Gaetano Ltd v Obertor Ltd

Gaetano Ltd v Obertor Ltd

Clause 21.1 of the Shareholders Agreement allows either shareholder to serve a Warning Notice 'at any time' to implement the deadlock procedure. Gaetano's letter of 24 October 2008 validly constituted such a notice, and Obertor's failure to elect to purchase Gaetano's shares at the specified price within 30 days was a breach. Obertor's counterclaim is unsustainable as it relies on breaches by directors, not Gaetano, and claims reflective loss, which is not recoverable.

Parties
Claimant: Gaetano Limited; Defendant: Obertor Limited
Jurisdiction
England and Wales
Judgment Date
29 October 2009
Procedural Posture
Civil / Summary Judgment Application and Counterclaim
Outcome
Claim allowed; counterclaim struck out
Legal Topics
Shareholders Agreement, Specific Performance, Reflective Loss, Exit Mechanism, Deadlock Procedure
Contract Law Company Law Shareholders Agreement Specific Performance Reflective Loss Exit Mechanism Deadlock Procedure

Case Brief

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Parties

Gaetano Limited

Claimant

Obertor Limited

Defendant

Procedural Posture

Civil / Summary Judgment Application and Counterclaim

Legal Issues

  1. 1 Whether Gaetano validly served a Warning Notice under clause 21 of the Shareholders Agreement
  2. 2 Whether Obertor breached the Shareholders Agreement by failing to purchase Gaetano's shares at the specified price
  3. 3 Whether Obertor's counterclaim discloses any reasonable grounds

Ratio Decidendi

Clause 21.1 of the Shareholders Agreement allows either shareholder to serve a Warning Notice 'at any time' to implement the deadlock procedure. Gaetano's letter of 24 October 2008 validly constituted such a notice, and Obertor's failure to elect to purchase Gaetano's shares at the specified price within 30 days was a breach. Obertor's counterclaim is unsustainable as it relies on breaches by directors, not Gaetano, and claims reflective loss, which is not recoverable.

Court Disposition

Claim allowed; counterclaim struck out

Orders

  • Order for specific performance requiring Obertor to purchase Gaetano's shareholding at €3.95 million
  • Counterclaim dismissed