Bamford v Bamford

JurisdictionEngland & Wales
JudgeLORD JUSTICE HARMAN,LORD JUSTICE KARMINSKI,LORD JUSTICE RUSSELL
Judgment Date31 January 1969
Judgment citation (vLex)[1969] EWCA Civ J0131-2
Docket Number1967 B. No. 6403:
CourtCourt of Appeal (Civil Division)
Date31 January 1969
Rupert Cyril Bamford and Anthony Paul Bamford
and
Henry Vincent Bamford
Richard Hawthorn Bamford
John George Bamford
Fredk. H. Burgess Ltd.(Sued as Frederick H. Burgess Ltd.)
and Bamfordfs Limited
Rupert Cyril Bamford and Anthony Paul Bamford
and
Bamfords Limited
Henry Vincent Bamford
Richard Hawthorn Bamford
John Geroge Bamford
Hubert Frederick Burgess (sued as H.F. Burgess (male))
and Graham Arthur Rayden (sued as Graham A. Rayden)

[1969] EWCA Civ J0131-2

Before:

Lord Justice Harman

Lord Justice Russell and

Lord Justice Karminski

1967 B. No. 6403:
1967 B. No. 6641:

In The Supreme Court of Judicature

Court of Appeal

(Civil Division)

(From: Mr. Justice Plowman)

Mr. QUINTIN HOGG, O.C. Mr. H.E. FRANCIS, Q.C. and Mr. PAUL BAKER (instructed by Messrs. Allen & Overy, Agents for Messrs. Wilkins & Thompson, Uttoxeter, Staffs.) appeared on behalf of the Appellants (Plaintiffs).

Mr. MICHAEL WHEELER, Q.C. and Mr. CHARLES DRAKS (instructed by Messrs. Theodore Goddard & Co.) appeared on behalf of the Respondent-Defendants H.V. Bamford, R.H. Bamford, J.G. Bamford, Bamfords Ltd. And G.A. Rayden.

Mr. MUIR HUNTER, Q.C. and Mr. R.A.K WRIGHT (instructed by Messrs. Ward Bowie & Co., Agents form Messrs. Lane, Clutterbuck & Co., Birmingham) appeared on behalf of the Respondent- Defendant Frederick H. Burgess Ltd.

LORD JUSTICE HARMAN
1

This appeal from Mr. Justice Plowman is concerned with a popular modern subject - the subject of take-overs. The company in question, Bamford Ltd., is a public company, making agriculture implements somewhere in the Midlands, incorporated in 1916, having under its present articles (dating from 1958, so in quite form) a capital of £1, 000,000, all now in shares of similar rights with a nominal value of 4s.0d., and 500,000 of them remaining unissued. From 1966 onwards another member of the Bamford family (this being largely a family company (kept on making proposals to amalgamate his business (which was that of making earth-moving machinery and whom I shall call "Excavators") with that of the company. He did not receive a very hearty welcome. In 1967 he started to make bids for taking over his cousins' company. The division roughly was that three directors, the defendants Vincent, Richard and John, were of one school of thought: another one, the plaintiff Rupert, was I think on the other side of the line; and the other party one needs to mention is the defendant Frederick H. Burgess Ltd., who were a private company who acted I think as distributors of Bamfords' agriculture machinery on a large scale and who the defendant's side thought it would be a good thing to engage in the Bamford business in order to promote its sales and so forth and, incidentally, to make a take-over by Excavators more difficult. The Proposal on one side was for the Excavator Company to buy every body out - anyway enough to obtain control - and the three Bamford defendants proposed instead to get Burgess Ltd. Into the company by issuing the unissued shares to that company or to Mr. Burgess its managing director and thus obtain his sympathy and help

2

The ball opens with a resolutions of the board of Bamfords Ltd. Made on the 20th November, 1967, the allot the 500,000 unallotted shares to Burgess Ltd. At Par. On the next day a writ was issued to prevent that being done, that being issued on behalf of Rupert and another Bamford - Anthony

3

Just before that allotment, the defendant director hadissued a circular to the shareholders, of whom there were a good many in number outside the family on both sides of the dispute. As I say, the first writ was issued on the 21st November and its purpose was to have it declared that the allotment was bad because it was made for an improper motive, namely as a move in the take-over war and not in the best interests of the company. As a counter to that the defendant directors gave notice of a general meeting for the 15th December at which they proposed to ask the general meeting to approve of what they had done, and they sent out a circular about that. There was another writ, on the 1st December, attempting to stop that meeting and to have it declared that anyhow any resolution passed at it was a nullity. The meeting nevertheless was held on the 15th December and there a resolution was passed. The resolution which was passed was in these terms: "That this General Meeting of Bamford Ltd. hereby ratifies and approves the allotment to Frederick H. Burgess Ltd. on the 20th November, 1967, of 500,000 shares of 4s.0d. each in the capital of the company at a price of 4s.0d. per share paid in full on allotment"

4

That having been passed, the action proceeded with interlocutory motions on each side and various moves and counter-moves: and it was eventually suggested on the part of the defendants that this was a suitable case for a preliminary point to be taken. The point was that, the general meeting of the 15th December having passed the resolution ratifying what the directors had done, it did not matter if the allotment when it was made was on allotment made for a purpose beyond the powers of the directors because not made within the trust purposes of their power. It was eventually decided to set the matter down and an order was made; and the preliminary point of law was argued on the 4th April last

5

The preliminary point, I think I had better state, was in these terms: "On the assumption (which is made solely for the purpose of the hearing of this preliminary point of law) that the allotment by the board of Bamford Ltd. of 500,000 shares at par to Fredik H. Burgess Ltd. on 20th November, 1967, was not madebona fide in the interests of Bamfords Ltd. because it was a tactical move in a battle for control of Bamford ltd. having as its primary purpose to make it more difficult for J.C. Bamford Excavators Ltd. to obtain such control Whether as a matter of Law and on the true constructive of the Memorandum and Articles of Association of Bamford Ltd. such allotment was capable of being effectively ratified and/or approved by an ordinary resolution of a general meeting of Bamford Ltd."

6

The learned judge decided that point of law in this way: "Declare that as a matter of law and on the true construction of the memorandum and articles of association of Bamford Ltd. such allotment was capable of being effectively ratified and approved or approved by an ordinary resolution of a general meeting of Bamford Ltd." if that is right that is an end of the action, as has been recognized by the fact that the order goes on to order both actions to be considered and to stand dismissed. Now there is an appeal to this court.

7

The Notice of Appeal gives as its grounds these: "(1) That on the true construction of the articles of association of Bamfords Ltd. the power to allot the shares purported to be allotted to Frederick H. Burgess Ltd. on the 20th November, 1967, was vested in the directors of Bamford Ltd. and in them alone and that the company in general meeting had no residual power to make or ratify or approve on allotment of the said shares. (2) That an allotment made bona fide in the interests of Bamfords Ltd. is void and thus incapable of ratification or approval"

8

Now to me from the very start that sounded odd, and I shall be forgiven if, after all the eloquence which we have had in this case, I am expressing the view which I have held throughout - that this is a tolerably plain case. It is trite law, I had thought, that if directors do acts, as they do every day, especially in private companies, which, perhaps because there is no quorum, or because their appointment was defective, or because sometimes there are no directors properly appointed at all, or because they are actuated by improper motives, they go on along years,carrying on the business of the company in the way in which, if properly consisted, they should carry it on, and then they find that everything has been so to speak wrongly done because it was not done by a proper board, such director can, by making a full and frank disclosure and calling together the general body of the shareholders, obtain absolution and forgiveness of their sins; and provided the acts are not ultra vires the company as a whole everything will go on as if it had been done all right from the beginning. I cannot believe that is not a commonplace of company law. It is done every day. Of course, if the majority of the general meeting will not forgive and approve, then the directors must pay for it

9

It will be remembered that in the well known case of Regal (Hastings) Ltd. v. Gulliver, decided in the House of Lords and reported in 1942 1 All England Reports at page 378, Lord Russell in the course of his speech made a very significant observation about this. In that case certain directors had acquired some shares by reason of the fact that they were directors of a certain company. They afterwards sold those shares at a profit. It was held that they must account for the profit because it had been obtained as a result of their directorships and therefore was in the nature of trust property of the company. Lord Russell said this: "The suggestion that the directors were applying simply as members of the public is a travesty of the facts. They could, had they wished, have protected themselves by a resolution (either antecedent or subsequent) of the Regal shareholders in general meetings. In Default of such approval, the liability to account must remain". So that the noble Lord considers it obvious that they could, either by getting a previous approval or a subsequent ratification, retain the profit, which otherwise they must disgorge

10

So it seems to me here that these directors, on the assumption which we have to make, made...

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