Christopher Charles Dixon and Another v Blindley Heath Investments Ltd (Respondent/Cross-Appellant) Peter Bass and Others (Respondents to the Cross Appeal) Gerald Fred Clarke and Another (Respondents as to costs only)
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Hildyard |
| Judgment Date | 09 October 2015 |
| Neutral Citation | [2015] EWCA Civ 1023 |
| Docket Number | Case No: A3/2014/1974 & 1975 |
| Court | Court of Appeal (Civil Division) |
| Date | 09 October 2015 |
[2015] EWCA Civ 1023
Lord Justice Longmore
Lord Justice Jackson
and
Mr Justice Hildyard
Case No: A3/2014/1974 & 1975
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
OF THE HIGH COURT
MS LESLEY ANDERSON QC
Sitting as a Deputy Judge of the High Court
HC12D01365
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Bernard Weatherill QC (instructed by Kenneth Elliott & Rowe) for the Appellants
Mr Robin Hollington QC and Mr Hashim Reza (instructed by JP Fletcher & Co) for the Respondent/Cross-Appellant
Mr Timothy Carlisle (instructed by Summit Law LLP) for the First to Seventh Defendants
Mr Dov Ohrenstein (instructed on a Direct Access basis) for the Ninth and Tenth Defendants
Hearing dates: 16 & 17 June 2015
This is the judgment of the Court to which we have all contributed.
Nature and scope of the appeal
This case relates to a struggle for control of EFI (Loughton) Ltd ("the Company") and, in particular, a transfer of 200 shares in the Company by the first to seventh Defendants below (as vendors) to a body corporate registered in the British Virgin Islands and now called Blindley Heath Investments Limited ("BHIL", the Claimant below) as purchaser pursuant to a share purchase agreement dated 7 October 2011 ("the SPA").
The Appellants are Mr Christopher Charles Dixon (individually, "Mr Dixon") and the Company. It is the Appellants' case that the transfer was made in breach of valid rights of pre-emption and the transaction should be unwound. If successful, they will secure legal control of the Company.
Ms Lesley Anderson QC sitting as a Deputy Judge of the High Court ("the Judge"), after a 10-day trial, found that there were valid pre-emption rights in place, but that (a) Mr Dixon (and his co-directors, Mr Gerald Clarke ("Mr Clarke") and Mr Richard Wells ("Mr Wells") respectively (the ninth and tenth Defendants below and who are now Respondents as to costs only) were in all the circumstances estopped by convention from relying on such rights to prevent the transfer; alternatively, (b) she concluded that the share transfers had been unanimously, though informally, approved and passed at a meeting in October 2011 by the Board of Directors of the Company, who comprised a majority of its shareholders, that their decision to effect registration of the transfers was binding upon all concerned, and its purported revocation at a subsequent Board Meeting in November 2011 was invalid.
The Appellants, who appeal with the permission of Briggs LJ given on 21 October 2014, contend that in both respects the Judge was wrong. They submit that the Judge misdirected herself as matter of law as regards her decision on estoppel by convention and as regards the effect of the alleged informal approval of the transfers at the Board Meeting in October 2011. They submit further that the facts as found did not support her conclusion on estoppel, nor was it open to her to find that the Directors had informally agreed and approved the transfers at the meeting in October 2011. The Appellants further submit that on the pleadings and evidence the Judge was not entitled to find that Messrs Dixon, Wells and Clarke did not exercise their powers at the November Board Meeting properly or in good faith.
This appeal thus raises issues as to the scope and applicability of the doctrine and principles of estoppel by convention, and as to (a) the revocability of a Board decision at a subsequent Board Meeting, (b) the powers and duties of directors in relation to the passing and registration of share transfers subject to pre-emption rights conferred not in the Articles of Association but (as in this case) in an agreement evidenced by letters between certain of its shareholders, and (c) the well known Duomatic principle (further explained below).
Also, BHIL cross-appeals against the dismissal of its claims against the vendors (the first to seventh Defendants below) for misrepresentations and breaches of warranty under the SPA; but its cross-appeal, in which BHIL seeks damages to be assessed in respect of the difference between the value of its beneficial but unregistered interest in the shares it acquired under the SPA and the value of a registered, legal interest in such shares, is contingent on the Appellants succeeding in the main appeal.
BHIL has also been granted permission to cross-appeal certain aspects of the Judge's quite complicated and detailed decision on costs, for which she gave reasons in a separate Supplemental Judgment on 16 June 2014 ("the Supplemental Judgment"), in the event of the Appellants succeeding in the main appeal. Additionally, it seeks permission to cross-appeal aspects of the Supplemental Judgment even if the main appeal is dismissed. Briggs LJ refused (in writing) permission for that second and free-standing cross-appeal; but he subsequently directed that any renewed oral application should be made at the hearing of the substantive appeal.
The main appeal was presented on behalf of the Appellants by Mr Bernard Weatherill QC. Mr Robin Hollington QC and Mr Hashim Reza represented the Claimant. Mr Dov Ohrenstein represented Mr Clarke and Mr Wells, who adopted a neutral stance in the main appeal but are also interested in the cross-appeals on costs. Mr Timothy Carlisle represented the first to seventh Respondents/Defendants on the cross-appeal.
The main appeal occupied the Court for two days. There was not sufficient time to deal with the cross-appeals on costs; but after the conclusion of the main appeal, the Court invited Mr Hollington to provide a written summary of his "best points" on BHIL's self-standing cross-appeal on costs to enable us to determine whether to grant permission to pursue such appeal.
We start with a description of the facts.
Summary of facts
The Judge set out the facts comprehensively and clearly over the course of some 34 pages in her judgment dated 16 May 2014 ("the Judgment"). It is sufficient for present purposes to set out the following, culled from the Judgment.
The Company was incorporated on 8 September 2000 in order to acquire a 125-year lease of land and buildings known as the Loughton Seedbed Centre. The Judge explained at paragraph [3] of the Judgment that "the seedbed centre concept involves the provision of high quality, modern, business accommodation and technical, secretarial and administrative services on licence to small or start-up businesses and is a way of enabling those businesses to share common costs …".
The Company's Articles of Association adopt the form in Table A to the Companies (Tables A to F) Regulations 1985 as amended, and include the following provisions:
Article 4: "The shares of the Company shall be under the control of the Directors who may allot, grant options over, or otherwise deal with or dispose of any relevant securities (subject to section 80 of the Act) to such persons, on such terms and in such manner as they think fit".
Article 6: "Any shares which are not in the original authorised share capital with which the Company is incorporated and where the Directors propose to issue shall first be offered to the Members in proportion as nearly as may be to the number of the existing shares held by them respectively unless the Company in General Meeting shall by Special Resolution otherwise direct".
Article 11: "The Directors may in their absolute discretion and without assigning any reason therefore decline to register the transfer of a Share whether or not it is a fully paid Share".
Article 31: "A Director may vote, as a Director in regard to any contract or arrangement in which he is interested or upon any matter arising thereout, and if he shall so vote, his vote shall be counted and he shall be reckoned in estimating a quorum when any such contract or arrangement is under consideration and Clause 94 to 97 inclusive of Table A shall not apply to the Company".
As at 22 November 2000 the directors of the Company were Mr Peter Bass ("Mr Bass", the first Respondent/Defendant), Mr David Mingay ("Mr Mingay", the seventh Respondent/Defendant), Mr Clarke, Mr Wells and the late Mr Mark Dixon (the brother of Mr Dixon, who until his death was in practice with the latter in the solicitors' firm of Kenneth Elliot & Rowe).
As at 18 December 2000 the 500 issued Ordinary £1 shares in the Company were held as follows:
i) 100 shares held by the Bass family (80 shares jointly by Mr Bass and his wife Annette ("Mrs Bass", the second Respondent/Defendant); 10 held by Mr Robert Bass (the third Respondent/Defendant), the son of Mr and Mrs Bass, who is married to Ms Catherine Bass (the fourth Respondent/Defendant); and 10 held by Ms Suzanne Bashford (the sixth Respondent/Defendant), the daughter of Mr and Mrs Bass, who is married to Mr Michael Bashford (the fifth Respondent/Defendant);
ii) 100 shares held by Mr Mingay;
iii) 100 shares held by the Clarke family (i.e. 85 held by Mr Clarke and 15 held by Carol White, his wife/partner);
iv) 100 shares held by the Wells family (i.e. 50 held by Mr Wells and 50 held by Rosemary Wells, his wife); and
v) 100 shares held by Mr Mark Dixon.
Subsequently, in February 2001, Mr Dixon was invited to become a shareholder. He was to subscribe for 100...
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