Following an eight-week trial, on 11 July 2016, the High Court (Rose J, sitting in the Chancery Division) has handed down a significant judgment determining claims under the Companies Act 2006 and other claims to reverse dividends declared by an English subsidiary in favour of its French parent. The case (BAT v Sequana & Others) arose from complex indemnity arrangements relating to environmental liabilities for the clean-up of historic paper pollution of the Fox River in Wisconsin, and involved claims against both the shareholder and the individual directors of its former subsidiary.
The Court’s judgment contains a detailed examination of several important areas of company law: the requirements for a valid capital reduction by solvency statement under s.642 of the 2006 Act, the requirements for dividends under Part 23 of the 2006 Act, the circumstances in which the duty of directors to consider the interests of creditors is engaged, and the application of s.423 of the Insolvency Act 1986 to dividends.
The Court dismissed BAT’s claims in respect of the capital reduction and under Part 23 of the 2006 Act, as well as the claims against the individual directors and under s.423 of the 1986 Act in respect of the larger of the two dividends (€443m). Although it has upheld a single claim under s.423 in respect of the smaller of the two dividends (€135m), the Court has ordered that a further hearing should take place later in the year to determine an appropriate remedy.
Ben Valentin QC, representing Sequana and the individual directors (with David Foxton QC and David Mumford QC) was instructed by Geoff Nicholas of Freshfields Bruckhaus Deringer.
A link to the Court’s judgment can be found here.