Court of Appeal Judgment in BAT Industries PLC v Sequana SA

8 February, 2019

On 6 February 2019, the Court of Appeal gave judgment on appeals in proceedings concerning claims brought (i) by British American Tobacco (BAT) against a French listed conglomerate (Sequana) (the BAT claim), and (ii) by BAT’s subsidiary (BTI) against Sequana’s wholly owned subsidiary (AWA), its directors and Sequana (the BTI claim), in relation to dividends paid in circumstances where AWA was exposed to substantial claims in connection with environmental liabilities in the US. Both sets of appeals arose out of the judgment of Mrs Justice Rose following a 32 day trial in the Chancery Division in 2016, and her further judgment following a 2 day hearing on the remedy to be granted on the BAT claim in 2017.

The Court of Appeal dismissed Sequana’s appeal against the High Court’s decision on the BAT claim that the €138 million second dividend was a transaction at an undervalue paid with the purpose of putting assets beyond the reach of creditors or otherwise prejudicing their interests for the purposes of section 423 of the Insolvency Act 1986.

The Court of Appeal also dismissed BTI’s appeal against the High Court’s decision on the BTI claim that the dividend was not paid in breach of AWA’s directors’ duty to have regard to the interests of creditors. The Court of Appeal held that although the duty could be engaged short of actual insolvency, it is only triggered when the directors know or should know that the company is or is likely to become insolvent.

Ciaran Keller acted for BAT and BTI, instructed by Kevin Lloyd and Richard Lawton of Debevoise & Plimpton LLP. Read the judgment in full here.