Ex-CEO faces trial for allegedly urging MPs to block Chinese-backed acquisition
The High Court is set to hear a case over an allegation against a former interim CEO of an aerospace firm who is accused of secretly lobbying MPs and the UK government to sabotage a Chinese-backed deal.
The case follows a national security review by the UK government into a deal that could have led to increased Chinese ownership of the company.
Derby-based Gardner Aerospace Holdings (GAH) was acquired by Ligeance Aerospace Technology (LAT), a Chinese company, in 2017 for £326m, following consent from British and French governments.
Through its subsidiaries (including Gardner Group), it operates in the aerospace industry.
However, in 2022, following financial challenges, LAT and the Chinese state-owned investment fund Sichuan Development reached an agreement on a debt-for-equity swap.
The transaction would increase Sichuan Development’s position in LAT to a shareholding of more than 25 per cent. On behalf of the Chinese fund, a partner at Herbert Smith Freehills notified the Department for Business, Energy and Industrial Strategy under the National Security and Investment Act 2021.
The then-Tory Secretary of State issued a call-in notice under the National Security Act in March 2022, viewing the deal as a “trigger event” that may pose a risk to national security.
A few months later, a final order was issued, permitting the deal to proceed, but only subject to extensive conditions, including restrictions on information sharing with China, the removal of Chinese representatives from Gardner’s board, and the appointment of a UK government observer.
The allegations against former CEO
A year later, Gardner Aerospace, along with Gardner Group, had law firm Fieldfisher file a breach of fiduciary duty claim in court targeting former director and interim CEO Antony Upton.
According to the claim form, as seen by Morning Wire, Upton is alleged to have actively lobbied MPs, including Richard Holden MP and Dame Margaret Beckett, to ensure the deal was subjected to a call-in notice.
He was also accused of misrepresenting the level of uncertainty of funding from LAT and Sichuan Development to the companies’ bank, Natwest, which resulted in the bank imposing an extensive monitoring programme on the businesses.
Gardner Aerospace Holdings Limited and Gardner Group are suing him for alleged damages, which they estimate to be over £12m, including £30,000 per annum for the government observer.
Upton fights back against claim
Upton, who is represented by Kennedys, denies all wrongdoing.
In his defence documents, as seen by Morning Wire, Upton denies being personally opposed to Chinese ownership and denies that his conduct was motivated by a desire to act in breach of his duties or secure future employment with a new buyer.
He stated in his defence that his discussions with MPs were solely to secure the future financial viability of the companies, safeguard jobs, and obtain investment, which was a concern for Richard Holden MP and Dame Margaret Beckett MP, given the company sites in their constituencies.
He also said he was required by law to respond to requests for information from the UK government under the National Security Act, and did so “accurately”.
Regarding the Natwest allegations, he denied misrepresenting the funding uncertainty, asserting that the uncertainty was genuine and that he was simply being truthful with the bank.
The claimants filed an application for third-party disclosure, which was heard in court last month, against the Department for Business and Trade, the Cabinet Office, and the Ministry of Defence. The High Court ordered disclosure for categories one and four, which focused on direct communications, but rejected categories two and three.
The trial is scheduled for the High Court on Wednesday before Mr Justice Richard Smith and is expected to last two weeks.