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Cite as: [2012] IEHC 170
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Judgment Title: In the Matter of Readymix PLX and In the Matter of the Companies Acts 1963 - 2009 Neutral Citation: [2012] IEHC 170 High Court Record Number: 2012 196COS & 2012 50COM Date of Delivery: 16/05/2012 Court: High Court Composition of Court: Judgment by: Kelly J. Status of Judgment: Approved |
Neutral Citation Number: [2012] IEHC 170 THE HIGH COURT COMMERCIAL [2012 No. 196 COS]
[2012 No. 50 COM] IN THE MATTER OF READYMIX PLC AND IN THE MATTER OF THE COMPANIES ACTS 1963 – 2009 ON THE APPLICATION OF READYMIX PLC JUDGMENT of Mr. Justice Kelly delivered on the 16th day of May, 2012 Introduction 2. The Company’s application is opposed by two of it’s shareholders namely Messrs. Tom Goode (who holds 266 shares) and Seamus Maye (who holds two shares). 3. Prior to the presentation of the petition by the Company, I directed the holding of a meeting of the shareholders of the Company to be affected by the scheme so that they might consider it. That meeting was held in accordance with the court’s directions. 4. The meeting took place on 5th April, 2012. 5. 294 shareholders were present or were represented at the meeting and voted in person or by proxy at it. The 294 shareholders represented 21,874,094 shares. 6. The resolution put to that meeting was to the effect that the scheme of arrangement proposed to be made between the Company and the holders of the “scheme shares” as defined in that scheme should be approved. It is that scheme which is the subject of this application. 7. 286 shareholders voted in favour of the resolution. They represented 19,694,692 shares. Eight shareholders voted against the resolution. They represented 2,179,402 shares. Thus, 96.94% of the shareholders by number voted in favour of the scheme with 3.06% against. The 96.94% voting in favour of the resolution represented 90.04% of the shares with the remaining 9.96% of the shares being represented by the 3.06% shareholders who voted against the scheme. 8. Mr. Maye owns 0.0000047% of the shares affected by the scheme. Mr. Goode owns 0.00063% of the shares affected by the scheme. The Task 10. In many cases where the court is asked to approve a scheme of arrangement, it does so in the context of a company which is insolvent. That is not the case here. Neither was it so in the case of Colonia Insurance Ireland Limited [2005] 1 IR 497, where I considered the relevant English authorities and set out what I believe are the issues with which the court should concern itself on an application of this sort. The five matters which I concluded had to be demonstrated to the satisfaction of the court are as follows:-
(2) The statutory requirements and all directions of the court must be complied with. (3) The classes of creditors or shareholders as the case may be must be properly constituted. (4) There must no coercion present. (5) The scheme of arrangement must be such that an intelligent and honest man, a member of the class concerned, acting in respect of his interest might reasonably approve of it. 12. I had to consider the matter again in the case of Re Depfa Bank Plc (Unreported, 2nd October, 2007) where I followed the earlier decision in Re Colonia which in turn followed English decisions in Re Osiris Insurance Limited [1999] 1 BCLC 182 and Re English Scottish and Australian Chartered Bank [1893] 3 Ch 385. 13. My attention has been drawn to a more recent decision of Morgan J. in the Chancery Division in England in a case of Re TDG Plc [2009] 1 BCLC 445. 14. That judge summarised the matters that require attention on an application such as this in the following terms. He said:-
(ii) It must be satisfied that in relation to the class of shareholders, the subject of the court meeting, was fairly represented by those who attended the meeting and the statutory majority are acting bona fide and not coercing the minority in order to promote interests adverse to those of the class they purport to represent. (iii) An intelligent and honest person, a member of the class concerned and acting in respect of his own interest, might reasonably approve the scheme of arrangement (iv) There must be no blot on the scheme.”
Readymix 18. The authorised capital of the Company is €15,600,000 divided into 130m ordinary shares of €0.12 each. 109,645,169 ordinary shares have been issued and are credited as fully paid up. 19. 61.2% of the ordinary shares are held by companies within the Cemex Group. The Cemex Group is a global building material supplier which is established in Spain. 20. A company called Readymix Investments is a wholly owned subsidiary of Cemex España S.A. which is part of the Cemex Group of companies. The objects of Readymix Investments are to carry out the business of an investment holding company. The scheme envisages that the entire issued share capital of the Company, other than any shares legally or beneficially already held by any member of the Cemex Group, will be acquired by Readymix Investments. These are the ‘scheme shares’. The consideration for the acquisition comprises cash with €0.25 being paid for each scheme share. The scheme shareholders are the holders of the ordinary shares of €0.12 each in the capital of the Company but excludes holders of ordinary shares legally or beneficially owned by any member of the Cemex Group. 21. The independent directors of the Company proposed the scheme and the meeting of shareholders comprised only the scheme shareholders. 22. The scheme intends that the scheme shares should be purchased for the consideration which I have mentioned and then they will be cancelled pursuant to ss. 72 and 74 of the Act. The reserve arising from the cancellation of the scheme shares will be capitalised to issue fully paid new shares to Readymix Investments or its nominees. As a result of all this the Company will become a wholly owned indirect subsidiary of Cemex España S.A. The Takeover Panel 24. On the evidence before me, there has been close liaison by the Company’s advisers with the Takeover Panel. That Panel reviewed and commented on the circular document issued to the scheme shareholders before it was issued to them. In addition to the other documents and information provided to it, the panel was sent copies of all documents lodged by the Company in these proceedings. Furthermore, the panel was, by my direction, served with the petition grounding this application and did not appear before the court. 25. Having regard to the evidence, I am satisfied that the scheme and all of the procedures relating to it have been proposed and conducted in compliance with the Irish Takeover Rules. The Panel has not exercised or indicated any intention to exercise any relevant power in relation to the scheme. Previous Proceedings 27. More recently, in proceedings which commenced in 2010, Goode Concrete sued Cement Roadstone Holdings Plc., Roadstone Wood Limited and Kilsaran Concrete Limited. The plaintiff in those proceedings holds 16,000 ordinary shares in the Company and ceased trading earlier this year. One of it’s directors is Peter Goode who is a son of Tom Goode. The Company is not a defendant in those proceedings. The principal allegation in those proceedings is that the defendants acted in concert to set prices which would effectively remove the plaintiff from the Dublin market. An application for an injunction in those proceedings was refused on 22nd February, 2011 and the action has not yet come to trial. The Objections 29. The affidavits sworn by way of opposition deal with an enormous breadth of material and contain many allegations of wrongdoing. It is important to point out that none of these allegations have been proved despite the opportunity to do so in the proceedings to which I have already referred. 30. Counsel for the objectors readily accepted that many of the allegations made on affidavit by them would not be capable of being adjudicated upon in these proceedings. He thus confined himself to three areas of objection. In fact only two of them (the latter two) could be regarded as objections properly so called. 31. The first area of objection related to an alleged defect in the online arrangements to deal with proxy votes. The second was a contention that the scheme of arrangement failed to give to the ordinary shareholder a true picture in respect of the proposed transaction. This was so because of an alleged inadequate explanation concerning payments that Cemex have received over the last six years from the Company. The third point is whether the scheme is appropriate for sanction when looked at in the light of the allegations which are made in respect of below cost selling and cartel activity by the Company. It is said that these activities have diminished the value of the shares over time. It is said to be unfair to ask ordinary shareholders to consider the scheme in circumstances where they have not been given the full picture in respect of these activities. Reliefs 33. First, the court is asked to refuse its sanction of the scheme. Alternatively, they ask that the scheme be approved but with modifications. In the event of being refused those reliefs, the objectors wish to obtain clarification from the Company in respect of the allegations made and/or to have a senior officer of the Company give undertakings to the court that the Company has not and will not be involved in illegal activities of an anticompetitive or price fixing type. Counsel acknowledges that much clarification has been obtained by the objectors from the contents of the replying application on this petition. 34. I will deal with the two substantive objections first and then turn my attention to the online proxy arrangements. Payments to Cemex from Readymix 36. In his replying affidavit, Mr. Gonzales deals with these contentions in some detail. He admits that payments have been made to Cemex by the Company. The payments are on foot of a commercial arrangement under which the Company uses ‘Cemex way’, which is an operating system developed by Cemex for its exclusive use and comprises a business model and information systems. When the system was introduced to the Company in 2007, it benchmarked the alternatives available in the market. The lowest development cost quoted for a comparable fully integrated system was of the order of €8m for installation only. Cemex also provides a range of technical, operating and product supports to the Company, for many of which no additional charge is made. The cost of the Cemex installation was €3.7m and the total cost to the end of 2011, including installation and all fees, has been €6.5 million. That is quite obviously a great deal less than the sum claimed by the objectors. 37. On the evidence before me, details of this arrangement have been fully set out in Readymix’s Annual Accounts over a number of years. They were included in the notes to the financial statements for the years ended December 2008, 2009, 2010 and 2011. Furthermore, a detailed explanation of the arrangements was given in a letter from the Chairman to shareholders of 22nd April, 2010, which formed part of the notice convening the Annual General Meeting which took place on 25th May, 2010. 38. A circular was sent to the scheme shareholders in respect of the meeting which was convened by direction of the court. That circular was prepared under the supervision and with the approval of the Takeover Panel. The circular included the 2011 financial statements. Note 24, located at p. 83 of the circular, recorded that the Readymix Group renegotiated the fee scheme for these payments in 2009. That arrangement was ratified by shareholders at the Annual General Meeting held on 25th May, 2010. 39. Having regard to these matters, I am not satisfied that there has been an inadequacy of information provided to the scheme shareholders in respect of these payments. On the contrary, I think that the matter is sufficiently disclosed so as to apprise shareholders of the matter. In addition, there is a commercial justification for the payments made in return for value received. I further note that the amount which is alleged by the objectors to have been paid greatly exceeds the sum which was actually paid. 40. The objectors have not discharged the onus of proof in respect of this objection. Anti-Competition/Below Cost Selling
43. At para. 28 of his affidavit, Mr. Maye says:
46. Not merely that, but these allegations are denied under oath by Mr. Gonzales. He says, at para. 36 of his affidavit as follows:
47. Mr. Gonzales’s affidavit then goes on to deal specifically with the allegations. Between paras 38 and 45, he deals with the allegations in considerable detail. 48. I do not deem it necessary to lengthen this judgment by setting out the detailed denials and the specific information which is placed before the court by Mr. Gonzales in his affidavit. It is not necessary to do so since I do not consider that the objectors can, in this collateral way, ventilate claims which they could have had tried years ago. It would be grossly unfair to uphold these objections based, as they are, on general allegations which have been specifically denied in detail by the Company. The objectors have had ample opportunity to prove their claims in appropriate proceedings but have not done so. They may not seek to achieve the desired result by repeating them as objections to the sanctioning of the scheme. I disallow this objection. Validity of Proxy Shares
9. I am concerned that the company may not have taken adequate precautions to ensure these proxies were validly executed. I beg to refer to a copy of the proxy form upon which marked with the letter TG4 I have signed my name upon prior to the swearing hereof. 10. I do not wish this Honourable Court to be unduly delayed on what I see as important but procedural points. I say that if this Honourable Court is satisfied with the oral submissions the company makes in regard to why their proxy arrangements comply with their obligations and are fair, I will not seek to inspect the proxies or to investigate this issue further.” 51. There were two forms of internet-enabled proxy facilities for shareholders in respect of the court directed meeting. His affidavit says as follows:
34. CREST also provides similar facilities to members who hold shares in Readymix, and indeed in a very large number of public companies in Ireland, the United Kingdom and elsewhere in uncertificated form. Again, the online facilities provided by CREST are industry-standard and are available at their choice to CREST members who transact their relevant business online. Access is only available to the member inputting the correct user ID supplied by CREST and the necessary password, so it is simply not possible for anyone other than members of the company to access the proxy forms. 35. I note that while Mr. Goode expresses concern about these routine arrangements, he does not actually suggest that there is any evidence of failure of security in this case. He does not allege that he himself or an other person was able to access any secure proxy form through the internet. I am fully satisfied that the arrangements for online proxy access for Readymix operated by Capita and CREST, which are both established reputable service providers and market leaders, were sufficiently secure to protect the members of Readymix. Their facilities are routinely provided by both of these firms to a large number of client companies without complaint and I do not believe any cause of concern properly arises.” 53. Two points are made by the objectors concerning proxy votes. The first relates to an alleged conflict between Article 60 of the Company’s articles of association and the circular sent to shareholders. 54. Article 60 of the Company’s Articles of Association deals with votes of members. It reads as follows:-
(b) Subject to the Acts and to such requirements and restrictions as the Directors may, in accordance with the Acts, specify, the Company at its discretion may provide for participation and voting in a general meeting by electronic means. (c) Subject to the Acts and such requirements and restrictions as the Directors may, in accordance with the Acts, specify, the Company may at its discretion provide for voting on a poll by correspondence. Where the Company permits votes to be cast on a poll by correspondence, it shall be required to count only those votes cast in advance by correspondence that it received before the date and time specified by the Company for that purpose, provided that such date and time is not more than 24 hours before the time at which the vote is to be concluded.”
57. The criticism which he makes (if criticism it be) under this heading is between the relevant provision in the articles and para. 6 of the circular dealing with the appointment of proxies in the circular. 58. It is important to bear in mind that two meetings took place on 5th April, 2012. The first was the meeting which was directed by the court. That meeting was held pursuant to directions which I gave. One of the directions (at para. 4 of the curial part of the order) was that notice of the court meeting was to be sent to each holder of scheme shares in the capital of the Company together with a statement in substantially the form of a draft which was exhibited as “CE3” in an affidavit of Clare Egan which had been placed before me. That part of the order dealt with the circular. There was also to be sent a form of proxy for a holder of shares in the Company in the form of the draft which was exhibited as exhibit CE4 to the affidavit of Clare Egan. That was what was called during the hearing the “blue proxy”. That was the proxy that allowed for electronic voting. It contains notes on completion of the form of proxy and paras. 2 and 3 deal with the appointment of a proxy electronically using the Capita Registrar’s website. Likewise, it dealt with appointing proxies using the CREST proxy systems. Thus, the proxy forms were sent having been approved of by the court. 59. The second meeting which took place was the extraordinary general meeting which was concerned with the reduction of capital whereby the scheme shares are cancelled. Immediately new shares are to be issued to Readymix Investment and, on cancellation, the scheme shareholders become entitled to their payment of 25c per share. So, it is argued, that any objection which may be taken on foot of the provisions of the articles is directed at the extraordinary general meeting rather than the court directed meeting. That may well be correct but I do not have to decide that question. 60. I am not satisfied that any point of substance has been made out by the objectors concerning an alleged conflict between the 24 hour and 48 hour notice provisions. There is no evidence at all of any confusion still less of any wrongful allowal or disallowal of proxy votes. It is not the function of the court to try a moot on to express views on “some form of conflict” between the documents in the abstract. 61. The second point which is made in respect of proxies arises pursuant to the provisions of Article 69 of the memorandum and articles of the Company. Paragraph B of that Article reads as follows:-
63. I am satisfied that electronic voting is permitted by Article 60(b). Article 69 expands on that in the terms which I have quoted. 64. The circular was approved by the Takeover Panel. It sets out information considered appropriate by the Takeover Panel which has the obligation of overseeing acquisitions of this nature. In the present case, the shareholders were furnished with the circular which at p. 5 referred to electronic voting and detailed procedures were set out from p. 15 onwards. The form of proxy explained precisely what the procedures were. Thus, any shareholder knew precisely what had to be done in order to cast a vote by proxy. In fact, the blue proxy form made it clear that one could turn up at the court meeting and the extraordinary general meeting with a blue proxy and still cast one’s vote. In other words, you were not obliged to cast it electronically. 65. Over and above all of this, both the proxy form and the circular and indeed the other documents made it clear that electronic voting was to occur through Capita Registrars and CREST. They utilise a sophisticated security system to ensure that only those entitled to vote get to do so. I am not satisfied that there was any deficiency in the information provided to shareholders. There is no evidence at all of any breakdown in the system. The directors behaved properly in utilising the Capita and CREST systems. There was no paucity information given to shareholders. 66. In these circumstances, I am unable to find that there is any validity in the issues raised concerning the proxy voting. Some Observations Conclusions 69. I would not be justified on the evidence and, indeed, it would be unfair to the almost 97% of the shareholders who voted in favour of the scheme that their will should be set aside on this application. 70. I, therefore, grant the relief which is sought. I am not prepared to attach any modifications to the scheme. Neither am I prepared to require officers of the Company to give undertakings of the type which are sought. In the absence of evidence of wrongdoing, it would not be just to require officers of the Company to undertake that they have not been guilty of such or will not be guilty of such in the future. 71. In these circumstances, I accede to the application of the Company.
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