Scottish Court of Session Decisions

The defender is a company incorporated under the Companies Acts. The pursuer is a shareholder of the company. On 16 June 1999, notice was given to shareholders of the company of an Extraordinary General Meeting, to be held on 26 July 1999. The notice intimated certain special resolutions which were to be proposed at the meeting. On 26 July, the EGM was convened, and adjourned until 5 August 1999. In this action, the pursuer seeks declarator that the purported EGM on 26 July 1999 was "unlawfully convened, ultra vires and of no force or effect." The second conclusion is for interdict against the defenders "from re-convening the purported Extraordinary General Meeting which was adjourned on 26 July 1999, and for interdict ad interim."

On 4 August, the pursuer enrolled for interdict ad interim in terms of the second conclusion of the Summons. By interlocutor of 4 August, the Lord Ordinary granted the motion, having heard counsel for the pursuer and no caveat having been lodged by the defender. The defender now seeks recall of that interlocutor.

Standing the interlocutor, no meeting was held on 5 August; and in the course of his submissions to me, counsel for the defender said that the defender's position now was that the EGM having been adjourned to that specific date, and that adjourned meeting not having taken place, they had no intention of reconvening the original meeting: it would now be impossible to reconvene the EGM which was adjourned on 26 July 1999. Counsel for the pursuer did not submit that it would now be possible to reconvene the meeting of 26 July. On both sides of the Bar, the position adopted was that any matter which might otherwise have been dealt with at the EGM on 26 July, or at any reconvening of that EGM, could now be brought before the company in general meeting only by convening a new meeting.

When the matter came before me, the only motion made on behalf of the defender was for recall of the Lord Ordinary's interlocutor of 4 August. Equally, no motion was made on behalf of the pursuer to up-date the conclusions by amendment, so as to seek (for example) interdict of any future EGM which might be convened.

In these circumstances, the matter raised by the pursuer's second conclusion is in my opinion dead. The allegedly wrongful conduct which was apprehended (the reconvening of the EGM adjourned on 26 July) can no longer occur, and there is no basis for apprehending that it might. Putting the matter another way, by obtaining interim interdict in terms of that conclusion, the pursuer succeeded in preventing the defender from reconvening the meeting, not only on 5 August but consequentially at any future date. Counsel for the pursuer did not indicate any way in which any right of his would be protected by leaving the Lord Ordinary's interlocutor standing. Equally, counsel for the defender did not indicate any way in which the defender's freedom of action would be restrained by the interlocutor remaining in place. In the whole circumstances, I am satisfied that the interlocutor's purpose is spent, and that on that ground it should be recalled rather than be left standing with no purpose.

While that is enough to dispose of the matter, the submissions for both parties were concerned less with any continuing practical usefulness which the interlocutor itself might have than with the question of whether the pursuer's pleadings revealed a prima facie case, so that the interlocutor could be regarded as well founded in law. In submitting that there was no prima facie case (and I would note that no argument was advanced in relation to balance of convenience) counsel for the defender not only contended that the interlocutor should accordingly be recalled, but went on to say that I should deal with this submission, even if the interlocutor should be recalled regardless of it, because the issue would arise again in relation to any new EGM at which the same resolutions would be proposed, and it would be more appropriate to deal with the matter now, rather than leave it over until it arose again. There are no doubt situations in which an argument which has become superfluous in its immediate context should nonetheless be dealt with because of its relevance to some expected recurrence of the same problem. But the suggestion that the problem is likely to arise again does not appear to me (for reasons to which I shall return) to be well founded; and if it were, it would in my view be preferable to deal with it in its own context, rather than hypothetically in advance. The contention that the pursuer's pleadings reveal no prima facie case, and the arguments advanced in favour of that proposition, would find their proper context if the parties' action led to a recurrence of the same problem. I see no reason to expect such a recurrence; but in so far as it is a possibility, I would regard it as more sensible, and indeed more proper, to abstain from a discussion of the point at this stage, when it is unnecessary.

Nonetheless, I think it proper to comment to some extent on the issue that was before me. The defender's Articles of Association incorporate and modify the Regulations contained in Table A of the Schedule to the Companies (Tables A-F) Regulations 1985. In particular, clause 7 of the Articles modifies clause 38 of Table A. The Articles do not modify or exclude the provisions of clauses 76 and 77 of Table A. In terms of clause 7(a), a notice convening a General Meeting is required to specify the general nature of the business to be transacted "only in the case of special business." The notice convening the EGM of 26 July specified the nature of certain business to be transacted, but did not in any way refer to appointment of directors. Clause 7(a) further provides that

On behalf of the defender, it was submitted that in terms of this provision all business transacted at an EGM was deemed to be special. If one of the items of business to be transacted at the EGM was to be the appointment of directors, then that business would be special, and it would be necessary for the notice convening the meeting to specify the general nature of that item of business. Since that had not been done, it would not be competent, in the absence of such notice, to deal with the appointment of directors at the EGM. On behalf of the pursuer it was contended that the list of exceptions set out in clause 7(a) (including appointment of directors) had effect as a list of exceptions qualifying the general provision that all business was to be deemed special that was transacted at an Extraordinary General Meeting. At an EGM, as at an AGM, appointment of directors was not deemed to be special business. Correspondingly, a notice convening an EGM did not require to specify the general nature of such an item of business. It would be competent to deal with appointment of directors at an EGM, notwithstanding the absence of any specification of the general nature of that business in the notice convening the meeting. In contending for this construction of clause 7, counsel for the pursuer relied not only upon the terms of clause 7 itself, but also upon the terms of clauses 76 an 77 of Table A, as set out in the 1985 Regulations. These were said to "cut across" the provisions of clause 38, and in particular to cut across the provisions of clause 38 in the modified form resulting from clause 7(a) of the defender's Articles.

After receiving the notice of 16 June, the pursuer sent notices to the defender in terms of clause 26 of Table A, intimating his intention to propose the appointment of himself and certain others as directors of the defender, at the EGM on 26 July. On the basis that the proposed appointment of these persons had been duly notified under clause 26, it was submitted on behalf of the pursuer that the defender was obliged, in terms of clause 27, to give notice to the persons specified in clause 27 of the proposed appointment. It is undisputed that the defender gave no such notice before the EGM. No such notice having been given, it is the pursuer's position that the meeting of 26 July was "ultra vires the defender, having been held in contravention of the provisions of clause 77." For the defender, the submission was to the effect that appointment of directors being special business, and no notice of the matter having been given in the notice convening the meeting, any such business was quite simply beyond the scope of the meeting, and could not be brought within the scope of the meeting by the procedures set out in Articles 76 and 77. Those provisions would apposite only where the matter in question was in any event within the scope a meeting, having regard to its nature and the terms of the notice calling the meeting.

Even if appointment of directors at an EGM were not "special business" so that no mention thereof would be required when the meeting was called and clauses 76 and 77 were properly in point, I am not persuaded that failure to comply with the requirements of clause 77 would render the whole meeting ultra vires, or justify the granting of interdict against holding or reconvening the meeting as a whole. Nor was it really suggested by counsel for the pursuer that this would always be the case. It was accepted that the original notice calling the meeting was valid, and would provide the appropriate basis for holding a meeting to deal with the resolutions set out in the notice. What was said to render the actual convening of the meeting ultra vires in the circumstances of the present case was the possibility that the special resolutions referred to in the notice would be passed, that the passing of these particular resolutions was likely to lead to a dilution by further allotments of shares or by repurchase of shares, which in turn might prevent the pursuer from securing the appointment of the directors in question at a future general meeting. These matters are averred in relation to balance of convenience; but even if one considers them in relation to the fundamental question of the validity of the EGM, it does not appear to me that the inter-relation between the special resolutions and the question of appointment of directors entails invalidity or a lack of vires in the holding of the meeting for the purposes specified in the original notice. It may be that there would be other grounds upon which it could be said that there was some injustice or impropriety, in particular circumstances, in proceeding to deal with one set of matters, without dealing with another matter at the same meeting. But I am not persuaded that the pursuer's pleadings reveal an invalidity in the meeting as a whole, justifying interdict. I would therefore recall the interdict upon that ground, even if appointment of directors is not special business.

I have already mentioned that I saw no basis for apprehending that the same circumstance would arise again. In suggesting that this was likely, counsel for the defender was proceeding upon the assumption that a new meeting would be called to deal with the special resolutions, but not with appointment of directors, and that this would bring about further purported procedures at the instance of the pursuer in terms of clause 76. But I was informed by counsel for the pursuer that he had taken the appropriate steps, with sufficient backing from other shareholders, to demand an EGM for the particular purpose of the appointment of directors. That being so, he would no longer have to depend on invoking clause 76, in relation to an EGM called by the company. While this was stated ex parte, and was outwith the knowledge of counsel for the defender, I see no sufficient basis for expecting matters to repeat themselves so closely as to make it appropriate for me to deal with the matter hypothetically. That is particularly so as the pursuer's contention that the meeting itself is invalid appears to turn on circumstantial matters which might be averred differently if the matter were to arise again.

In all these circumstances, I think it both unnecessary and inappropriate to deal with the quite lengthy submissions which were advanced to me, as to the proper construction of the second sentence of clause 7(a). If the second comma in that sentence were not there, I should have little or no difficulty in regarding the list of exceptions as applying only to annual general meetings. And even with that second comma, I am inclined to regard the words preceding the first comma in the sentence as standing on their own and unqualified, with the whole of the rest of the sentence relating to annual general meetings. But having regard to the multiplicity and complexity of some these submissions made to me I would wish to refrain from expressing a concluded view. I recall the interlocutor on the other grounds I have mentioned.