England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR PERMISSION TO APPEAL

		Royal Courts of Justice Strand London WC2 Friday, 13th July 2001

1. LORD JUSTICE MUMMERY: This is an application for permission to appeal against an order made by Mr Justice Hart on 5th April. The application is made by the claimants, CAS (Nominees) Ltd, an Isle of Man company, and AON Pension Trustees Ltd. They appear by Mr Moss QC. The order which they wish to appeal is one by which Mr Justice Hart dismissed a petition under Section 459 of the Companies Act 1985. The respondents to the petition and the defendants in the proceedings in the Companies Court were Nottingham Forest Plc, which owns the shares in the second defendant, Nottingham Forest Football Club Ltd, the proprietor of the football team known as Nottingham Forest. Mr Moss's clients were minority shareholders in Nottingham Forest Plc, holding just under 25 per cent of the shares.
2. The judge dismissed the petition, first, on the basis that the claimants had suffered no unfair prejudice, saying in paragraph 74 of his judgment that that was "sufficient to dispose of the case". He went on to say that, if he was wrong -

"on the question of the fairness of the transaction, the question arises as to whether the claimants had suffered any prejudice."

3. He commented that that question was -

"closely allied to the nature of the remedy to which they might be entitled if prejudice could be shown."

4. On the question of prejudice he heard evidence from three expert witnesses. He reviewed that evidence in his judgment from paragraph 75 onwards. He concluded in paragraph 82 that he was not -

"persuaded that the loss by the claimants of their power to block a special resolution [by using their minority shareholding] resulted in any measurable financial loss to them."

5. He held in paragraph 85, had he been required to decide the point on the basis he was wrong on prejudice, he would have fixed the price of the compulsory buy-out of the claimants' shares at no higher than 13.25p per share.
6. The details of the transaction which gave rise to the petition need not be recounted in detail for the purpose of dealing with this application. That is for this reason: when an application for permission to appeal was made to the judge he said this in refusing permission:

"This is a s.459 petition on which, to succeed, the claimants had to show conduct which was both unfair and prejudicial. I found that it was neither. On the question of fairness a point of law arises on which, had it stood alone, I would have granted permission to appeal. The question of prejudice was a question of fact. I am not persuaded that the claimants have a reasonable prospect of reversing me on this."

7. It was a question of fact determined by him on the basis of expert evidence.
8. The claimants renewed their application for permission to appeal to this court. When it came before the single Lord Justice on paper he neither granted nor refused permission. The order made on 11th June 2001 was that the application should be adjourned for an oral hearing on notice. Subject to further order the submissions at the adjourned hearing were to be limited to the "prejudice" parts of the skeleton argument submitted on behalf of the claimants. A direction was also given that the hearing on notice was to take place with a time estimate of one hour. There was an express dispensation of the requirement for the respondents to submit a skeleton argument.
9. The respondents to the application were, first, the two Nottingham Forest companies represented by Mr Kosmin QC and Mr Doughty represented by Mr Richards QC. If there is one thing to be remembered about this application it is the experience of hearing three Chancery QCs complete their submissions within the course of one hour, a feat unprecedented in my experience and a tribute to them. The reasons for the order made by the single Lord Justice were these. He shared the judge's view that, but for his finding that the respondents caused no prejudice to the applicant, it would be appropriate to give permission to appeal.
10. He stated that his present view is that there is no real prospect that the Court of Appeal would reverse the decision - it caused no prejudice to the applicants. "But, in a case of this complexity, I think ..... the applicants should have the opportunity to present" the question before two Lords Justices:

"If there is to be an oral hearing, the Court is likely to be assisted if the respondents attend and take such part as the Court thinks appropriate in the circumstances.

If permission to appeal on the substantive issue is refused, I see no real prospect that the Court of Appeal would interfere with the judge's decision that the respondents should have the costs incurred in connection wiwth the instructin and evidence ofseparate expert witnesses."

11. We have not heard argument this morning on the general question of the unfairness point or the particular question of the order for costs that the judge made. The arguments are, as one would expect, of high quality and have been of great assistance to the court in deciding this matter in the unusual way in which it has come before it.
12. The argument presented by Mr Moss was that his clients' minority shareholding allowed them to block any special resolution. They suffered prejudice in that they had been deprived of the ability in the transaction between Mr Doughty and the companies to block the special resolution. They had suffered prejudice as a result. He said that, as a matter of law, it was not necessary for a petitioner under a Section 459 petition to establish he had suffered prejudice of a financial kind that was immediately measurable in monetary terms or that his shares had been reduced in value by any particular amount. He said that prejudice was a broad concept. He referred us to authorities in support of that proposition: Re Noble & Sons (Clothing) Ltd [1983] BCLC 273, 291, the Scottish case of McGuinness and Another [1988] 4 BCC 161 at 167, Re a Company [1984] BCLC 393 at 394 and a very helpful summary of the position in relation to prejudice in the Law Commission Consultation Paper No 142 at paragraph 9.30 dealing with the meaning of prejudice. Mr Moss submitted on the basis of these authorities that the judge had made a mistake in law in holding that it was necessary for the claimants to show some measurable loss in financial terms, which they failed to do.
13. Financial loss was one particular type of prejudice but not a requirement under Section 459. Section 459 does not refer to loss or damage, but to the more flexible notion of prejudice. He said any prejudice that does not involve financial loss is also capable of giving rise to relief. That proposition, as a matter of law, was not disputed by Mr Kosmin on behalf of the Nottingham Forest companies or by Mr Richards on behalf of Mr Doughty. They said very persuasively that whether there is relevant prejudice in any particular case depends on the evidence and the facts. In this case the relevant evidence, having regard to the remedy that was sought and the nature of complaints made by the claimants, was financial. The judge, after a very careful consideration of the expert evidence on this point, came to a conclusion which this court was very unlikely to upset on appeal, that there was no financial loss established. The case was brought because that is what the claimants wanted, compensation for financial loss. It had not been established. An appeal against a finding of fact, particularly one reached on the full consideration of expert evidence, is one which stands no real prospect of success on appeal. Those submissions of Mr Kosmin were adopted by Mr Richards.
14. Mr Richards went on to emphasise that the whole case, by the end of the trial, had been put on the financial basis. The judge had made no mistake of law looking at it on that basis. There was no real prospect of challenging his conclusions on that evidence.
15. The conclusion which I have reached may seem unusual. It is this. First, I am not satisfied that this appeal does have a real prospect of success. I find the submissions made by Mr Kosmin and Mr Richards very forceful. I am not satisfied that Mr Moss has a real prospect of success on his main submission that the judge has made an error of law in looking at only the financial aspects of prejudice. But I am unhappy about the procedural unfairness of the way in which this application is to be decided by this court. The submissions have been kept within a very short time. It is undoubtedly a complex and substantial case. We have, by reason of the dispensation of the requirement of the respondents' skeleton argument, not had the benefit of considering those points in aadvance of the hearing. The whole question of prejudice has been divorced from the question of alleged unfairness, which is said to have produced it. It has been assumed by everyone for the purpose of this hearing that, but for the prejudice point, permission to appeal would have been granted to the claimants on the unfairness point. It seems to me that the judge had the benefit of considering both the unfairness and the prejudice points in the round. It is not fair to the claimants, on their application for permission, that a decision should be made against them without the court at this level also having the opportunity to see the matter in the round. That is what I would seek to achieve by the order I propose.
16. I would not grant permission to appeal for the reasons stated. I would stand over this application for permission to appeal with a direction that, if permission is granted, the appeal will immediately follow. On that application the court would hear argument both on the unfairness point and the prejudice point. It should come before a three-judge court. That court should include two Chancery Lords Justices. There should be full skeleton arguments from both sides in the normal way. It may be that when the matter comes before that court, pre-reading will enable them to decide whether they wish to hear argument on the prejudice point ahead of and separate from the unfairness point. At least they would have had the opportunity of seeing all the arguments on prejudice and unfairness in that context.
17. I have taken into account the provisions of Part 52.3 (6) of the Civil Procedure Rules which enable permission to be given in cases where the court is not satisfied of a real prospect of success but for another compelling reason. That is not directly applicable because I am not intending to grant permission. But it enables a court to take into account not only whether the matter has come before it in a procedurally fair way but also such matters as complexity of the case and the extent of the public interest in it. It seems that the course I propose, which does not involve granting permission, takes into account the fact this is a substantial case. It is a complicated case. It does raise issues which are of public interest. It is not confined to the private interests of these parties. I propose to stand over the application for permission with those directions.
18. MR JUSTICE WILSON: I agree.
Order: Application adjourned