Forte (Charles) Investments Ltd v Amanda
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WILLMER,LORD JUSTICE DANCKWERTS,MR JUSTICE CROSS |
| Judgment Date | 13 June 1963 |
| Judgment citation (vLex) | [1963] EWCA Civ J0613-1 |
| Date | 13 June 1963 |
| Court | Court of Appeal |
[1963] EWCA Civ J0613-1
Lord Justice Willmer
Lord Justice Danckwerts
and
Mr Justice Cross
Supreme Court of Judicature
Court of Appeal
Sir ANDREW CLARK, Q. C Mr MICHAEL M. WHEELER, Q. C. and Mr R. A. K. WRIGHT (instructed by Messrs Paisner & Co.) appeared on behalf of the Appellants (Plaintiffs).
Mr R. B. INSTONE (instructed by Messrs William Charles Crocker)appeared on behalf of the Respondent (Defendant).
We need not trouble you to reply, Sir Andrew.
This is an appeal from a Judgment of Mr Justice Pennycuick given on the 15th May, 1963, whereby he dismissed a Motion brought by the Plaintiff company asking for an interim injunction pending trial restraining the Defendant from presenting a petition to wind up the company. The company we are concerned with, which is admittedly a solvent company, is a private company incorporated on the 21st May, 1962, with the main object stated in paragraph 3(A) of the Memorandum of Association, namely "To acquire for payment in shares the whole of the issued capital of Forte's (Holdings) Limited".
The capital of the Plaintiff company is £750,000, all issued and paid up, divided into 750,000 shares of £1 each. The Plaintiff company holds 1½ million Ordinary Shares and 4 million "B" Ordinary Shares in Forte's (Holdings) Limited. We are informed that that holding is sufficient to give the Plaintiff company for practical purposes a controlling interest in Forte's (Holdings) Limited. The latter company is a public company, whose shares are dealt with on the Stock Exchange, and which has other shareholders apart from the Plaintiff company. Its Directors, however, are the same persons as are Directors of the Plaintiff company.
The Defendant is the holder of 10,000 shares in the Plaintiff company, and he acquired those shares in the following circumstances. In or about the year 1958 he accepted an appointment through Mr Charles Forte with Forte's (Holdings) Limited, and in consideration of his taking up that appointment he was given 10,000 shares in Forte's (Holdings) Limited. Unhappily, after a year or so had passed, the Defendant fell out with Mr Charles Forte and ultimately, in or about December 1960, he resigned his appointment. There was then a dispute between the Defendant and Mr Charles Forte as to the ownership of the shares which were held by the Defendant.
Mr Charles Forte claimed that on the termination of the Defendant's appointment they should be returned to him. The Defendant did not agree with that claim. In the result an action was brought in the Queen's Bench Division by Mr Charles Forte, in which it was alleged that the Defendant was under an obligation to re-transfer his shares for a nominal consideration on the termination of his employment. The action in the event came to nothing, for Mr Charles Forte, when it was due to come on for hearing, decided not to proceed with it, and consequently the action was dismissed in November 1962.
In the meantime, however, whilst all this had been going on, the Plaintiff company was formed, and in the ordinary course the Defendant, as a shareholder in Forte's (Holdings) Limited, received 10,000 shares in the Plaintiff company in exchange for his previous holding in Forte's (Holdings) Limited. Being no longer employed by the company, however, and being at loggerheads with Mr Charles Forte, the Defendant was minded to dispose of his shares.
On the 4th March, 1963, he submitted to the Board of the Plaintiff company through his stockbrokers three transfers for registration. The first was a transfer dated 1st March, 1963, in respect of 130 shares, which was in favour of a Mr Richard Evelyn Fleming and two other named gentlemen, all of whom were of the address 8, Crosby Square, E. C.3. The second was a transfer, also dated 1st March, 1963, of 3,850 shares. That was in favour of a body called R. F. Nominees Limited of the same address, 8, Crosby Square. As has been pointed out to us in argument, those transferees were readily identifiable, both by their name and by their address, as being nominees of Robert Fleming & Company Limited, well-known merchant bankers. Both those transfers were transfers for valuable consideration and were duly stampedwith the appropriate advalorem stamp. The third transfer was dated 4th March, 1963, and was in favour of Branch Nominees Limited and covered the remaining 6,000 shares held by the Defendant. That was stamped only with a 10/- stamp, and was endorsed with a certificate to the effect that no beneficial interest passed.
Those transfers were considered by the Board of the Plaintiff company, who, on or about the 14th March, 1963, passed a resolution declining to register the transfers without assigning any reason therefore. At this point it should be stated that the Articles of Association of the Plaintiff company incorporated regulation 3 of Part II of Table A, which is in the following terms: "The directors may, in their absolute discretion and without assigning any reason therefore, decline to register any transfer of any share, whether or not it is a fully paid share".
Following the Board's refusal to register the transfer correspondence ensued between Solicitors for the respective parties, and that correspondence culminated in a letter of the 1st May, 1963, written by the Defendant's Solicitor to the Solicitors to the company. I should, I think, read the second and third paragraphs of that letter. It says: "Our client is advised by Counsel that in the circumstances of this case such refusal cannot have been based upon any interest of the company, and constitutes an abuse of the Directors' fiduciary powers which justifies him in presenting a petition for its winding-up by the Court. We are reluctant to take this step without giving your clients an opportunity to reconsider their attitude. The requisite petition and evidence in support have already been prepared, but we will refrain from presenting the petition if, within 14 days "from the date of this letter, we receive an undertaking on behalf of the Directors of the company that if the two transfers for the sale of a total of 4,000 of our client'sshares in favour (a) of R. F. Nominees Limited and (b) of Mr R. E. Fleming and others are resubmitted to the company, they will be forthwith registered. Our client is not at present disposed to press for the registration of the third transfer, which was in favour of a bank nominee company for holding on his own account".
The Plaintiff company countered that letter by issuing the present Writ. By the endorsement of the Writ the company claims an injunction to restrain the Defendant from presenting a petition for winding up the company "on the grounds that the refusal of the Directors of the Plaintiffs to register three transfers of shares in the Plaintiffs" - then details of the three transfers are given - "constituted an abuse of the Directors' fiduciary powers justifying the Defendant in presenting a petition for winding up the Plaintiffs".
The company obtained an interim injunction ex parte to cover the period until the 14th May when the present Motion came on for hearing. By their Notice of Motion the Plaintiff company now asks for an injunction pending trial in the terms of the endorsement of the Writ.
The Plaintiffs' case can, I think, be summarised under three heads. First, it is said that the petition is not sought to be presented for any proper purpose, but merely as a means of bringing pressure to bear on the Directors to reverse the decision at which the Board arrived. As such, it is claimed that such a petition would be an abuse of the process of the Court. Secondly, it is said that there is no evidence of any facts sufficient to substantiate the allegation made against the Directors, which is virtually an allegation of lack of bona fides. On that ground it has been contended that the petition is a petition which is bound to fail, and is therefore an abuse of the process of the Court which should be halted inlimine. perhaps that is not quitethe correct expression, because I suppose what is really said is that it should never reach the threshold at all. Thirdly, it is said that even if there were evidence to support the allegations put forward, a winding-up petition is not the proper remedy. The proper remedy, if the Defendant has any legitimate grievance, would be an action for rectification of the register or a proceeding by way of Motion under Section 116 of the Companies Act. It is pointed out that if what the Defendant wants to do is to have the transfer registered, a winding-up petition will not give him the relief which he seeks. On the other hand, if he brought an action, and assuming he was able to prove his facts, he could possibly get what he seeks, or alternatively he could obtain damages for the refusal to register the transfers.
The Plaintiffs here invoke the inherent jurisdiction of the Court to stay proceedings which are vexatious or an abuse of the process of the Court. They do not rely on any of the Rules of the Supreme Court, but solely upon the inherent jurisdiction. The learned Judge held that this jurisdiction should not be exercised unless it were made perfectly clear that the plea could not succeed. He then proceeded to consider whether in his view it could be said that the plea could not possibly succeed. He considered, first, the contention that the petition would be bound to fail on its facts, and secondly, the contention that a winding-up petition was the wrong remedy. As to the latter, he came to the conclusion that in certain circumstances a winding-up petition could be a legitimate remedy in a case such as the present, or that it was at least arguable that it might be an appropriate remedy in this case. As to...
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