Petition of West Coast Capital (Lios) Limited. West Coast Capital sought to interdict the board of Dobbies Garden Centres PLC

15 May 2008

The petitioners, West Coast Capital (Lios) Ltd ("WCC"), under section 994 of the Companies Act 2006 (formerly section 459 of the 1985 Act), sought to interdict the board of Dobbies Garden Centres plc ("Dobbies") from putting to the vote at Dobbies' AGM on 21st May 2008 resolutions to give effect to an Open Offer by Tesco Holdings Ltd ("Tesco"). WCC also sought an order that Tesco purchase its shareholding in Dobbies or that Tesco sell its shareholding in Dobbies to WCC. The Open Offer offered shareholders six new shares at £12 each for every five held. The intention was to raise £150m of new capital.

In 2007 Tesco made a takeover bid for Dobbies. WCC also contemplated making a bid. WCC, through another company, has a substantial interest in Wyevale Garden Centres Ltd, a competitor of Dobbies. In the event, WCC did not proceed with the bid. They acquired a shareholding of about 29% in Dobbies while Tesco acquired about 65%. As majority shareholder, Tesco appointed three of its officers and directors of its parent company to the board of Dobbies to serve alongside two of the former directors who had remained. After the Tesco takeover, the Dobbies board made a number of strategic decisions which WCC criticised as being unfairly prejudicial to their interests qua shareholder.

Interim interdict was refused. Lord Glennie summarised the tests for the grant of interim interdict with particular reference to section 994 applications. He considered the approach under section 994 observing that the concepts of fairness and unfairness were used in the context of a commercial relationship; the court will not readily review the decisions of directors on questions of management, if made in good faith rather than for an improper purpose.

Lord Glennie said that WCC did not have a prima facie case. He declined to adjudicate upon competing commercial interests or form a view on the motivation of the directors. Even if WCC had a prima facie case, the balance of convenience favoured the Respondents. WCC did not have a strong prospect of succeeding at the end of the day. The court should not be used to further the interest of one or other party in a commercial tussle; the granting of interim interdict would prolong the battle. The remedy of share purchase would sufficiently protect WCC.

The Dean of Faculty (Richard Keen Q.C.) of Axiom Advocates appeared on behalf of WCC and J. Gordon Reid Q.C., F.C.I.Arb. of Axiom Advocates appeared on behalf of Tesco.

A copy of the full decision can be found at http://www.scotcourts.gov.uk/opinions/2008CSOH72.html