Demite Ltd v Protec Health Ltd and Others
| Jurisdiction | England & Wales |
| Judgment Date | 12 June 1998 |
| Date | 12 June 1998 |
| Court | Chancery Division |
Chancery Division
Before Mr Justice Park
Company - business sold to another concern - shareholder approval not obtained
The prohibition, in section 320(1) of the Companies Act 1985, of entry by a company into a specified arrangement "unless…first approved by a resolution of the company in general meeting" could not be circumvented by deploying the dictum in In re Duomatic LtdELR ((1969) 2 Ch 365, 373E).
Mr Justice Park so held in the Chancery Division, in;
(a) giving the defendants, Protec Health Ltd and the administrative receivers of the plaintiff, Demite Ltd, purportedly so appointed by a debenture holder on July 15, 1996, leave to defend a claim by Demite, acting by its provisional liquidator, that they had not validly been appointed;
(b) assuming their appointment was valid, holding that an agreement of July 16, 1996, by which they had purported to sell Demite's business to Protec,
required, but did not have, prior shareholder approval in general meeting under section 320 of the Companies Act 1985.
Mr Gabriel Moss, QC, for the provisional liquidator of Demite; Mrs Jane Giret for Protec; Mr Christopher Boardman for the receivers.
MR JUSTICE PARK said that while trading, Demite had had two directors: Dr Wharton Shober and Mr Hanmer Webb Peploe.
Its shareholders were two offshore holding vehicles: Integro Fiduciaire Sarl with 58.5 per cent and Schroder Asia Nominees Ltd with 40.5 per cent, representing each director's interest, and Mrs Lynda Platts, its operations manager, with 1 per cent.
In October 1995 Demite borrowed £215,000, secured by a debenture, from a Mr Christian de Lassus. On July 12, 1996 Dr Shober and Mr Peploe signed a document headed "Shareholders' Agreement", expressed to be between them and Mrs Platts, paragraph 2 of which read: "Because of the prospective insolvency of Pioneer (a sister company of Demite) and Demite, they will be placed in receivership and then liquidated."
Mr de Lassus's reaction, on learning of that, was on July 15 to appoint the receivers, who next day sold Demite's business and assets for £235,000 to Protec, in which Mr Peploe and Mr de Lassus, but not Dr Shober, were believed to have interests.
On the subsequent application of Dr Shober and an unsecured creditor, the court appointed provisional liquidators of Demite: on whose behalf Mr Moss now sought summary judgment under two heads:
1 Under Order 14 of the Rules of the Supreme...
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