Vice Faces $20 Million Claim From Pulse Films Founders After High Court Ruling

Vice Media is facing a $20.43 million dispute with the founders of Pulse Films, who allege former company executives misled them about Vice's finances and an expected sale after payments tied to its 2021 buyout of their remaining stake stopped.

Thomas Benski and Marisa Clifford, founders of the production company behind "Gangs of London," sought access to internal records before bringing proposed claims for fraudulent misrepresentation and unlawful means conspiracy. Peter MacDonald Eggers KC, sitting as a deputy High Court judge in London, rejected their request for pre-action disclosure on September 3 but did not decide whether the underlying allegations were true.

Vice acquired a majority stake in Pulse Films in 2016 before purchasing Benski and Clifford's remaining 22% ownership in December 2021. The deal valued that stake at $53.24 million, with $10 million paid in cash and another $43.24 million issued through a secured loan note payable in installments.

Vice made the initial payments but missed a $5 million installment in September 2022 and failed to make later payments, according to the High Court judgment. The unpaid amount eventually reached $20.43 million.

The loan note gave Benski and Clifford the right to force a sale of Pulse following a default in an effort to recover what they were owed. They allege they held off on exercising that right because executives repeatedly assured them that Vice remained valuable, a sale of the wider company was progressing, and the proceeds would cover the outstanding debt.

Benski and Clifford claim they were told during meetings and calls in 2022 that Vice was worth more than $1 billion and Pulse was worth between $100 million and $150 million. Their proposed case alleges the assurances continued while Vice was experiencing liquidity problems and exploring a sale involving potential buyers including Antenna Group.

According to the judgment, Vice began working with financial and legal advisers on a possible sale in spring 2022. Due diligence with prospective buyers continued into 2023, but no purchase price was agreed with Antenna or another bidder.

The founders contend they were kept from information that would have changed their decision to wait for repayment. Their proposed claims center on whether Vice and Pulse executives knew the company's financial position and sale prospects differed from the assurances allegedly being given while Benski and Clifford refrained from using their contractual enforcement rights.

Vice Group filed for Chapter 11 bankruptcy protection in May 2023, less than two years after the Pulse buyout. Its bankruptcy filings listed Benski and Clifford among the company's major secured creditors.

The latest High Court proceeding concerned evidence rather than liability. Pre-action disclosure can allow prospective claimants in England and Wales to obtain documents before filing substantive proceedings when specific requirements are met, including when early disclosure could help resolve the dispute or save costs.

Benski and Clifford sought records concerning Vice's valuation, solvency, sale efforts and what executives knew while the disputed statements were allegedly being made. The application named Pulse Films, Hozefa Lokhandwala, Bruce Dixon and former Vice CEO Nancy Dubuc as respondents and potential defendants.

Eggers found that the requested disclosure was too broad and that the proposed allegations had not been defined with enough precision to establish that the documents would fall within the normal scope of disclosure. The proposed review could have involved an initial pool of about 264,000 documents and cost more than £440,000, according to evidence submitted by the respondents.

The judge also noted that Benski and Clifford had acknowledged they already possessed enough evidence to bring their proposed claims. He concluded that they could file a particularized case first, allow the respondents to answer the allegations and then proceed through the ordinary disclosure process.

The ruling did not resolve whether any fraudulent misrepresentation or conspiracy occurred. Eggers said those allegations would have to be determined in substantive proceedings based in part on what the respondents knew about Vice's finances and the unsuccessful sale process when the disputed assurances were allegedly made.

Vice rejects the allegations. A company spokesperson called them "groundless" and said Vice would continue to defend any claim that is pursued. The respondents have maintained that they dealt with Benski and Clifford with honesty and integrity.

Benski and Clifford can still bring the substantive claims outlined in the High Court proceeding without obtaining the early disclosure they sought. Any future case would put the alleged representations, Vice's financial condition at the time, and the remaining $20.43 million at the center of the dispute.