Neutral Citation No:  IEHC 35
THE HIGH COURT 1988
AFRIC SIVE LIMITED AND
ALTA PETROLEUM INCORPORATED
OIL & GAS EXPLORATION PLC KEVIN NORTON
DELIVERED BY THE HONOURABLE MISS JUSTICE MELLA CARROLL ON 30TH JANUARY 1989
The issues which I have to determine are issues of fact:
(1) whether the exclusion of the Plaintiffs from the rights issue was done in good faith;
(2) whether the rights issue and the underwriting transaction was done in good faith.
In determining whether there was a lack of bona fides the Court must look at what was said and done and the sequence and timing of events. At the end of the Plaintiffs' case the evidence then given, particularly on the sequence and timing of events, caused me to have doubts about the bona fides but these doubts have been dispelled having heard the evidence given by the Defendants.
An important issue to be resolved was what was said about communicating with Mr Dolan and Mr Waddell in relation to the Defendant Company's affairs. Mr Norton's evidence of two meetings is borne out by the notice of the appointments in his diary but nothing, in fact, turns on this. It was the meeting with Mr Doyle which is relevant. There is a large measure of agreement about what happened, namely, that Mr Dolan and Mr Waddell asked for Board representation and put forward their ideas for investing in provincial UK property, which was not encouraged by Mr Doyle. That is not disputed. But what is disputed is the arrangement about the Company's affairs. Mr Dolan said they did not want to read in the newspapers what was happening to the Company and Mr Norton said he would keep them fully informed on anything major happening in the Company. Mr Waddell could not remember the exact words used but came away with the impression that there was a commitment by Mr Doyle to let them know before the Board made a decision affecting their holding in the Company. Mr Norton denies he said he would contact them about anything major happening in the Company. He said he assured them that they would not have to read in the newspapers about developments in the Company, meaning that he would send them copies of documents being sent to shareholders and to the Press.
All these people were and are, I am sure, astute business people. I do not think it likely that Mr Norton would have given a commit-ment to as yet unregistered purchasers of shares in the Defendant Company to inform them of the affairs of the Company over and above other shareholders in the Company. The parties were probably fencing with each other at this preliminary stage, the directors not sure what the purchasers of the shares had in mind and the purchasers not giving much away and hoping for Board represen-tation without disclosing their intentions.
I am sure Mr Norton's account is correct. If Mr Dolan and Mr Waddell read more into what he said than was in fact promised then that did not create any obligation.
THE RIGHTS ISSUE AND THE UNDERWRITING ARRANGEMENT
The question of a rights issue and the form of underwriting arrangement pre-dated the arrival on the scene of Mr Dolan and Mr Waddell. Oil & Gas Exploration PLC was in need of extra capital before they arrived on the scene when the rights issue was decided on, and the directors of the Company, including Mr Doyle, decided to underwrite it. This decision was made bona fide in the interests of the Company because it could be done for a much cheaper fee and at not a very large discount. After Black Monday the scheme was put in abeyance but it had not died, as the Plaintiffs suggest. The Defendant Company was still in need of additional capital.
When Mr Doyle died the Doyle family did not want to underwrite the issue and Mr Norton made arrangements with a colleague of his that he would take up half the shares not taken up in the rights issue and pass some of them on to his sub-underwriters and Mr Norton would do likewise. Mr Colthurst, the other director, did not want to participate. The rights issue was reduced from 2 for 1 to 1 for 1. This is explicable because the Doyle family were not going to become involved. Mr Norton took professional advice from Mr Garvey, Stockbroker, which he followed.
It is part of the Plaintiffs' case that the rights issue was done in undue haste to exclude Afric Sive but this is not so. Mr Norton did not know that Afric Sive would hold off for so long in registering the transfer. At any time prior to 29th March they could have presented the share transfer and if they had done so they would have been entitled to an allotment letter, being an Irish registered company. However, they did not do so and no satisfactory explanation was given to me as to why they held off registering the transfer. If they could not decide the relative merits of having one shareholder or several shareholders, they could have registered in the name of Afric Sive and subsequently transferred into other names. The main reason why this case came into being was because no transfer was registered.
I am satisfied that the rights issue and the underwriting arrange-ment was made bona fide in the interests of the Defendant Company, professional advice from both solicitor and stockbroker having been taken and followed.
As to the 200,000 shares, Afric Sive were not entitled to an allotment letter because they were not the registered owners. Alta Petroleum were not entitled to an allotment letter because they were a Canadian Company, and here I follow the judgment in Mutual Life Insurance Co. and Ors v Rank Organization Ltd, 1985 Butterworths, page 11. Neither Plaintiff is entitled to object to the fact that the taken up in the rights issue were not offered to share holders or that the underwriters kept the shares and did not put them on the market. The directors of the Defendant Company had power to make the underwriting agreement and allot shares to persons other than the existing shareholders. Further, the Company was not bound by the Stock Exchange regulations in the Yellow Book.
But that still does not dispose of the matter. There is still the question of whether there could be oppression if the 200,000 shares which would have gone to Alta Petroleum if it had not been Canadian or to Afric Sive if it had been registered are not sold to Afric Sive at the rights issue price. The Defendants' case is that there was no intention to exclude either, that the way it worked out was fortuitous. That being so, Afric Sive's money is as good as anyone else's. But section 205 of the Companies Act was not argued, and if Afric Sive wish to pursue a claim on the basis of oppression I will adjourn the matter to allow arguments to be addressed under that section.
ADJOURNED TO WEDNESDAY, 1ST FEBRUARY, AT 10.30 A.M.