Enviroco Ltd v Farstad Supply A/S

Enviroco Ltd v Farstad Supply A/S

On the true construction of the charterparty and the statutory provisions as incorporated, the Contractor remained an 'Affiliate' of the Charterer despite the Parent's shares in the Contractor being pledged to the bank and registered in the bank's nominee's name. Section 736A(7) requires the provider of security to be treated as holding the rights attached to the shares, including for the purposes of membership, to avoid commercial absurdity and evasion.

Parties
Claimant: Enviroco Limited; Defendant: Farstad Supply A/S
Jurisdiction
England and Wales
Judgment Date
22 May 2009
Procedural Posture
Commercial/contractual Dispute / Trial of Preliminary Issue; Reserved Judgment
Outcome
Preliminary issue determined in favour of the Claimant (Contractor).
Legal Topics
Interpretation of 'subsidiary' and 'affiliate' in Contracts, Effect of Share Security/pledge on Company Status, Statutory Incorporation Into Contracts
Company Law Contract Law Interpretation of 'subsidiary' and 'affiliate' in Contracts Effect of Share Security/pledge on Company Status Statutory Incorporation Into Contracts

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Parties

Enviroco Limited

Claimant

Farstad Supply A/S

Defendant

Procedural Posture

Commercial/contractual Dispute / Trial of Preliminary Issue; Reserved Judgment

Legal Issues

  1. 1 Whether the Contractor (Enviroco Limited) remained an 'Affiliate' of the Charterer under the charterparty after the Parent's shares in the Contractor were pledged to a bank and registered in the bank's nominee's name
  2. 2 Whether the statutory definition of 'subsidiary' under section 736 of the Companies Act 1985 (as amended) and section 736A applies in the context of the charterparty

Ratio Decidendi

On the true construction of the charterparty and the statutory provisions as incorporated, the Contractor remained an 'Affiliate' of the Charterer despite the Parent's shares in the Contractor being pledged to the bank and registered in the bank's nominee's name. Section 736A(7) requires the provider of security to be treated as holding the rights attached to the shares, including for the purposes of membership, to avoid commercial absurdity and evasion.

Court Disposition

Preliminary issue determined in favour of the Claimant (Contractor).

Orders

  • Declaration that the Contractor was an 'Affiliate' of the Charterer for the purposes of the charterparty, notwithstanding the pledge and registration of shares in the bank's nominee's name.