Companies - application by LXB Retail Properties Plc to approve a scheme of arrangement.
(Samedi)
Before : |
T. J. Le Cocq, Esq., Deputy Bailiff, and Jurats Olsen and Blampied. |
IN THE MATTER OF THE REPRESENTATION OF LXB RETAIL PROPERTIES PLC.
AND IN THE MATTER OF ARTICLES 125 AND 127 OF THE COMPANIES (JERSEY) LAW 1991.
Advocate J. D. Kelleher for the Representor.
judgment
the deputy bailiff:
1. This is an application by LXB Retail Properties Plc ("the Company") under Articles 125 and 127 of the Companies (Jersey) Law 1991 ("the Law") to approve a scheme of arrangement ("the Scheme") between the Company and a number of its members (the "Scheme Shareholders") by which the Company and certain of its subsidiaries will be subject to reorganisation and then, once the reorganisation is completed, the Company will be dissolved.
2. The Company's application to the Court was made by representation dated the 31st January, 2018, and was first dealt with by the Court on the 2nd February, 2018, which ordered that the Company should convene a meeting of the Scheme Shareholders for the purposes of considering and if thought fit approving the Scheme and gave a number of other orders and directions relating to the convening of and holding of that meeting.
3. The order on the 2nd February, 2018, was underpinned by a judgment issued by the Court on the 5th March, 2018. This amongst other things set out the background to the Scheme and we do not need to repeat that information herein.
4. On the 16th March, 2018, following the holding of the Court meeting in accordance with the order of the Court of the 2nd February, 2018, the Company made an application to this Court for approval of the Scheme. We gave that approval with brief reasons to follow. These are those reasons.
5. This Court has dealt with applications under Article 125 of the Law on many occasions. The approach of the Court is well understood and is referred to in a number of judgments.
6. The stages of the process by which a Scheme under Article 125 of the Law becomes binding has been set out in the matter of Representation of CPA [2010] JRC 011 where the Court said:
"There are three stages in the process by which a Scheme of arrangement under Article 125 of the Companies Law becomes binding:
(i) First there is an application under Article 125 (1) for an order that a meeting of the Shareholders or creditors if necessary be called. It is at this stage that the Court should consider whether or not to summon separate class meetings and if so, who should be summoned to each meeting. The Court will not look at the merits at this stage (see Re Telewest Communications Plc [2004] EWHC 92).
(ii) Second, the Scheme proposals are put to the Court-convened meeting and are approved by a majority by number representing three quarters of the voting rights of members present and voting in person or by proxy.
(iii) Third, and assuming the requisite approval at such meeting is given, the Court exercises its discretion as to whether to sanction the arrangement; see Re National Bank Limited [1966] 1 All ER 1006 at 1012 approved by the Royal Court in Re Telewest Finance (Jersey) Limited [2004] JRC 109."
7. The Court also identified the test to be applied at the hearing seeking sanction of the Scheme in the subsequent judgment Representation of CPA [2010] JRC 021 in the following terms:
"The Court's duty when considering applications under Article 125 were set out in the case of the Representation of Andsberg Limited [2007] JLR N53 and has also been repeated in Re CI Traders Limited [2007] JRC 149A, where, although the case heard in 2007, the judgment has apparently only just being transcribed and published. The test is threefold. The Court must consider:
(i) Whether the provisions of the 1991 Law had been complied with;
(ii) Whether the class of shareholders to be affected by the proposed Scheme was fairly represented by those who attended the meeting and whether the statutory majority are acting bona fide and not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and
(iii) Whether the arrangement is such that an intelligent and honest man, a member of the class concerned and acting in respect of his interest might reasonably approve."
8. Finally, in the Representation of WPP Plc [2013] JRC 035 the Court made the observation that the test set out above was based upon a statement in Re National Bank Limited (1966) 1 All ER 1006 at 1012 and cited it with approval:-
"In exercising its power of sanction the Court will see, first, that the provisions of the statute have been complied with; secondly, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class who they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve.
The Court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting; at the same time the Court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interests of the class which it is empowered to bind, or some blot is found in the Scheme."
9. The Scheme is not without its complexities but these were largely considered by the judgment of the Court when convening the Court meeting. We do not propose to go into any further detail relating to the Scheme as we do not think that it is necessary to do so.
10. This stage of the process, the application for this Court to sanction the Scheme, was supported by an affidavit of the 1st February, 2018, deposed by Mr Philip Oliver Wrigley who is a member and chairman of the board of directors of the Company; a second affidavit also from Mr Wrigley which reports on the conduct and outcome of the Court meeting; an affidavit dated the 9th March, 2018, from Mr Mark Elliott of Link Market Services Ltd which maintains the register of members for the Company and who prepared a schedule of the names and addresses of the Scheme Shareholders for the purpose of giving notification of the Court meeting and, lastly, an affidavit of the 7th March, 2018, deposed by a Mr Kenneth Deloe of Perivan Financial Print who arranged to send by post to the Scheme Shareholders the notice of the Court meeting together with all the relevant accompanying documentation.
11. We were, firstly, satisfied that the requirements of Article 125 of the Law had been fully complied with. As Mr Wrigley's first and second affidavit show there were 104 Scheme Shareholders holding between them 166,600,374 of the Scheme shares and at the Court meeting, which was held in accordance with the order of the Court of the 2nd February, 2018. The meeting was attended in person or by proxy by twenty-eight holders of the Scheme shares which amounted in aggregate to 89,987,695 of the Scheme Shares which itself is 54% of the issued Scheme shares. The majority in number who voted voted in favour of the Scheme (with only two voting against) and holders of in excess of ¾ of the voting rights voted in favour of the Scheme. This represented 99.9% of the votes of the Scheme Shareholders who voted. Accordingly the necessary statutory majorities were achieved as required by Article 125 (2) of the Law.
12. Mr Wrigley's second affidavit confirms that, save for the two votes cast against the Scheme, the Company had received no objections to the Scheme from any of the Shareholders or beneficial owners of shares in the Company. Similarly no one communicated with the Court or attended the hearing before us to indicate any opposition to the Scheme. Accordingly those who did exercise their right to vote can, it seems to us, be taken to fairly represent the Shareholders and there is no indication of any coercion of the minority. There is no suggestion in the documentation before us that those who voted in favour of the Scheme did so other than on a bona fide basis.
13. It seems clear that the arrangement which will be implemented by the Scheme is indeed such that an intelligent and honest man, a member of the class concerned and acting in respect of his interests, might reasonably approve. Ultimately the Scheme brings about the end of the Company's existence within a specific timeframe. This is intended to maximise the return to the Shareholders from their individual investments and at the same time makes a proper provision for potential or future obligations arising from the property developments undertaken by the group of which the Company is a parent.
14. Lastly we do not consider that there is any particular feature that could represent a blot on the Scheme by reason of which we should withhold our sanction.
15. There were a number of variations to the Scheme documentation and we were taken through these in detail by Advocate Kelleher and we are satisfied that none of them cause any difficulty and indeed most simply reflect the fact that the board has been able to move forward with the Scheme within a shorter timeframe than had been anticipated.
16. A somewhat unusual feature of the application before us was a request to echo paragraph 17 of the Act of Court of the 2nd of February, 2018. It is in the following terms:-
"That the Court file not be searched without the leave of a judge of the Royal Court on an application made on notice to the representor."
17. The reason for this application, so Advocate Kelleher informed us, was because of the nature of the contingent liabilities of the Company and other members of the group. If creditors were aware then it is possible that claims may be made of an unmeritorious nature.
18. On consideration we agreed to echo the order contained in paragraph 17 of the previous order of the Court and so ordered.
19. For the sake of completeness we should also note that the originals of the affidavits filed were, so we were informed, filed with the Judicial Greffe as were the undertakings which formed part of the overall Scheme.
20. Accordingly we sanctioned the Scheme and made certain orders ancillary thereto.
Authorities
Companies (Jersey) Law 1991.
Representation of CPA [2010] JRC 011.
Representation of CPA [2010] JRC 021.
Representation of WPP Plc [2013] JRC 035.
Re National Bank Limited (1966) 1 All ER 1006 at 1012.