Bruce Peskin and Another v John Anderson and Others
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MUMMERY,LORD JUSTICE LATHAM,LORD JUSTICE SIMON BROWN,Lord Justice Mummery |
| Judgment Date | 14 December 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J1214-15 |
| Docket Number | Case No: A3/2000/0429/6326 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 December 2000 |
[2000] EWCA Civ J1214-15
Lord Justice Simon Brown
Lord Justice Mummery and
Lord Justice Latham
Case No: A3/2000/0429/6326
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE NEUBERGER
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Geoffrey Vos QC & Daniel Lightman (instructed by Class Law for the Appellants)
Lord Grabiner QC & Craig Orr (instructed by Slaughter and May for the Respondents)
This is an appeal from the order of Neuberger J on 7 December 1999 under CPR Part 24. He summarily dismissed claims for damages for breach of duty brought (or intended to be brought) by about 355 former full members of the Royal Automobile Club (the Club) against the Committee of the Club and against its holding company. His judgment is now reported in [2000] 2 BCLC 1.
He refused permission to amend the Statement of Claim dated 21 July 1998. He refused permission to appeal, which was granted by a single Lord Justice on 19 April 2000.
The dispute arises out of the fact that the claimants did not obtain any benefit from the de-mutualisation of the Club. That took place after their membership of the Club (and of its holding company) had ceased, either by their retirement from membership or by them allowing their membership to lapse, during the period from 9 July 1995 to 28 March 1998. The substantial sums (£34,161 each) distributed to those who were members of the Club at 8 July 1998 stemmed from the sale in mid-1999 of the valuable motoring services business associated with the Club and its holding company.
It is common ground that the relevant question is whether the claims have a real prospect of succeeding. If they do not, then the judge was right to dismiss them at this stage. If they do, then they should be allowed to proceed to trial in the usual way.
The Club, the Companies and the Members
The Club was a proprietary club. It was not a members' club. It was the property of its holding company, The Royal Automobile Club Limited (RACL), which was incorporated in 1897 as a company limited by guarantee.
The full members of the Club were members of RACL. The board of directors of RACL for the time being constituted the Committee of the Club. The Committee was vested with the entire management of the Club in accordance with the Rules of the Club. The Rules provided for the submission of an annual report by the Committee to the Annual General Meeting under Rule 19 and for the election of members. Membership was from year to year ending on 31 December in each year. Subscriptions were due and payable on 1 January in each year. Membership ceased for non-payment of subscriptions. Members were permitted to resign in accordance with a notice procedure in Rule 56. If a member resigned and re-applied for membership within three years, he might be re-elected without being proposed and seconded, if the Committee so decided.
RAC Motoring Services (RACMS), which operated the motoring services business, was also owned by RACL. So the full members of the Club had an indirect interest in it.
The Memorandum of Association of RACL contained provisions at the heart of this dispute between the former members and the Committee.
The objects of RACL stated in clause 3 of the Memorandum included
" (a) To establish, maintain and conduct a club for the encouragement and development in Great Britain of the auto-motor vehicle and other allied industries, and for the accommodation of Members of the Company and their friends, and to provide a club-house or club-rooms, and other conveniences, and generally to afford to Members and their friends all usual advantages, conveniences, and accommodation of a social club and centre of information and advice on all matters pertaining to auto-motor vehicles.
………
(m) To sell or dispose of the undertaking of the Company, or any part thereof, for such consideration as the Company may think fit, and in particular for shares, debentures, or securities of any other company.
………
(p) To do all such other things as are incidental or conducive to the attainment of the above objects, or any of them…"
Clause 4 provided that
" The income and property of the Company, whensoever derived, shall be applied solely towards the promotion of the objects of the Company as set forth in this Memorandum of Association, and no portion thereof shall be paid or transferred directly or indirectly, by way of dividend, bonus or otherwise howsoever, by way of profit to the Members of the Company. And upon the winding up of the Company, the surplus assets (if any) of the Company or funds arising from the realisation thereof which shall remain, after payment of all the debts and liabilities of the Company, shall not be paid or distributed among Members of the Company, but shall be given, paid or transferred to such public museum or to such institution or institutions connected with engineering, or with the objects of the Company as the Directors of the Company shall determine at or before the time of dissolution of the Company….."
Article 67 of the Articles of Association provided that
" If upon the winding up or dissolution of the Company there remains…any property whatsoever, the same shall not be paid to or distributed among the Members of the Company but shall be paid or applied as provided for by the Memorandum of Association."
Clause 4 of the Memorandum of RACMS contained a prohibition on distribution to members in slightly different terms with a further clause 5 which stated that
" No addition, alteration or amendment shall be made to Clause 4 hereof."
In mid-1998, after all the claimants had ceased to be members of the Club, these prohibitions were deleted from the Memorandum of each company by the combined effect of Special Resolutions and two schemes of arrangement made by the court under section 425 of the Companies Act 1985.
The Sale of RACMS
A. The Negotiations for sale to Cendant
The defendants' case is that in March 1998 an approach was made to RACL by Cendant Corporation with a view to acquiring the business of RACMS. This is disputed by the claimants. Coincidentally, a proposal to call an EGM, as the first step in a process to de-mutualise the Club and to de-merge RACMS, was made in a letter dated 27 March 1998 from the then chairman of RACL, Mr Jeffrey Rose, to all the full members of the Club. The board resolved that it would not elect any person as a member of RACL after 27 March 1998. In May 1998 the terms of sale of RACMS to Cendant for £450m were finally agreed.
B. The Scheme
On 4 June 1998 a meeting was held for a scheme of arrangement of RACMS. On 19 June 1998 a meeting was held for a scheme of arrangement of RACL. At that meeting a special resolution was passed for the deletion of clause 4 of the Memorandum.
On 8 July Neuberger J approved the schemes of arrangement of RACMS and RACL under section 425 of the Companies Act 1985: see Re RAC Motoring Services Ltd [2000] 1 BCLC 307. The schemes of arrangement became effective on 9 July 1998. They facilitated the transaction for the disposal of RACMS to Cendant and enabled the members to realise their indirect interest in RACMS.
The effect of the scheme was that the members ceased to be members of RACL at the close of business on 8 July 1998. A new company named RAC Acquisitions became the sole member of RACL. RAC Acquisitions itself became a subsidiary of RAC Holdings Limited ( RACH). One share of £1 each in RACH was allotted to each person who was a member of RACL at the close of business on 8 July 1998. That share was later divided into 2 shares of 50p each.
In addition, each of those former members of RACL became a member of New Club Company Limited, to which the entire share capital of a company called Club Acquisition Company Limited (CACL) was transferred. CACL had, while it was a subsidiary of RACL, acquired all the assets of RACL.
The New Club Company, which became and remains the ultimate proprietor of the Club, was later re-named "The Royal Automobile Club Limited." RACL was re-named "RAC Limited" and was subsequently re-registered as an unlimited company with a share capital, whereupon its name became "RAC."
C. The Sale to Lex Service
On 4 February 1999 it was announced that Cendant had decided not to proceed with the purchase in view of conditions imposed by the Secretary of State for Trade and Industry on competition grounds.
On 9 February 1999 Lex Service PLC announced that it was making a bid. On 21 May Lex Service made an offer to the shareholders in RACH to purchase their shares. That offer became unconditional on 9 July 1999. The sale took place for £437m.
The end result was that Lex Service became the holding company of RACH, RACL and RACMS and that the members, in their new capacity as shareholders in RACH, received about £34,000 each direct from Lex Sevice in respect of the sale of their shares in RACH.
The Proceedings
As the claimants had all ceased to be members of the Club and to be members of RACL before the schemes of arrangement took effect, they never became shareholders in RACH. So they never became entitled to receive any part of the benefits flowing from the sale of RACMS to Lex Service.
The majority of the personal defendants were the directors of RACL and the members of the Committee at the material time. Four of the defendants only became directors of RACL and members of the Committee on or after 1 January 1998, by which time most, if not all, of the claimants had ceased to be members. RACL is a proposed defendant under its...
To continue reading
Request your trial
-
Re Equipment Maintenance Ltd
...obligation arises (see Percival v Wright [1902] 2 Ch 421; Coleman v Myers [1977] 2 NZLR 225; Platt v Platt [1999] 2 B.C.L.C. 745 and Peskin v Anderson [2001] 1 B.C.L.C. 372 ). The directors owe their duty to the company. This is part of the general law against which the contract has to b......
-
Thompson (John) and Janet Thompson v Goblin Hill Hotels Ltd, Mies Investments Ltd, Marvin Goodman and Rosalie Goodman
...a duty to individual share holders (see Coleman v Myers [1977] 2 NZLR 225; Platt v Platt [1999] 2 B.C.L.C. 745 and Peskin v Anderson [2001] 1 B.C.L.C. 372 ). For this duty to arise there must be some conduct on the part of the directors towards those specific share holders who allege that s......
- TTN (Malaysia) Sdn Bhd v Triumphal Equities Sdn Bhd ((in Liquidation)) and Others
-
Alasan Penghakiman Wa-22Ncc-393-08-2020 Roda Berlian 4 Lagi v Lim Titt Huat 4 Lagi.
...duality duties owed by directors not just to the company but to shareholders as propounded in Peskin and another v Anderson and others [2001] 1 BCLC 372 I must hasten to add that on the facts, even if there is a duality of duties owed, whether the individual Plaintiffs can successfully prov......
-
This Time It's Personal: Grand Court Of The Cayman Islands Recognises Minority Shareholder Rights To Bring A Direct Personal Claim
...v Ampol [1974] AC 821, Residues Treatment and Trading Co Ltd v Southern Resources [1988] 6 ACLC 1160 ("Residues"), Peskin v Anderson [2001] 1 BCLC 372 and Eclairs Group Ltd v JKX Oil and Gas plc [2016] 3 All ER While his Lordship was hesitant to disagree with the decision of Mr Justice Kawa......
-
Incomplete contracts, contingent fiduciaries and a director's duty to creditors.
...Petrochemical Services Ltd [1983] Ch 258; Grove v Flavel (1986) 43 SASR 410, 417 (Jacobs J); Peskin v Anderson [2000] BCC 1110; affd [2001] BCC 874. (117) See Keay, 'Directors' Duties to Creditors: Contractarian Concerns', above n (118) It should be noted that Riz Mokal argues that the Brit......
-
Case Comments: Company Law and the Spoliated Director: Greaves v Barnard
...stated that the fiduciary duties of the director arose by virtue of agencyand not by virtue of his directorship; Peskin v Anderson 2001 (1) BCLC 372(CA) at 379 where it was held that the duties against the shareholders werebased on a special factual relationship and not on directorship).CO......
-
The interaction of directors' duties and sustainable development in Australia: setting off on the uncharted road.
...to that shareholder. This duty to shareholders must not, however, compete with the fiduciary duty to the company. In Peskin v Anderson [2001] 1 BCLC 372, it was confirmed that directors will only owe a fiduciary duty to shareholders if there is some 'special factual relationship' (usually a......
-
“Modernising Company Law”: The Government's White Paper
...the equating of thecompany’s interests with that of the shareholders. The Court of Appeal has recently asserted inPeskin vAnderson [2001] 1 BCLC 372, that the general rule remains that directors’ duties areowed to the company (see further: I. Moore, ‘Fiduciary Duties owed to Shareholders: T......