiary. Developments was incorporated to develop and fit out the Casino which Leeds now operates. The sole asset of Holdings was its interest in Developments.

  3. What I shall refer to as the Global Group was established as a joint enterprise between Mr Wollenberg and Mr Herd and until recently both were directors of Holdings, Developments and Leeds. They have now fallen out, in part due to differences of opinion about the operation of the Group and, in particular, its finances. At the time of the hearing before Arnold J they remained directors of Holdings, although Mr Herd has subsequently resigned. But, for reasons which I shall come to, Mr Wollenberg had by then been removed as a director of Developments and Leeds leaving Mr Herd as the sole director of those companies.

  4. The development and operation of the Casino was financed by Summit Partners (GGV) Sarl (``Summit'') under the terms of a facilities agreement dated 17 February 2016 (``the Facilities Agreement''). The total amount of the facility was US$41.75m. Developments was the borrower under this agreement with Holdings and Leeds joining in as guarantors. Further security was provided in the form of a debenture (``the Debenture'') under which Holdings charged its shares in Developments and Developments charged its shares in Leeds to Summit by way of fixed first charge. It was a term of the Debenture that in the event of a default under the Facilities Agreement including the non-payment of interest, Summit would be entitled to appoint Receivers over the shares.

  5. At the same time a shareholders' agreement in relation to Holdings (``the Shareholders Agreement'') was entered into between Group, Holdings, Developments, Leeds and Mr Herd under which ``all significant policy and management decisions'' of Holdings would be referred to the board of Holdings before implementation (clause 3.1) and Holdings and Group (as its shareholder) agreed to exercise all powers available to them to procure that Holdings should ``ensure that all its business other than routine business is undertaken or supervised by the directors'': clause 4.1(c). By clause 4.2 the parties also agreed to procure that each group company (other than Holdings) would comply with the provisions of clause 4.1 in relation to that group company.

  6. Clause 5.1 provided:

    ``GGV Holdings shall provide to each Shareholder and its Nominated Director(s) and where requested, to their representatives, such information relating to the Group as any Shareholder may reasonably request from time to time and without prejudice to the foregoing, GGV Holdings shall keep the Shareholders fully and promptly informed of all material developments regarding the Group's financial and business affairs and all significant events (including and material litigation or arbitration) which will or may affect the Group.''

  7. ``Group'' is defined in clause 1.1 of the Shareholders Agreement as Holdings and its subsidiaries from time to time. ``Shareholder'' includes Group and Mr Herd as the registered shareholders in Holdings.

  8. Clause 12.1 also provided:

    ``Shareholders' procurement obligation

    Each of the Shareholders agrees it shall exercise its rights hereunder and as a Shareholder in GGV Holdings in such manner as could reasonably be expected to prevent, and shall not exercise those rights in any manner which could reasonably be expected to result in:

    (a) a breach by GGV Holdings of any of its obligations under this Agreement or any restrictions imposed upon it under its Articles (whether or not enforceable against GGV Holdings itself); or

    (b) the affairs of any members of the Group being carried on in a manner inconsistent with the terms of this Agreement.''

  9. The obligations under the Shareholders Agreement (including those under clauses 3, 4, 5 and 12.1) continue to subsist and be enforceable so long as the relevant party remains a Shareholder of Holdings: see clause 19.

  10. The Casino opened for business in January 2017 but within a comparatively short space of time a dispute arose between Summit and Mr Wollenberg and Mr Herd about distributions to them as shareholders. There were also cash flow difficulties in relation to the operation of the Casino. At the beginning of June 2017 Mr Wollenberg and Mr Herd proposed various measures to address the problem. These included the deferral of interest payments due under the Facilities Agreement and the sale of certain currency hedges. Summit was not prepared to accede to these requests but it did agree to appoint Union Gaming, an investment bank which specialised in the gaming sector, to assist in raising further capital. They were appointed on 15 June 2017 and proceeded to contact potential investors.

  11. The background to these attempts to resolve Developments' cash flow difficulties was the breakdown I have referred to in the relationship between Mr Wollenberg and Mr Herd. Mr Wollenberg says that he became aware during a board meeting held on 4 July 2017 that Mr Herd had contacted Summit without his knowledge to discuss various options and had been told by Summit that its preferred option was for Mr Wollenberg to defer taking his consultancy fees but for Mr Herd to continue to be paid. Mr Herd says that Mr Wollenberg's claim for expenses exceeded the guidelines agreed for employees and that he, Mr Herd, was unwilling to agree to the payment of expenses at a time when Developments was unable to meet the interest due under the Facilities Agreement. He accepts that this led to a heated conversation between the two directors during which Mr Wollenberg told him that he should not contact Summit. As the judge noted, it appears that Mr Wollenberg had formed the view that Mr Herd was not performing adequately as the CEO of Developments and Leeds and should resign. Whatever may be the merits of this dispute, it is clear that there had been a significant breakdown in the relations between the directors which was bound to be a matter of concern to Summit and any other potential investor in the business.

  12. On 24 July 2017 a further board meeting took place which two representatives of Summit attended by telephone. The minutes of the meeting (taken by Mr Paul Spence of Hill Dickinson) record that Mr Wollenberg again expressed a lack of confidence in Mr Herd and asked him to step aside. The meeting also discussed the payment of the next instalment of interest under the Facilities Agreement which was due on 1 August and it was made clear to Summit's representatives that the payment could not be made. Mr Herd says that Mr Wollenberg told the meeting that he (Mr Wollenberg) was unaware that this was the case, although it had been discussed at previous board meetings. In the event, Summit was asked to agree to defer the payment. It reserved its position and asked for Developments to produce a turnaround plan in respect of the Group's business. This was presented to Summit on 28 July. Mr Wollenberg says that he did not agree with what he terms the downbeat figures in the plan prepared by the Executive Committee and still believes that there were good prospects of turning the business around. But the plan did at least buy the Group some time because on 31 July Summit agreed to defer the 1 August interest payment for two weeks.

  13. Mr Wollenberg and Mr Herd took advice from Hill Dickinson about their duties as directors in relation to the continued trading of the Casino business should Summit withdraw its financial support. But on 11 August matters came to a head when Summit indicated that it would not agree to any further deferrals of interest payments unless Group and Mr Herd were willing to transfer to it ownership of Holdings. In an e-mail to Hill Dickinson, Summit's solicitors said:

    ``Summit is not prepared to grant a further interest deferral while the existing shareholders preside over continued financial underperformance. The only turnaround plan which Summit would be prepared to support would involve the orderly transfer of ownership of the equity in Global Gaming Ventures Holdings Limited to Summit in return for broad releases for the directors and shareholders but without any further economic participation in the group on the part of the existing...

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