England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
MR JUSTICE EVANS-LOMBE

		Royal Courts of Justice Strand, London, WC2A 2LL Wednesday 4th July 2001

LORD JUSTICE CHADWICK:

1. This is an appeal from an order made on 19 July 2000 by Mr Justice Evans-Lombe in proceedings brought by Philip Morris Products Inc and Philip Morris International Inc against Rothmans International Enterprises Ltd and The Rothmans (UK) Partnership (a firm).
2. Philip Morris is a major international tobacco group. Companies within the group manufacture and sell cigarettes throughout the world. One of the most popular and successful brand names under which its cigarettes are sold is "Marlboro". In 1989 Philip Morris entered into arrangements with one of its world-wide competitors, the Rothmans group, with a view to combining their sales activities within the United Kingdom. In 1999 the Rothmans group tobacco interests were acquired by British American Tobacco plc. The underlying question in those proceedings is whether, following that acquisition, the first claimant, Philip Morris Products Inc ("PM Products"), was entitled to terminate a licence agreement dated 30 April 1989 by which The Rothmans (UK) Partnership ("the Partnership") was authorised to manufacture and sell "Marlboro" brand cigarettes in the United Kingdom.
3. That question turns on whether or not there had been "any change in control of the Partnership" within the meaning given to that expression by clause 14 of an earlier agreement ("the Master Agreement") dated 20 April 1989 made between Rothmans International Plc, other companies in the Rothmans' group, Philip Morris International Inc ("PMI"), PM Products and other companies in the Philip Morris group. Rothmans International Enterprises Ltd ("RIE") was subsequently substituted for Rothmans International Plc as party to the Master Agreement.
4. The judge held that there had been a change of control for the purposes of those agreements. He made appropriate declarations to give effect to his decision. He refused permission to appeal. RIE and the Partnership were granted permission to appeal by this Court (Sir Andrew Morritt, Vice-Chancellor) on 15 September 2000.

The contractual terms

5. Although the circumstances in which the question arises are of some complexity, the question for decision on the appeal turns on the construction of a few words in a commercial contract.
6. By clause 2.1 of the agreement dated 30 April 1989 ("the Licence Agreement") PM Products granted to the Partnership an exclusive licence to use the "Marlboro" trade marks in connection with the sale and distribution of cigarettes in the United Kingdom and the Isle of Man and to manufacture cigarettes for sale and distribution by the Partnership in that territory. The licence was for a term of twenty five years, terminable in accordance with the provisions set out in clause 10. Clause 10.2 provided for termination by the licensor at any time upon not less than one year's notice to the Partnership "if there is any change in control of the Partnership."
7. The members of the Partnership were named in the Licence Agreement as Park (UK) Limited, Semicrete Limited (subsequently renamed Rothmans Trading Limited) and Philip Morris & Company (UK) Limited. Each of those companies was a party to the Master Agreement dated 20 April 1989; to which PM Products was also a party. Clause 14.2 of the Master Agreement was in these terms, so far as material:

"For the purposes of Clause 10.2 of the Marlboro Licence Agreement there shall be deemed to be a change of control of the Partnership entitling PM Products to terminate the Marlboro Licence Agreement if :-

14.2.1 there occurs a change of control of Rothmans; . . .

and in no other circumstance. . . . "

In that context "the Marlboro Licence Agreement" means the agreement subsequently made on 30 April 1989 to which I have already referred; and, following the substitution of RIE for Rothmans International Plc by a later agreement of 11 August 1992, "Rothmans" means RIE.

8. Clause 14.4 of the Master Agreement explained what was meant by the expression "a change of control of Rothmans":

"For the purposes of this Clause a change of control of Rothmans takes place if:-

14.4.1 any person or group of persons acting in concert (other than members of the Philip Morris Group) not having such control at the date of this Agreement acquires control of Rothmans; or

14.4.2 any person or group of persons acting in concert (other than members of the Philip Morris Group) not previously having such control directly or indirectly acquires control of a person who controls Rothmans.

In this Clause 14.4 the expressions "acting in concert" and "control" shall bear the meanings and shall be construed in accordance with the City Code on Takeovers and Mergers as in force at the date of this Agreement."

9. It is clear, therefore, that, as between the parties to the Licence Agreement, there was deemed to be a change of control of the Partnership – for the purpose of the termination provisions in clause 10.2 of that agreement – if there occurred a change of control of Rothmans within the meaning given to that expression by clause 14.4 of the Master Agreement; and that, in the context of clause 14.4 of the Master Agreement, "control" – and the associated concept "acting in concert" – were to have the meanings, and were to be construed in accordance with, the City Code on Takeovers and Mergers ("the Code").

The City Code

10. "Control" and "acting in concert" are defined terms for the purposes of the Code. In the January 1988 revision of the Code (which, as we were told, was the revision current at the date of the Master Agreement) they have the following meanings:

"Control means a holding, or aggregate holdings, of shares carrying 30% or more of the voting rights . . . of a company, irrespective of whether the holding or holdings gives de facto control"

"Person acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate control . . . of that company.

Without prejudice to the general application of this definition, the following persons will be presumed to be persons acting in concert with other persons in the same category unless the contrary is established:-

(1) a company, its parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies, all with each other (for this purpose ownership or control of 20% or more of the equity share capital of a company is regarded as the test of associated company status); . . ."

In that context "voting rights" means all the voting rights attributable to the share capital of a company which are currently exercisable at a general meeting.

11. The Code, as paragraph 1(a) in the introductory section (section A) makes clear, is issued by the Panel on Take-overs and Mergers with a view to ensuring "fair and equal treatment of all shareholders in relation to take-overs" and to provide "an orderly framework within which take-overs are conducted". Section B of the Code contains a number of General Principles; section C contains definitions (including the definitions of "acting in concert" and "control" to which I have just referred; and sections D to Q contain a number of more specific rules directed to particular situations. An important feature of the Code are the Notes to the definitions and to the rules.
12. The interpretative approach of the Panel when addressing a question which falls within the ambit of the Code is explained in paragraph 3(a) of section 1 ("General Principles and Rules"):

"The Code is based upon a number of General Principles, which are essentially statements of good standards of commercial behaviour. These General Principles apply to all transactions with which the Code is concerned. They are, however, expressed in broad general terms and the Code does not define the precise extent of, or the limitations on, their application. They are applied by the Panel in accordance with their spirit to achieve their underlying purpose; the Panel may modify or relax the effect of their precise wording accordingly.

In addition to the General Principles, the Code contains a series of Rules, of which some are effectively expansions of the General Principles and examples of their application and others are provisions governing specific aspects of takeover procedure. Although most of the Rules are expressed in more detailed language than the General Principles, they are not framed in technical language and, like the General Principles, are to be interpreted to achieve their underlying purpose. Therefore, their spirit must be observed as well as their letter and the Panel may modify or relax the application of a Rule if it considers that, in the particular circumstances of the case, it would operate unduly harshly or in an unnecessarily restrictive or burdensome, or otherwise inappropriate manner."

That approach is endorsed in the first introductory paragraph to section B:

"It is impracticable to devise rules in sufficient detail to cover all circumstances which can arise in offers. Accordingly, persons engaged in offers should be aware that the spirit as well as the precise wording of the General Principles and the ensuing Rules must be observed. Moreover the General Principles and the spirit of the Code will apply in areas or circumstances not explicitly covered by any Rule."

13. The Code definitions of "control" and "acting in concert" have particular relevance to General Principle 10 and to Rule 9. The General Principle is in these terms (so far as material):

"Where control of a company is acquired by a person, or persons acting in concert, a general offer to all other shareholders is normally required; a similar obligation may arise if control is consolidated. . . ."

Rule 9.1 (in section F) requires (so far as material) that:

"Except with the consent of the Panel, when: -

(a) any person acquires, whether by a series of transactions over a period of time or not, shares which (taken together with shares held or acquired by persons acting in concert with him) carry 30% or more of the voting rights of a company; or

(b) any person who, together with person acting in concert with him, holds not less than 30% but not more than 50% of the voting rights and such a person, or any person acting in concert with him, acquires in any period of 12 months additional shares carrying more than 2% of the voting rights,

such person shall extend offers . . . to the holders of any class of equity share capital whether voting or non-voting and also to the holders of any class of voting non-equity share capital in which such person or persons acting in concert with him hold shares. . . ."

It may be noted that, when read in conjunction with the definition of control in section C of the Code, the acquisition of shares which carry 30% or more of the voting rights of a company is synonymous with obtaining control for the purposes of the Code; and it is, I think, plain that the related concept "consolidating control" to which General Principle 10 and the definition of "acting in concert" refer includes transactions to which Rule 9.1(b) is directed.

14. An obvious question which is likely to arise in connection with the acquisition of control, for the purposes of the Code, is whether the acquisition of control by a person, say A, of one company, say company B, which itself has control of a second company (company C), gives rise to an obligation on A to make an offer for outstanding shares of company C. The point is addressed in Note 7 to Rule 9.1, under the heading "The chain principle". For reasons which will appear later in this judgment, the Note is, I think, of some importance in understanding the inter-relation of clauses 14.4.1 and 14.4.2 of the Master Agreement. The Note is in these terms:

"Occasionally, a person or group of persons acquiring statutory control of a company (which need not be a company to which the Code applies) will thereby acquire or consolidate control, as defined in the Code, of a second company because the first company itself holds a controlling block of shares in the second company, or holds shares which, when aggregated with those already held by the person or group, secure or consolidate control of the second company. The Panel will not normally require an offer to be made under this Rule in these circumstances unless either: -

(a) the shareholding in the second company constitutes a substantial part of the assets of the first company; or

(b) one of the main purposes of acquiring control of the first company was to secure control of the second company.

. . ."

It is, I think, reasonably clear that " acquiring statutory control" in that context must mean something other than control as defined by the Code; but that "secure or consolidate control" does mean control as defined by the Code. The point addressed by the Note, as it seems to me, is whether (and, if so, when) the acquisition by a person or group of persons (say A) of shares in company B (carrying more than 50% of the voting rights) in circumstances in which either (i) company B itself holds shares which carry 30% or more of the voting rights in company C or (ii) the shares which company B holds in company C will, when aggregated with the shares in company C held by A, carry 30% or more of the voting rights in company C, will give rise to an obligation on A to make a general offer for the shares in company C. Or, to put the point another way, whether (and, if so, when) the acquisition of statutory control of company B will be treated as the acquisition of control (for the purposes of the Code) of company C (in which company B has an existing holding).

The events upon which Philip Morris rely

15. The events which are said to have given rise to a change of control of RIE took place between the beginning of January and the middle of June 1999. It is convenient to begin with a description of the position as it was immediately before British American Tobacco plc ("BAT") made a public announcement, on 11 January 1999 that it was to acquire 100% of the shares in Rothmans International BV ("RIBV"), then a parent company of RIE. As at that date, and until 10 March 1999, the entire issued share capital of RIE was held by Rothmans International Limited ("RIL") which was, itself, a wholly owned subsidiary of RIBV. The share capital of RIBV was held by Rothmans International Holdings SA ("RIH"). The share capital of RIH was held, as to 66.66%, by Richemont SA and as to 33.33%, by Rembrandt Group Limited.
16. It was appreciated , of course, that, unless some steps were taken to avoid that result, the acquisition by BAT of the shares in RIBV would give rise to a change in control of RIE; and so give PM Products the opportunity to terminate the Licence Agreement. In circumstances where, as the judge observed, BAT and Philip Morris are in competition as, respectively the largest and second largest tobacco companies in the world, it could be expected that Philip Morris might well be less than enthusiastic about an arrangement under which their leading brand was marketed in the United Kingdom through a partnership in which BAT would have a substantial stake and effective control. Lord Grabiner QC, who appeared on this appeal for BAT, sought to persuade us that that was an arrangement with which Philip Morris could feel entirely comfortable; but, be that as it may, it is clear from the steps which were taken that BAT did not think it commercially sensible to run the risk that PM Products might take the opportunity to terminate (or threaten to terminate) the Licence Agreement which a change of control would provide.
17. Put shortly, the objective, in law, of the steps which were taken in anticipation of the acquisition by BAT of the whole of the issued capital of RIBV was to move control of RIE from RIBV to a company further up the corporate tree (Richemont SA) so that it could be said (i) that the circumstances in which RIBV itself ceased to have control of RIE did not give rise to a "change of control" of RIE within the meaning given to that concept by clause 14.4 of the Master Agreement and (ii) that, RIBV having ceased to have control of RIE, the subsequent change of control of RIBV – upon its acquisition by BAT – could not give rise to a change of control of RIE. But, of course, the commercial objective of the BAT acquisition required that the economic interest to be derived from ownership and control of RIE remained in the Rothmans' companies that were to be acquired by BAT. The means by which those legal and commercial objectives were to be reconciled were (a) the issue by RIE to Richemont SA of a "Special Share" which conferred voting rights sufficient to divest RIL (and so RIBV) of control – as defined by the Code – but which conferred no economic interest of any value and (b) the terms of a shareholder agreement between Richemont SA and RIL.
18. In pursuit of those objectives Richemont SA and RIL entered into a shareholder agreement on 10 March 1999 "with regard to the Special Share to be issued by [RIE] to us [Richemont SA]". The parties acknowledged that "the purpose of our holding of the Special Share is to ensure that we, Richemont SA, retain voting control of [RIE] following, and notwithstanding, the acquisition of [RIBV] by [BAT]". The shareholder agreement contained the following provisions (so far as material):

"1. We [Richemont SA] agree that we will not exercise our voting rights attached to the Special Share in respect of the appointment and removal of directors without first consulting with you [RIL] so far as practicable and having regard to any representations which you might make.

2. We agree that we will not exercise our voting rights attaching to the Special Share in a manner which is inconsistent with the recommendations of the board of directors of the Company [RIE] with regard to the payment of dividends.

3. . . .

4. You will not serve a Notice of Termination except where permitted to do so in accordance with the Articles of Association of the Company.

5. In consideration for the mutual undertakings hereby given by both parties, we acknowledge that you are hereby given the option to acquire, for the sum of £1, the Special Share in either of the following circumstances:

(i) forthwith upon written notice on 1st May 2014 and on each successive date being five years from the last date upon which such option arose; and

(ii) on six months' written notice at any time provided that:

(a) you have first given us one month's notice of your intention to serve a notice exercising your option; and

(b) you have consulted with us during the one month notice period referred to in (a) above."

19. On the same day, 10 March 1999, the authorised share capital of RIE was increased to £1,000,001 by the creation of one additional Special Share of £1 with the rights set out in new articles of association approved and adopted on that day. The Special Share was allotted forthwith to Richemont SA. The new articles of association of RIE introduced the following provisions in relation to the Special Share:

"11. Neither the Special Share nor any interest therein shall be capable of being transferred without the prior written consent of the holder(s) of the majority of the ordinary shares of the Company.

Special Share rights

12. At any time when a Notice of Termination has not been served, the holder of the Special Share shall be entitled to exercise votes at any general meeting of the Company equivalent to 70.1% of the total votes exercisable at that meeting. For the purposes of these articles, a Notice of Termination means a notice served on the holder of the Special Share and on the Company by the holder(s) of a majority of the issued ordinary shares terminating the special voting rights attached to the Special Share on the grounds that there has been an event of default under the principal banking or other debt facilities of [RIBV] or its subsidiaries.

13. The holder of the Special Share shall be entitled to participate, pari passu with the holders of ordinary shares, in any dividend declared by the company to the extent that and only if such dividend exceeds £1,000,000 per share.

14. In a winding up or other return of capital by the Company, the holder of the Special Share shall be entitled, pari passu with the holders of ordinary shares, to receive repayment of the amount paid up or credited as paid up on the Special Share.

15. The Special Share shall carry no further right to participate in the profits or assets of the Company in addition to those set out above.

16. At any time when a Notice of Termination has not been served, no general meeting of the company shall be deemed to be quorate unless the holder of the Special Share is present in person or in proxy."

The significance of the provision in article 12 – that the Special Share should carry 70.1% of the voting rights exercisable at any general meeting of RIE – was, of course, that the voting rights attached to the ordinary shares (then held by RIL) were reduced to below 30% (the threshold for control under the Code). Further, it was common ground that there were no conceivable circumstances in which any dividend declared by RIE would exceed £1 million per share. The effect of clause 13, therefore, was that there were no conceivable circumstances in which the Special Share would carry a right to dividend.

20. Following the transactions effected on 10 March 1999, BAT was in a position to issue a circular to shareholders in connection with the proposed merger with RIBV. The circular, which is dated 15 March 1999, contained the following paragraph in Part 5 (Additional Information):

"5.4 Following the Merger, under existing arrangements entered into by [RIL], Richemont will retain (through one of its wholly owned subsidiaries) voting control over 70.1 per cent. of the voting rights of the principal Rothmans Group party to the partnership arrangements in the UK with subsidiaries of Philip Morris Companies Inc. These arrangements are intended to secure that, for the purposes of the relevant partnership agreement, there will be no change of control resulting from completion of the Merger. The relevant companies with an interest in the partnership arrangements will remain subsidiary undertakings of [RIBV]. Richemont and its subsidiaries will have substantially no direct economic interest in such companies." [emphasis added]

In that context "Richemont" means Compagnie Financière Richemont AG, a company incorporated in Switzerland, of which Richemont SA was a wholly owned subsidiary.

21. It is pertinent to note that, in Part 2 of the circular (Accountant's Report on Rothmans) – in a section headed "Principal Accounting Policies: Basis of Consolidation" – the reporting accountants (PricewaterhouseCoopers) explain that, for the purposes of the financial information on which they are reporting:

"Subsidiary undertakings are defined as those undertakings controlled by the Rothmans Group. Control of an undertaking most commonly exists when Rothmans holds, directly or indirectly through other subsidiary undertakings, more than 50 per cent. of the ordinary share capital and voting rights of the undertaking. An undertaking in which Rothmans holds, directly or indirectly through other subsidiary undertakings, between 20 per cent. and 50 per cent. of the ordinary share capital and voting rights is also accounted for as a subsidiary undertaking if the Rothmans Group is able to exercise a dominant influence over the undertaking." [emphasis added].

In that context "Rothmans" means RIBV; and "Rothmans Group" means "[RIBV] and its subsidiary undertakings and associates" – see the definitions applicable to the circular as a whole.

22. If the test for identifying subsidiary undertakings adopted by the reporting accountants is to be applied consistently throughout the circular, then the statement in the third sentence of paragraph 5.4 to which I have already referred – "The relevant companies with an interest in the partnership arrangements will remain subsidiary companies of [RIBV]" – is not easy to reconcile with the assertion, in the second sentence of that paragraph, that: "These arrangements are intended to secure that, for the purposes of the relevant partnership agreement, there will be no change of control resulting from the completion of the merger". On the one hand, it seems to be accepted, in the third sentence of paragraph 5.4, that the Rothmans Group companies with an interest in the partnership arrangements (in particular, RIE) will continue – notwithstanding the issue of the Special Share – to be companies over which RIBV and RIL will exercise a dominant influence; but, on the other hand, it is said, in the second sentence, that, nevertheless, following the acquisition of RIBV by BAT, there will be no change in control in relation to RIE. That may be the effect of the specific terms in which "change of control" is defined for the purposes of clause 14 of the Master Agreement; but, if that is the effect of incorporating terms which are to be construed in accordance with the Code – as clause 14.4 of the Master Agreement requires - the result may fairly be described as surprising.
23. The acquisition of RIBV was completed on 7 June 1999. BAT acquired the entire issued share capital of RIBV from RIH in consideration for the issue of 35% of its own shares (carrying 25% of the voting rights) to RIH, which immediately changed its name to R & R Holdings SA. A press announcement issued by the "Merger Steering Group" contained the statement that "Rothmans International [meaning, in that context, RIBV] and its world-wide subsidiary companies are now subsidiaries of the British American Tobacco Group".

These proceedings

24. On 11 June 1999 Rothmans sent to Philip Morris copies of the new articles of association of RIE (adopted on 10 March 1999) and the shareholders' agreement. Philip Morris wrote, on 14 July 1999, to assert that the effect of the arrangements made on 10 March 1999 was that Richemont SA held the Special Share as nominee for RIL; with the result that, on the acquisition of RIBV on 7 June 1999, there was a change of control of RIE for the purposes of the Master Agreement. That contention was rejected. These proceedings were commenced on 29 July 1999.
25. The relief claimed in the proceedings were declarations (i) that there was a change of control of RIE on 10 March 1999, alternatively on 7 June 1999, within the meaning of clause 14.2.1 of the Master Agreement, (ii) that there was a change of control of the Partnership on 10 March 1999, alternatively on 7 June 1999, within the meaning of clause 14.2 of the Master Agreement, and (iii) that there had been a change of control of the Partnership for the purposes of clause 10.2 of the Licence Agreement. The declarations sought under (ii) and (iii) follow from the declaration sought under (i).
26. The particulars of claim, served on behalf of the Philip Morris claimants, put the claim on two grounds, in the alternative. First it was said that that the allotment of the Special Share to Richemont SA on 10 March 1999 was ineffective to transfer control of RIE from its direct parent (RIL) to Richemont SA. The basis of that contention, as pleaded, was (i) that in all the circumstances Richemont SA held the Special Share upon trust for RIL (there referred to as "RIE Parent"), alternatively (ii) that the allotment of the Special Share was a sham, in the further alternative (iii) that, notwithstanding the allotment of the Special Share, RIE remained under the control of RIL within the meaning of the Code. Second, that if (contrary to the primary contention) the issue of the Special Share on 10 March 1999 was effective to transfer control of RIE to Richemont SA, then that effected a change of control of RIE for the purposes of the Master Agreement. The basis of that contention, as pleaded, was (i) that, if Richemont SA acquired control on 10 March 1999, it did so in circumstances in which it was not (prior to that date) a person having control for the purposes of clause 14.4.1 of the Master Agreement, alternatively (ii) that control of RIE was acquired on 10 March 1999 by Richemont SA and BAT acting in concert, in the further alternative (iii) that control of RIE was acquired on 10 March 1999 by Richemont SA acting in concert with BAT and RIL.
27. The proceedings came before Mr Justice Evans-Lombe in June 2000. He heard evidence from Mr Jan du Plessis, who had been a director of Richemont SA from its incorporation in 1988 and who, following the acquisition by BAT of the Rothmans' tobacco interests, became a director of BAT, Mr Nigel Gourlay, a chartered accountant who had been BAT's Head of Business Development since May 1998 and, as such, the executive at BAT with day to day responsibility for the Rothmans acquisition, and Mr Andrew Cripps, formerly Director of Corporate Finance at RIBV and, following the BAT acquisition, Deputy Head of Business Development at BAT. On the basis of that evidence the judge reached the conclusion, expressed at paragraph 46(5) of the judgment which he delivered on 19 July 2000, that:

". . . on the evidence adduced before me, I find that at the time BAT acquired, through subsidiaries, all the shares in RIL there existed an "understanding" between BAT and Richemont SA by which BAT was left to control RIE through RIL's holding of ordinary shares or was to be assisted in doing so by the favourable voting of the Special Share."

It is clear from his judgment that the judge' finding that there was an "understanding" between BAT and Richemont SA – to the extent that he described – was made in the context of the expression "pursuant to an agreement or understanding (whether formal or informal)" which appears in the Code definition of "acting in concert".

The judge's analysis

28. The judge identified three main strands to the arguments advanced before him on behalf of the Philip Morris claimants: (i) that on its true construction the application of clause 14 of the Master Agreement to the facts led to the conclusion that there had been a change of control of RIE; (ii) that the effect of the material transactions was that RIL retained a sufficient equitable interest in the Special Share such that it never lost control of RIE – so that, on the acquisition of RIBV by BAT, there was a change of control, (iii) that the issue of the Special Share by RIE to Richemont SA conferred on Richemont SA direct control of RIE (which it did not have before) and that that change from indirect to direct control was sufficient to constitute a change of control for the purposes of clause 14.4.1 of the Master Agreement. He explained, at paragraph 43 of his judgment, that the argument under the first of those strands had been put in two ways:

"In the first place it is submitted that the acquisition of [RIBV] by BAT on the completion of the take-over, which included the acquisition of RIL, amounted to a change of control of RIE within the meaning of the Code because its effect was to confer de facto voting control of RIE on BAT as a result of RIL being constituted the wholly owned subsidiary of BAT. In the second place, it is submitted that BAT acquired such voting control, either, as a result of its acquisition of 29.9% of the voting rights at a general meeting of RIE, in concert with Richemont SA the holder of the remaining votes, or, BAT and Richemont SA, as a "concert party" not having control of RIE before the take-over, as a result of that take-over, acquired control."

29. The judge addressed, first, the argument that BAT acquired control of RIE, in concert with Richemont SA, when (indirectly through its acquisition of RIBV) it acquired the shares in RIE held by RIL. He accepted that argument. His reasoning is set out at paragraph 46 of his judgment, in five numbered sub-paragraphs, and may be summarised as follows: (i) The definition of "acting in concert" in the Code, imports into the definition of "control" that such control can be demonstrated where a party ("the purchaser") who acquires shares carrying less than 30% of the voting rights, nonetheless, as a result of an "understanding" with a second party, who holds shares in the target company, can control that company provided that in the aggregate they both hold shares carrying 30% or more of the voting rights; in particular, it does not matter that the second party may already control the target company; (ii) whether or not the purchaser, in acquiring shares carrying less than 30% of the votes in the target company, thereby acquires control of the target company depends on the nature of the understanding between the purchaser and the second party – whether or not the second party, by himself, already controls the target company; (iii) so control of the target company may be acquired by a purchaser who acquires shares in the target company carrying less than 30% of the votes if it can be demonstrated, as a matter of fact, that, at the time of the acquisition, the purchaser had an understanding with another shareholder of the target company whose holding of shares carried votes which, aggregated with those of the purchaser, amounted to 30% or more of the votes; again (by implication) it does not matter that the shares already held by that other shareholder carried more than 30% of the votes; (iv) in the present case, the relevant acquisition of shares was the acquisition by BAT (indirectly, through its acquisition of RIBV) of the shares in RIE held by RIL, which carried 29.9% of the votes in RIE; (v) accordingly, the relevant question was whether, at the time that BAT acquired (indirectly) the shares in RIE held by RIL, there existed an "understanding" between BAT and Richemont SA by which BAT was to be left to control RIE through RIL's holding of ordinary shares, or was to be assisted in doing so by the favourable voting, by Richemont SA, of the Special Share. As I have already indicated, the judge held that that question of fact should be answered in the affirmative.
30. The judge then went on to consider the alternative argument that BAT and Richemont, as a "concert party" not having control of RIE before the BAT take-over, acquired control of RIE as a result of that take-over. He accepted that argument also. He said this, at paragraphs 64 and 65 of his judgment:

"On the basis of the findings of fact which I have just made BAT and Richemont SA constituted a group of persons acting in concert for the purposes of sub-clause 14.4.1. However, contrary to the submissions of the [Rothmans] defendants, in my judgment, before the completion of the take-over, they were not acting in concert for the purposes of controlling RIE. Richemont SA controlled RIE by means of the Special Share. BAT held no shares, directly or indirectly, in RIE. Before completion of the take-over, any understanding between Richemont SA and BAT as to their future conduct, should the take-over be completed, contributed nothing to Richemont SA's control of RIE. That situation changed on completion of the take-over on the 7^th June. At that point BAT became through RIL a holder of shares in RIE and the understandings which I have found existed between BAT and Richemont SA became effective. They became effective because they became necessary for the management of the enlarged BAT Group in which Richemont SA had a significant interest and management role as a result of the take-over agreement.

It follows, in my judgment, that at the point of completion there came into existence a group of persons having control of RIE who did not previously as a group have such control and that accordingly the [Philip Morris] claimants are entitled to succeed under this part of their argument also."

As the judge said, his acceptance of the arguments advanced on behalf of the Philip Morris claimants under the second limb of their first main head was sufficient to dispose of the case. Nevertheless, he went on to address the arguments under the first limb of that first head, and the arguments in support of the second and third main heads.

31. The judge accepted the argument that, applying a purposive construction to the change of control provisions in clause 14.4 of the Master Agreement, the conclusion to be drawn was that the acquisition of RIBV by BAT did "amount to a change of control of RIE within the meaning of the Code" because its effect was to confer de facto voting control of RIE on BAT as a result of RIL becoming a wholly owned subsidiary of BAT. The argument is summarised at paragraph 68 of the judgment:

"The Court's approach to construction of the words "control" and "acting in concert" as used in the clause should be the same as the approach of the Panel in construing those words for the purposes, inter alia, of coming to decisions under Rule 9.1 of the Code. Since, in the light of the arrangements embarked upon by Rothmans to evade the change of control provisions in the Master Agreement, the Panel would undoubtedly have come to the conclusion, for the purposes of Rule 9.1, that there had been a change of control of RIE, this Court should come to the same conclusion for the purposes of deciding that the events which trigger the right of PM [Products] to terminate the Licence Agreement have occurred."

The judge accepted, at paragraph 70 of his judgment, that clauses 14.2 and 14.4 of the Master Agreement were included "in order to provide PM [Products] with an opportunity to withdraw from the Licence Agreement in the event that, for whatever reason, the company with which its affiliated companies were in partnership for the purposes of selling and distributing cigarettes in the United Kingdom and the Isle of Man became controlled by a party of which it disapproved." In the light of that, he held, at paragraph 75, that:

"Approaching the construction of clause 14.4 in that way, in my judgment, the word "control" when used in clause 14.4.1 should be construed so that BAT, on completion of the take-over, is to be treated as having control over the voting rights conferred by the Special Share albeit that the legal owner of that share remained Richemont SA because of the circumstances of its allotment, the conditions subject to which it was allotted and the understanding which I have found existed between BAT and Richemont SA at the time of its allotment and subsequently. Not to construe the clause in this way renders it ineffective to achieve the purpose for which I have found that the parties included it in the Master Agreement. It follows that, in my judgment, the claimants are entitled to succeed under this head of the argument also."

32. The judge accepted, also, that the Philip Morris claimants were entitled to succeed under their second main head - that the effect of the material transactions was that RIL retained a sufficient equitable interest in the Special Share such that it never lost control of RIE, so that, on the acquisition of RIBV by BAT, there was a change of control. He did so on the basis that, because RIL, as the holder of an option to re-purchase the Special Share at any time for a nominal consideration, was (in effect) in a position to prevent Richemont SA from exercising the voting rights conferred by the Special Share in manner which was inconsistent with RIL's interests, it (RIL) continued to control RIE through the Special Share. After referring to the option provisions in the shareholders' agreement, and to observations of this Court in two tax cases – Wood Preservation Limited v Prior [1969] 1 WLR 1077, 1096, 1097 and J Sainsbury PLC v O'Connor [1991] 1 WLR 963, 975, 976 - and in the later case of Michaels v Harley House (Marylebone)Limited [1999] 3 WLR 229, he said this, at paragraph 88 of his judgment:

" . . . the facts of this case lead to the conclusion that the Special Share was so shorn of all economic interest in RIE before its allotment to Richemont SA that, when allotted, it was a "bare legal shell" in the hands of that company. I would hold that RIL, the option holder, has at all material times since its allotment, been entitled to control, in the manner which I have described above, the exercise of the voting powers conferred by the Special Share on Richemont SA."

Having held that the Special Share was shorn of all economic interest so as to make it valueless, the judge rejected the alternative argument that the transfer by allotment to Richemont SA gave rise to a resulting trust.

33. The judge rejected, also, the third main head of argument - that the issue of the Special Share by RIE to Richemont SA conferred on Richemont SA direct control of RIE (which it did not have before) and that that change from indirect to direct control was sufficient to constitute a change of control for the purposes of clause 14.4.1 of the Master Agreement. The argument is summarised in paragraph 93 of the judgment:

". . . 'control' in Clause 14.4.1 means direct control and not indirect control through an intermediate holding company. The fact that the Code makes no distinction between direct and indirect control in giving a meaning to that word is not decisive against the argument. Clause 14.4.1 is drafted so as to deal with direct control by contrast to Clause 14.4.2 which deals with indirect control of RIE. Since Richemont SA did not have direct control, either itself or through one or more nominees (it being noted that between Richemont SA and RIE the chain of shareholding of the group passed through Rothmans International Holdings SA in which Rembrandt Group Limited held a one-third shareholding. It follows, so the argument runs, that it cannot be demonstrated that Richemont SA controlled RIE in the sense required by Clause 14.4.1 immediately before the allotment of the Special Share to it. There was thus a change of control on such allotment."

The issues on this appeal

34. The appellants (Rothmans) challenge each of the four grounds upon which the judge decided against them. They summarise those grounds in the skeleton argument on which they rely: (i) that, on the indirect acquisition of RIL on 7 June 1999, BAT (on its own) acquired control of RIE within the meaning of clause 14.4.1 of the Master Agreement and the Code definition of "control"; (ii) that, on the indirect acquisition of RIL on 7 June 1999, BAT and Richemont SA constituted a group of persons acting in concert acquiring control of RIE within the meaning of clause 14.4.1; (iii) that, on the indirect acquisition of RIL on 7 June 1999, BAT acquired de facto control of RIE and thereby acquired control of RIE within the meaning of clause 14.4.1; and (iv) that, following allotment of the Special Share, RIL retained sufficient equitable interest in the voting rights in RIE that upon BAT's indirect acquisition of RIL on 7 June 1999, BAT acquired control of RIE within the meaning of clause 14.4.1.
35. The respondents (Philip Morris) criticise the appellants' division of the judge's conclusion on what they had advanced at the trial as the second limb of their first main argument into (i) and (ii) above as "artificial"; but it may be said, in fairness to the appellants, that that reflects the way in which the judge analysed the argument. The respondents prefer to run the two points together. As they say in their skeleton argument:

"The ground of his decision was that there were understandings between BAT and Richemont SA the effect of which was that BAT and Richemont SA were acting in concert to enable (a) BAT alone, or (b) BAT in conjunction with Richemont SA, to obtain voting control over RIE on the completion of the agreed take-over."

They observe that "This is much the most straightforward reason why the issue of the special share did not avoid a 'change of control'.

36. The respondents, by notice served under CPR 52.5, raise what may be described as a contingent challenge to the judge's conclusions on the issues which he decided against them. They accept that, if (as they contend) the judge was right to hold that Richemont SA acquired no more than bare legal ownership on the allotment of the Special Share, no question of resulting trust arises; but they wish to contend that, if the judge were wrong on that point, then the voluntary transfer of control by RIL to Richemont SA (on the allotment of the Special Share) in circumstances where there was no intention to benefit Richemont SA, did give rise to a resulting trust over the Special Share (or the voting rights) in favour of RIL. They contend, also, that, if (contrary to their primary submission) the allotment of the Special Share did leave Richemont SA in sole control of RIE after the take-over, then the allotment of the Special Share itself involved a change of control within the meaning of clause 14.1 of the Master Agreement. The point reflects the argument to which the judge had referred at paragraph 93 of his judgment. As set out in paragraph 4 of the respondents' notice.

" . . . the Judge was wrong to construe the word 'control' in Clause 14.4.1 so as to include indirect control. The Judge should have held that the test in Clause 14.4.1 (as distinct from that in Clause 14.4.2) was intended to deal with questions of direct control only, so that a change in direct control was within the Clause, regardless of the fact that the new (direct) controller used to have indirect control."

37. Although the various points have been refined and elaborated in the way that I have described, there are, as it seems to me, really only two issues on this appeal. First, whether the effect of the arrangements made in connection with the issue of the Special Share on 10 March 1999 was such as to leave control over the voting rights conferred by the articles of association of RIE on the holder of that share in the hands of RIL; in other words, whether the contractual position evidenced by the articles of association and the shareholders' agreement was, in some way, overridden by some equitable right or interest which enabled RIL (and, through RIL, RIBV and subsequently BAT) to direct how the voting rights conferred by the Special Share should be exercised. Second, whether (absent any overriding equitable considerations) the combined effect of (i) the arrangements made on 10 March 1999, (ii) the acquisition of RIBV by BAT on 7 June 1999 and (iii) the existence of any relevant understanding between BAT and Richemont SA was that there was a change of control of RIE for the purposes of clause 14 of the Master Agreement.

The first issue: an overriding equity?

38. Although, as it seems to me, the question whether the contractual position evidenced by the articles of association and the shareholders' agreement was, in some way, overridden by some equitable right or interest which enabled RIL to direct how the voting rights conferred by the Special Share should be exercised is logically anterior to the question whether the effect of the contractual arrangements (viewed in the light of any relevant understanding as to how contractual rights would be exercised) gave rise to a change of control for the purposes of clause 14 of the Master Agreement – because, if there were some overriding equity which required Richemont SA to exercise the voting rights attached to the Special Share in accordance with the directions of RIL, the argument that, nevertheless, there was no change of control when BAT acquired RIBV (and so, indirectly, RIL) would be unreal – the first question on which we were addressed was whether the effect of the contractual arrangements (as a matter of construction) was such as to give rise to a change of control. In the light of the submissions advanced on that point, we did not find it necessary to hear argument on the other question. Accordingly, while recognising the force of the proposition that (absent sham) the court should be slow to refuse to give effect according to its terms to a contractual arrangement made with the benefit of skilled legal advice, I express no view on the question whether the contractual position was overridden by some equitable right or interest.

The second issue: change of control under clause 14.4 of the Master Agreement?

39. It is convenient to set out, again, the material provisions of clause 14.4 of the Master Agreement:

"For the purposes of this Clause a change of control of [RIE] takes place if:-

14.4.1 any person or group of persons acting in concert . . . not having such control at the date of this Agreement acquires control of [RIE]; or

14.4.2 any person or group of persons acting in concert . . . not previously having such control directly or indirectly acquires control of a person who controls [RIE]." [emphasis added]

40. The first question, as it seems to me, is whether, prior to the issue of the Special Share, Richemont SA was a person "having such control . . . of [RIE]" for the purposes of clause 14.4.1. The factual position, prior to the issue of the Special Share, was that Richemont SA held two thirds of the shares in RIH; of which, through wholly owned intermediate holding companies (including RIBV and RIL), RIE was a wholly owned subsidiary. There is no doubt, therefore, that – whether "such control", in the context of clause 14.4.1 means statutory control or control for the purposes of the Code – Richemont SA was, prior to the issue of the Special Share, a person having indirect control of RIE. Equally, as it seems to me, there can be no doubt that Richemont SA was not, prior to the issue of the Special Share, a person having direct control of RIE. The answer to the question posed, therefore, turns on whether, in the context of clause 14.4 as a whole, the words in clause 14.4.1 "having such control" mean, and mean only, having direct control; or whether the meaning of those words includes having indirect control.
41. Clause 14.4.2 recognises direct and indirect control as distinct concepts. This appears from the use of the expression "having such control directly or indirectly" in that clause. "Direct control" is apt to describe the situation where one person, say A, controls a company, say company C, because A holds shares in company C which carry more than 50% of the votes in company C (statutory control) or (where the Code definition is applicable) shares which carry 30% or more of the votes in company C (Code control). "Indirect control" is apt to describe the situation where A controls company C, not by holding shares in company C but because A controls company B and company B holds shares in company C which carry more that 50% (or 30% or more, as the case may be) of the votes in company C. In the second case, A has indirect control of company C whether A's control of company B is direct or indirect. So indirect control may exist through a chain of intermediate companies, each having direct control of the company in which it holds shares. This seems to me to accord with the "chain principle" to which Note 7 to Rule 9.1 of the Code refers; although it is, I think, reasonably clear that the Note contemplates that, where company B has Code control of company C, A will not be regarded as having acquired indirect control of company C for the purposes of the Code unless A acquires statutory control of company B. A would not be treated as having indirect control of company C for the purposes of the Code in circumstances where A acquired shares in company B which carried only 30% of the votes in company B which itself had only 30% of the votes in company C. It is to avoid that result that Note 7 speaks of "a person or group of persons acquiring statutory control of a company . . ."
42. With that distinction in mind, it is clear that the words "directly or indirectly" have been included in clause 14.4.2 – and omitted from clause 14.4.1 – by design. Clause 14.4.2 is plainly intended to cover cases in which there is a change of indirect control. This is evident from the words "any person . . . acquires control of a person who controls [RIE]". Those words are apt to bring within clause 14.4.2 a case in which A acquires control of company B which controls company C (where company C, in this case, is RIE). In that context it is plain that the test of control as between company B and company C is that of Code control – that is to say ownership of shares which carry 30% or more of the votes in company C. If it were necessary to decide the point (which, in the present case, it is not) I would hold that, in that context, the test of control as between A and company B is also Code control. What, then, is the role of the additional words "directly or indirectly"? Those words bring within clause 14.4.2 the case in which A acquires control of company B1, which controls company B2 which, in turn, acquires company C. Again, if it were necessary to decide the point (which it is not), I would incline to the view that, although the test of control in that context as between company B1 and company B2, and as between company B2 and company C, remains that of Code control, the test of control as between A and company B1 is that of statutory control. That, as it seems to me gives proper effect to the words "any person . . . acquires control of a person who controls [RIE]" in conjunction with the words "directly or indirectly". It reflects the concept of indirect control in Note 7 of the Code, while giving effect to what, in my view, must have been one of the objects of clause 14.4.2 – to introduce a second layer of Code control in cases where control is indirect.
43. Clause 14.4.2, therefore, is directed both to the case in which A acquires control of company B which controls company C and to the case in which A acquires control of company B1 which controls company B2 which controls company C. And, of course, to the case where A acquires control of company B1 which controls company B2 which controls company B3 which controls company C; and so on. It matters not how many intermediate companies there are between A, the person who acquires control of company B1, and B(n), the company which controls company C. In the first case A acquires direct control of company B – and indirect control of company C; in the second and subsequent cases A acquires indirect control of company B2 – or company B3 or B(n) as the case may be – and, also, indirect control of company C. Clause 14.4.2 covers all cases where there has been a change in indirect control of company C.
44. If that is the scope and purpose of clause 14.4.2 – as, in my view, plainly it is – then the scope and purpose of clause 14.4.1 becomes apparent. Clause 14.4.1 is intended to cover the one situation which does not fall within clause 14.4.2 – the case where A acquires direct control of company C (where company C, in this case, is RIE) by acquiring shares in company C which carry 30% or more of the votes. Clause 14.4.1 is not intended to cover the case where A acquires indirect control of company C by acquiring shares in company B. That case is covered, explicitly, by clause 14.4.2; and, for reasons which I have sought to explain, it is necessary that it should be. Clause 14.4.2 introduces a second layer of Code control. The answer, therefore, to the question whether, in the context of clause 14.4 as a whole, the words in clause 14.4.1 "having such control" mean, and mean only, having direct control is that they do. It follows that the answer to the question whether, prior to the issue of the Special Share, Richemont SA was a person "having such control . . . of [RIE]" for the purposes of clause 14.4.1 is that it was not.
45. The judge reached the opposite conclusion on this point. He held, at paragraph 94 in his judgment that:

" . . . the success of this argument [that "control" in clause 14.4.1 means direct control and not indirect control through an intermediate holding company] turns on whether the words "such control" forming part of the phrase "not having such control" in the second line of sub-Clause 14.4.1 refers to the word "control" used in the last line of that sub-Clause or the words "control of [RIE]" as used in the first line of the clause. When used in the first line of the clause the words "control of [RIE]" must mean control in the Code sense that is both direct and indirect control."

I agree that the words "control of [RIE]" in the opening line of clause 14.4 refer to both direct and indirect control of RIE; but that is consistent with the scheme of the clause as a whole. Clause 14.4 contains two distinct sub-clauses: there is no reason why one sub-clause (clause 14.4.1) should not be directed to cases of direct control of RIE while the other (clause 14.4.2) is directed to cases of indirect control of RIE. For the reasons which I have sought to explain, I think that the better view is that "control" in clause 14.4.1 means only direct control. I would reverse the judge on this point and find in favour of the respondents' on the second of the issues raised in their respondents' notice.

46. It must follow that there was a change of control of RIE as a consequence of the issue of the Special Share. It is, to my mind, irrelevant that, before the issue of the Special Share on 10 March 1999, Richemont SA was a person who had indirect control of RIE. That does not lead to the conclusion that a different answer should be given to the question posed by clause 14.4.1 - "did any person or group of persons acting in concert not having such control acquire direct control of RIE?" The most that can be said is that it leads to the conclusion that the question posed by clause 14.4.2 – "did any person or persons acting in concert not previously having such control directly or indirectly acquire control of a person who controls [RIE]?" – should be answered in the negative. Richemont SA did not, upon the issue of the Special Share acquire control of a person who controlled RIE; it acquired direct control of RIE. The question which Lord Grabiner QC, on behalf of the appellants, invites us to answer is an amalgam of the questions actually posed by clauses 14.4.1 and 14.4.2. He invites us to give a negative answer to the question: "did any person, not previously having control directly or indirectly of a person who controls [RIE], acquire control of [RIE]?". If that were the relevant question, it would, plainly, be answered in the negative. But it is not a question posed by clause 14.4; and there is no reason to construe the clause as if it were. The parties have been careful, in clause 14.4, to pose two distinct tests, either of which (if satisfied) must lead to the conclusion that there has been a change of control. That is the bargain which they have made; and it is not for the court to substitute some other bargain which they might have made if they had been less careful. Whether or not the clause took the form which it did because those advising Philip Morris foresaw, and intended to provide for, some arrangement such as that made by Rothmans in the present case is immaterial. In the events which have happened, the clause provides the protection which, it may fairly be assumed, Philip Morris would have demanded (and Rothmans would have been obliged to concede) if the possibility of such arrangements had been foreseen. I would dismiss the appeal on that ground.
47. The view which I have taken makes it unnecessary to decide whether the judge was right for the reasons which he gave; and I do not do so. But there is obvious force in his conclusion that, on completion of the acquisition of RIBV by BAT on 7 June 1999, BAT and Richemont SA, acting in concert, acquired control of RIE. There is, in my view, no doubt that when Richemont SA acquired direct control of RIE on the allotment of the Special Share it did so as part of the transaction under which BAT was to acquire RIBV. This is acknowledged in the shareholders' agreement; and it is, as it seems to me, implicit in paragraph 5.4 of the BAT circular of 15 March 1999. No-one has suggested – nor could they – that the allotment of the Special Share to Richemont SA in March 1999 had any sensible purpose which was independent of the acquisition of RIBV which had been agreed in January 1999 and which (subject to shareholders' approval) was to take place in June 1999. It is plain from the evidence that Richemont SA and BAT actively co-operated in the arrangements which led to the allotment of the Special Share – in the sense that the Special Share would never have been allotted by RIE in March 1999 without the approval of BAT (as the prospective purchaser of RIBV) to the terms upon which it was to be held. It is plain, also, that the fact that Richemont SA had subscribed for, and accepted allotment of, the Special Share was material in the context of the subsequent acquisition of RIBV. That is why the allotment of the Special Share receives mention in the circular of 15 March 1999. It follows that I would hold, if it be necessary, that BAT and Richemont SA were persons acting in concert in relation both to the acquisition of the Special Share in March 1999 and in relation to the acquisition of RIBV in June 1999. If, contrary to the views which I have already expressed, the relevant question were - "did any group of persons acting in concert, not previously having such control as a group, directly or indirectly acquire control of [RIE] as a result of the composite transaction comprising the issue of the Special Share and the acquisition of RIBV?"- the answer must be affirmative.
48. It follows that I would hold that the judge was right to reach the conclusion that there had been a change of control of RIE within the meaning of clause 14.2 of the Master Agreement. He was right to reach the conclusion that there was a change in control of the Partnership for the purposes of clause 10.2 of the Licence Agreement. I would confirm the declaration made in paragraph 3 of the order of 19 July 2000. In the circumstances that the other members of the Court – whose judgments I have had the advantage of reading in draft – are satisfied that there was a change of control on 7 June 1999 (as well as, or in the alternative to, 10 March 1999) the declarations made in paragraphs 1 and 2 of the order must also be confirmed.

TUCKEY LJ:

49. I agree that this appeal should be dismissed for the reasons given in both judgments.

SCHIEMANN LJ:

50. I agree that what was done by Rothmans amounted to circumstances entitling PM to terminate the agreement. Lord Grabiner suggested in argument that Evans-Lombe J. had been unduly influenced by the merits. I have not been persuaded that any influence which the merits may have had on his conclusion was undue. I share the Judge's instinct that the ultimate conclusion at which he arrived accorded with what the parties to the Master Agreement must be taken to have intended. The contrary conclusion would have allowed the triumph of an artificial scheme with no intrinsic commercial purpose over PM's natural and understandable belief that such an end result was precisely the sort of thing against which they had sought to guard themselves.
51. Chadwick L.J. arrives at the same conclusion as the Judge by a different route from that taken by him. Chadwick L.J. concludes that the word "control" in Clause 14.4.1 means "direct control"; that Richemont SA did not have direct control before the issue of the special share but did have direct control thereafter. He therefore would dismiss the appeal on that ground. I agree with Chadwick L.J. on this point for the reasons which he gives.
52. I also agree with him and the Judge that BAT and Richemont SA were persons acting in concert in relation both to the acquisition of the Special Share in March 1999 and in relation to the acquisition of RIBV in June 1999. I agree with the Judge that at the point of completion there came into existence a group of persons acting in concert which had control of RIE and which did not previously as a group have such control.
53. If, contrary to the view expressed above, "control" in clause 14.4.1 embraces indirect control as well as direct control then nevertheless the end result is the same – what has happened amounts to a change of control.
54. The only way in which the appellant's arguments can be made plausible is by splitting into several independent transactions what as a matter of commercial reality was one transaction. I would reject this as a proper method of arriving at an answer to the question "has there been a change of control?".
55. I also therefore would dismiss this appeal.
ORDER: Appeal dismissed with the costs. Detailed assessment of same on the standard basis.
(Order does not form part of approved Judgment)