MCR OIL TOOLS LLC AGAINST SPEX OFFSHORE (UK) LTD AND OTHERS

Factual and Procedural Background

The petitioner, Company A, seeks orders to restore two dissolved companies, Company B1 and Company B2, to the Register of Companies. These companies were formerly known under different names and are named as defendants, along with others, in ongoing litigation in Texas ("the Texas proceedings"). The restoration is sought to enable Company A to retain Company B1 and Company B2 as defendants in those proceedings, subject to the Texas court allowing amendments to reflect the name changes. The Texas proceedings involve claims against Company B1, Company B2, a group of related companies ("the respondents"), and an individual formerly a director of Company B1 and Company B2. The respondents oppose the restoration application, arguing it would be inappropriate for the court to exercise its discretion to restore the companies.

Before dissolution, Company B1 and Company B2 were part of a corporate group that included the respondents. Both companies had entered into licence agreements with Company A regarding intellectual property. The agreements terminated in 2014 and 2016 respectively, and both companies subsequently entered creditors' voluntary liquidation and were dissolved in 2017 and 2018. The Texas proceedings assert multiple claims including breach of contract, misappropriation of trade secrets, unfair competition, fraud, tortious interference, conspiracy, and piercing the corporate veil. Company A's claims rely on contractual obligations and remedies including specific performance, declaratory judgments, injunctions, and damages.

Company A initiated the present petition under the Companies Act 2006 to restore Company B1 and Company B2 to the register, enabling continuation of the Texas litigation against them. The respondents contest the petition, asserting that restoration is unjust, particularly because the claims based on piercing the corporate veil are bound to fail under Scots law, and that restoration would impose undue costs.

Legal Issues Presented

1. Whether it is just, under section 1031(1)(c) of the Companies Act 2006, to restore Company B1 and Company B2 to the Register of Companies.
2. Whether the claims in the Texas proceedings against the dissolved companies, particularly those based on piercing the corporate veil, have sufficient merit to justify restoration.
3. The proper application of the test for restoration, including the meaning of a claim not being "merely shadowy" and the court's discretion in restoration applications.

Arguments of the Parties

Petitioner's Arguments

• Company B1 and Company B2 were part of the same corporate group as the respondents, with clear connections through shareholding and liquidation processes.
• The Texas proceedings, managed by qualified US attorneys, have factual and legal merit, and Company A has a clear interest as a creditor or potential creditor in restoring the companies.
• Restoration is necessary to enforce contractual obligations, seek specific performance, and pursue claims including declaratory judgments and fraudulent inducement.
• Piercing the corporate veil claims are part of a broader strategy to recover intellectual property and hold parties accountable, but restoration is also required for other claims independent of piercing the veil.
• The respondents' opposition aims to frustrate the Texas litigation by relying on dissolution to dismiss claims.
• Restoration would prevent respondents from using dissolution as a procedural bar and allow the Texas court to decide the merits of all claims.
• Additional affidavits concerning discovery and depositions in Texas were proposed but rejected due to procedural fairness concerns.

Respondents' Arguments

• Restoration is normally administrative, but the court must be satisfied that the claim is not "merely shadowy".
• The claims against the dissolved companies, particularly those relying on piercing the corporate veil under Scots law, are bound to fail and thus restoration serves no purpose.
• Enforcement of damages or intellectual property rights cannot succeed against insolvent companies; the remedy of specific performance depends on successful piercing of the veil, which is unlikely.
• The petitioner could have pursued alternative legal routes, such as patent infringement claims, but chose a route that is destined to fail.
• The motion to dismiss in the Texas proceedings is based on dissolution and does not apply to primary claims against the respondents, meaning litigation can proceed without restoration.
• Restoration would cause unnecessary expense and delay, particularly as the claims based on piercing the veil are misconceived and without prospect of success.
• Claims for injunctive relief and fraudulent inducement were not previously vouched and should not influence restoration.

Table of Precedents Cited

Court's Reasoning and Analysis

The court applied the statutory framework under the Companies Act 2006, particularly section 1031(1)(c), which permits restoration if the court considers it just. The court emphasized the established legal principle that restoration applications are quasi-administrative and generally granted if the applicant satisfies one of the statutory "gateways" and the claim is not "merely shadowy". The court explained that "merely shadowy" means a claim that is imaginary, vague, or without substance, and that the court should not conduct a detailed trial on the merits of the claim at this stage.

The petitioner satisfied the statutory gateways, having a potential legal claim and creditor interest. The court accepted the affidavits of two experienced US attorneys responsible for the Texas proceedings, concluding the claims have a responsible factual and legal basis. The court rejected the respondents' contention that claims based on piercing the corporate veil were bound to fail, noting that the pleadings included claims that the corporate veil of other defendants should be pierced to hold them liable, and that piercing the veil was only part of the claims. The court found that other claims, including breach of contract and specific performance, had a proper legal foundation independent of piercing the veil.

The court noted that the presence of the dissolved companies as defendants was necessary for specific performance and declaratory relief, and that restoration would enable the petitioner to fully pursue its claims in Texas. The court declined to examine the detailed merits of the piercing the veil argument, as this was properly for the Texas court applying Scots law. The court also found that the respondents' argument that restoration would impose undue expense was insufficient to deny restoration.

The court refused a late affidavit from the petitioner concerning discovery difficulties due to lack of procedural fairness and potential prejudice to the respondents.

In conclusion, the court held that restoration was just in the circumstances, as the claims were not "merely shadowy" and restoration would serve a proper purpose in enabling the Texas litigation to proceed fully.

Holding and Implications

The court's final decision was to grant the petition for restoration of Company B1 and Company B2 to the Register of Companies, subject to further procedural steps concerning the companies' liquidation status upon restoration.

Holding: The court ordered that restoration of the dissolved companies to the register is just and should be granted.

Implications: The restoration allows Company A to continue pursuing all claims against Company B1 and Company B2 in the Texas proceedings, including claims for specific performance and declaratory relief. The decision prevents the respondents from relying on dissolution as a procedural bar to the litigation. The court did not set new precedent but applied established principles confirming that restoration is appropriate where claims are not "merely shadowy" and serve a legitimate purpose.