Leading Supreme Court judgment: Collaboration on concept did not imply ownership in respect of the "Tromborg business"
Yesterday, the Danish Supreme Court delivered judgment in a case concerning alleged co-ownership of the "Tromborg business" due to a collaboration between the companies Tromborg ApS and Y ApS. The primary issue of the case was whether Y ApS owns or owned at the time of termination of the collaboration an undivided share of the "business" carried on through Tromborg ApS, including development, sale of products and operation of the "Tromborg concept". The Supreme Court found that the collaboration between Tromborg ApS and Y ApS did not result in the establishment of a "business" between the two companies in which it was possible to own an undivided share. Plesner represented Tromborg Aps in the Supreme Court.
In 2003, Marianne Tromborg and a former business partner entered into a collaboration on beauty products named "Tromborg", and from 2005 the companies the collaboration took place between Tromborg ApS and Y ApS. In December 2018, Tromborg ApS terminated the collaboration with Y ApS.
In 2018, Y ApS brought an action against Tromborg ApS, claiming that Y ApS owned an undivided share of 1/3 of "the Tromborg business". The City Court found in favour of Tromborg ApS on the grounds that the claim of ownership must be considered an attempt to be placed in a situation in which Y ApS owned a share of Tromborg ApS, notwithstanding the fact that this had repeatedly been refused by Marianne Tromborg. According to the City Court the claim also implied the existence of an "internal/silent company" which allegedly developed between Tromborg ApS and Y ApS and joint property in it, which could not be assumed to be in accordance with applicable law.
The judgment was appealed to the High Court which, in September 2021, ruled in a majority of two to one in favour of Y ApS that "at the time of the termination of the parties' collaboration in 2018 [Y ApS] owned an undivided share of 1/3 of the business carried on through Tromborg ApS, including development, sales of products and operation of the "Tromborg concept". In doing so, the High Court expanded the claim submitted by Y ApS, as "at the time of the termination of the parties' collaboration in 2018" was added to the text of the judgment.
Following this, Tromborg ApS appealed the High Court's judgment to the Supreme Court, requesting that the Supreme Court considered two issues of fundamental importance, i.e. (i) whether the High Court had exceeded the limits of the court's directions by expanding the claim, and (ii) the recognition of internal/sleeping companies in Danish law, as the judgment of the High Court - no matter that the High Court did not consider this explicitly - would have to presuppose the existence of an "internal/sleeping company" that had developed between the parties, which otherwise appears to be contrary to applicable case law.
The Supreme Court did not consider issue (i) as, due to the result of the judgment in favour of Tromborg ApS, there was no reason to consider the claim for dismissal that had been made. Accordingly, it still remains uncertain whether the High Court exceeded the limits of the court's directions by expanding the claim.
As far as issue (ii) is concerned, it must now be considered to have been finally determined that so-called "internal/sleeping companies" are in contravention of applicable case law and the provisions of the Danish Business Act (Danish: Erhvervsvirksomhedsloven) and the Danish Act on registration of beneficial owners (Danish: Lov om registrering af reelle ejere).
The case was conducted by Peter Schradieck og Sarah Schæffer.