IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
COMPANIES COURT
(MR JUSTICE WARREN)
Strand London, WC2 |
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B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE MOORE-BICK
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THE PENINSULAR AND ORIENTAL | ||
STEAM NAVIGATION COMPANY | CLAIMANT/RESPONDENT | |
- v - | ||
ELLER AND CO | DEFENDANT/APPELLANT | |
THUNDER FZE | INTERESTED PARTY |
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Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
MR M MOORE QC (instructed by Freshfields Bruckhaus Deringer, LONDON EC4Y 1HS) appeared on behalf of the Respondent.
MR A THORNTON appeared on behalf of the Interested Party.
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Crown Copyright ©
(2) On the next business day after that, pursuant to paragraph 1(C) of the Special Resolutions, the company was to issue £1,000 of Special Deferred Stock to the Offeror and its nominee. The variation of the rights attached to Deferred Stock effected by the alteration of the regulations was such that for a period of five days after issue the Special Deferred Stock carried the right to receive any surplus profits which it was determined to distribute to the holders of the Deferred Stock and as a result also carried the right to receive any paid-up stock which during that period fell to be appropriated to the holders of Deferred Stock pursuant to a capitalisation of reserves effective during that period. Thereafter it would rank pari passu with ordinary Deferred Stock.(3) Once the Special Deferred Stock had been issued and the names of the persons entitled to it had been entered in the Register of members of the Company, the capital of the Company was to be reduced by cancelling and extinguishing what was called the Deferred Cancellation Stock in issue at a moment defined as the Deferred Capital Reduction Time. The Deferred Cancellation Stock means in effect all Deferred Stock other than a) that held by the Offeror b) the Special Deferred Stock and c) Deferred Stock in respect of which the loan note alternative had been taken up which was to be transferred rather than cancelled. The reduction of capital which forms this step in the process could not take effect, as it otherwise would, under Sections 135 to 138 of the Companies Act 1985 because those sections only apply to companies incorporated under the Companies Acts. Instead it is carried out under Article 10(A) of the Charter and without a court order.
(4) Immediately upon the cancellation of the Deferred Cancellation Stock the capital of the company would be increased to its former amount, by the creation of a number of units of New Deferred Stock equal to the number of units of Deferred Cancellation Stock.
(5) The reduction of capital gave rise to a reserve in the books of the company. That reserve was to be capitalised and applied in paying up in full or part the new Deferred Stock, which was to be allotted and issued credited as fully paid to the holders of the Special Deferred Stock. The capitalisation also has to be effected in accordance with the Charter.
(6) Last, in consideration of the cancellation of the Deferred Cancellation Stock and the allotment and issue of the new Deferred Stock, the Offeror was bound to pay to or for the account of holders of Deferred Cancellation Stock a cash sum for every unit of Deferred Cancellation Stock. The Offeror's obligation expressed in the scheme was made binding on it by it giving the Court an undertaking on the sanction of the scheme to comply with the provisions of the scheme. The court's sanction of the scheme under section 425 would make it binding as between the Company and the holders of the Deferred Cancellation Stock.
"27. (1) Fourteen clear days' notice at the least or, in the case of an Annual General Meeting or a meeting convened to pass a Special Resolution, twenty-one clear days' notice at the least (in all cases exclusive of the day on which the notice is served or deemed to be served and of the day for which the notice is given) shall be given in manner provided by these Regulations to such members as are, under the provisions of these Regulations, entitled to receive notices from the Company, to each of the Directors and also to the Company's Auditors. Every notice of meeting shall specify the place, the day and the hour of meeting, and, in the case of special business, the general nature of such business. Every notice convening an Annual General Meeting shall specify the meeting as such and every notice convening a meeting to pass a Special Resolution or an Extraordinary Resolution shall also specify the intention to propose the resolution as a Special Resolution or an Extraordinary Resolution, as the case may be. Every notice of meeting shall state with reasonable prominence that a member entitled to attend and vote is entitled to appoint a proxy to attend and, on a poll, to vote thereat instead of him, and that a proxy need not be a member. The accidental omission to give notice of any meeting to, or the non-receipt of the notice of meeting by, any person entitled to receive the same, shall not invalidate the proceedings at the meeting.
(2) For the purpose of giving notice of any General Meeting to members holding Uncertificated Stock, the Directors may determine that the members entitled to receive notice of the General Meeting in respect of such Stock are those persons entered on the relevant register of members at midnight on a day not more than twenty-one days before the day on which notice of the meeting is sent."
"Every notice convening a meeting to pass a Special Resolution shall … specify the intention to propose the resolution as a Special Resolution."
"… that the share premium account of the Company amounting to £1,356,900.48 be cancelled".
It turned out that this was not justified. The resolution put to the meeting was:
"… that the share premium account of the Company amount to £1,356,900.48 be reduced to £1,356,321.17".
"In the case of a notice of intention to propose a special resolution, nothing is achieved by the addition of such words as 'with such amendments and alterations as shall be determined upon at such meeting'."
"Considering and if thought fit approving, with or without modifications, the scheme of arrangement set out in the circular."
"That the scheme of arrangement dated 20 December 2005 (the "Deferred Scheme") between the Company and the holders of its Deferred Scheme Stock (as defined in the Deferred Scheme) a print of which has been produced to this meeting and for the purposes of identification has been signed by the Chairman of this meeting, be hereby approved and for the purpose of giving effect to the Deferred Scheme in its original form or with or subject to any modification, addition or condition approved or imposed by the court a) with effect from the passing of this resolution the regulations of the Company shall be altered".
"Notice is hereby given that pursuant to the resolutions cast at the Meetings, the adjourned Meetings will now be held on 13 February 2006. These adjourned Meetings will take place to consider and if thought fit, approve the Revised Offer."
Then notice was given of the place and time of the meetings.
"7.1 Modification of the Deferred Scheme.
"The terms of the Deferred Scheme are to be modified to reflect the Revised Proposals. The number '443' in clauses 4 and 6 of the Deferred Scheme set out in Part XIII of the Scheme Document, is to be deleted and replaced with the number '520'. A resolution to this effect will be put to the Deferred Stockholders Court Meeting and no other modification is necessary. Save in respect of the expected timetable of events [the modified version of which is set out later in the document] there are to be no other changes to the Deferred Scheme, and (save as mentioned in paragraph 7.3 below) in all other respects the proposals remain as set out in the Scheme Document."
"As a technical matter it is not possible to amend the Special Resolution 1(A)(iii)(C) set out in Part XX of the Scheme Document which states that each person to whom Deferred Stock is issued on or after the Deferred Capital Reduction Date (other than under the Deferred Scheme or to the Offeror or its nominee(s)) will be paid 443 pence per unit of Deferred Stock. However PCFC will, as soon as reasonably practicable following the Deferred Scheme becoming effective, enter into a deed poll under which such persons will also be entitled to the increased sum of 520 pence per unit of Deferred Stock."
"To approve the Deferred Scheme and authorise the directors to take all such actions they consider necessary or appropriate to carry the Deferred Scheme to effect."
Then at the bottom of the relevant part of the form one sees:
"As described more particularly in the notice convening the Extraordinary General Meeting."
"The board had written to stockholders on 27 January to give notice of the Meetings to be held on 13 February and had sent stockholders details of the revised terms of the offer on 1 February."
Then at paragraph 8 it said:
"Therefore, the present meeting was being held to consider and if thought fit approve the revised offer."
At paragraph 9 the Chairman summarised the offer. Paragraph 10:
"After dealing with questions, the Chairman proposed [special resolution 1]:
'That the variation of the rights attaching to the Deferred Stock, as set out in the Notice of the meeting, be approved'."
"So in the present case the registrars deliberately sent the documents by courier. They did not intend them to arrive late but they did so, so that non-service, an unintended result, was the result of actions being actions designed and reasonably expected to achieve the intended result of service, in cases quite different from Musselwhite, accordingly the failure to serve notices in time to members on the local register was in my judgment an accidental omission."
Musselwhite is a case to which I will revert shortly.
Order: Application refused.