Gibbs-palmer (holdings) Ltd V. Gibbs-palmer (midland) Ltd
| Jurisdiction | Scotland |
| Judge | Lord Caplan |
| Date | 08 September 1999 |
| Docket Number | P70/9C |
| Court | Court of Session |
| Published date | 08 September 1999 |
OUTER HOUSE, COURT OF SESSION
| P70/9C/98
| OPINION OF LORD CAPLAN in the Petition of GIBBS-PALMER (HOLDINGS) LIMITED Petitioner; against GIBBS-PALMER (MIDLAND) LIMITED Respondent: for An Order pursuant to sections 459-461 of the Companies Act 1985 in respect of LAWSON DONALDSON LIMITED a company incorporated under the Companies Acts and having its registered office at Calder Road, East Hermiston, Edinburgh, EH14 4AJ ____________ |
Petitioner: N. Davidson, Q.C.; McGrigor Donald
Respondent: Moynihan, Q.C., Johnston; Henderson Boyd Jackson, W.S.
8 September 1999
The petitioner is a shareholder in Lawson Donaldson Limited (hereinafter referred to as "the Company"). The Company has its registered office in Edinburgh. The Directors of the Company are James Mark Harvey, Alan John Marr, Athole MacDonald, David John Onslow, David Leonard Shaw, Robert James Tabberner and John Simon Yealland. The petitioner seeks an order against the respondent pursuant to sections 459 to 461 of the Companies Act 1985. The Directors of the respondent are Gordon Ian Burn, Nicholas Frederick, Robert James Tabberner, John Simon Yealland, William Anthony Johnston and David John Onslow. At a preliminary hearing before me the respondent had argued that the petition is irrelevant.
The Company's principal activity is that of wholesalers of horticultural and pet products. The Company's authorised share capital is £75,000 divided into 7,500 ordinary shares of £10 each, all of which are issued and paid. As at 25 August 1998 the shareholders of the Company were as follows:
| 1. The Petitioner | 3,294 | |
| 2. The Respondent Company | 3,294 | |
| 3. R. Marr | 416 | |
| 4. B. MacDonald | 145 | |
| 5. A. Harvey | 145 | |
| 6. D. E. Beddie | 55 | |
| 7. P. Fallon | 55 | |
| 8. A. Boyle | 48 | |
| 9. N. Cowie | 48 | |
| 7,500 |
It will be noted that R. Marr, B. MacDonald and A. Harvey are not the same persons as the Directors of the Company but apparently are their wives. It will be noted that the shares thus owned by wives of the Company's Directors total 706. Since the petitioner and respondent each were registered holders of 3,294 shares the said block of 706 shares could have a critical influence on the control of the Company.
On 4 April 1988 an Agreement (hereinafter referred to as "the 1988 Agreement") was entered into and this governed the sale and purchase of most of the ordinary share capital of the Company (then known as Lawson Donaldson Seeds Limited). A copy of that Agreement has been produced and its terms are not disputed by either the petitioner or respondent. The parties to the 1998 Agreement were the petitioner, the respondent, and persons set out in column 1 of Part 1 of Schedule 1 of the Agreement (who were therein designed as "the Vendors"). The petitioner and respondent were described in the 1988 Agreement as "the Purchasers". It is also to be noted that Clause 1.1.3 of the 1988 Agreement provided that any reference to the Vendors includes, where appropriate, their personal representatives. However, it should be noted that in terms of Clause 1.1 the word "Associate" is used to define relatives including any spouse. The effect of the Agreement was that the parties specified as Vendors in the first column of Part 1 of Schedule 1 transferred all or part of their respective shareholdings to the party specified as Purchaser in the third column (namely to the petitioner or respondent as was specified). Mr Marr, Mr MacDonald and Mr Harvey were parties to the 1988 Agreement as Vendors but not their respective wives. The petitioner avers that prior to the 1988 Agreement they had acquired 1,342 shares in the Company and that the respondent had acquired 1,343 shares. The 1988 Agreement resulted in the transfer of 1,506 shares to each of them so that after the Agreement was implemented they held approximately equal numbers of shares and it is averred by the petitioner that until the events of August 1998 they maintained this equality of shareholding.
It is clear that one of the objects of the 1988 Agreement was the maintenance of this equality. The petitioner found strongly in Clause 11.5 of the Agreement which was in the following terms:
"11.5Any acquisition of shares to be made by the Purchasers shall be made as nearly as may be for equal number of Shares provided that if either Purchaser does not wish to take its full entitlement the other Purchaser shall be entitled to acquire the balance of such shares."
Since the interpretation of Clause 11.5 was a critical part of the debate before me it may be important to look at the other provisions of Clause 11 which may affect its construction. We find these to be:
"11.1Upon any Vendor ceasing to be employed by the Company or any of its Subsidiaries such Vendor shall forthwith be deemed to have offered to sell any Shares owned by such Vendor to the Purchasers at a price to be determined pursuant to clause 11.2 below by the Company's auditors from time to time (acting as experts and not as arbitrators).
11.2The price per Share referred to in clause 11.1 above shall be such price as the said auditors shall upon being so instructed by either or both of the Purchasers certify as being the fair price which a willing purchaser would pay a willing vendor by reference to the latest audited accounts of the Company and such certificate shall in the absence of manifest error be final and binding on the parties.
11.3Within one month of receipt of the certificate referred to in clause 11.2 above the Purchasers shall in writing notify the relevant Vendor of whether or not they or either of them wishes to acquire such Shares. In the event that the Purchasers wish to acquire such Shares the notice shall specify:-
11.3.1the number of Shares to be acquired by each Purchaser;
11.3.2the price per Share as certified by the said auditors;
11.3.3the date of completion of the sale and purchase which shall be not
less than 7 and not more than 14 days following the date of service of the notice; and
11.3.4the place of completion.
11.4At completion the Vendor shall deliver to the Purchasers:-
11.4.1duly executed share transfers of the Shares to be acquired made out
in accordance with the notice referred to in clause 11.3 above;
11.4.2the share certificates for the Shares; and the Purchasers shall
deliver to the Vendor cheques for the consideration of the Shares to be acquired.
...
11.6Each Vendor hereby irrevocably appoints the Purchasers jointly and severally to be his attorney to execute any transfer of Shares and to do all such other things as may be required to procure compliance to such Vendors' obligations under this Clause.
11.7No Vendor shall dispose of the legal or beneficial interest in any Shares he may hold in the Company until 30 June 1991 other than pursuant to this Agreement and thereafter no such disposal shall be effected unless the Purchasers shall have been given a reasonable opportunity to acquire such Shares on the same terms."
By amendment, allowed only on the morning of the hearing, the petitioner introduced reference to another informal agreement which they aver and found upon. They aver:
"Prior to the execution of the Agreement [the 1988 Agreement] the petitioner and respondent had transferred to them in February 1988 respectively 1,342 and 1,343 shares in the Company. The respective acquisition of shares proceeded on the basis of an informal agreement between the petitioner and respondent arrived at during negotiations in 1987 with the Company. It was agreed by the petitioner and respondent that the acquisition of shares would be effected on the basis of equal holdings of said shares. It was agreed that this equality of holdings would be the basis on which the petitioner and respondent were to conduct the relationship with the Company and inter se."
The respondent does not accept that there was ever such an informal agreement.
The petitioner accepts that while there were Directors of the petitioner and respondent who were also Directors of the Company the Company functioned largely independently and that the Managing Director, Mr Andrew Marr, took most commercial and operating decisions. The respondent makes averments that in recent times the petitioner had been in financial difficulties and unstable but this the petitioner disputes. The petitioner does accept that a large customer moved its custom from the petitioner to the respondent in the summer of 1998. The customer had formerly been serviced jointly by the petitioner and the respondent (both of whom it would appear carry on a business similar to that of the Company). However, the petitioner avers that the respondent represented to the customer that it would be able to supply the customer to the exclusion of the petitioner.
The petitioner avers that a notice of Board Meeting of the Company was given by fax to the Director, David John Onslow, on 18 August 1998. The business of the meeting was therein stated to be:
"1.Proposal to acknowledge and approve the transfer of 404 shares from
existing shareholders to the following new members - A. J. Marr, J. Harvey. A. MacDonald, Mrs Beddie, Mrs Fallon, Mrs Cowie and Mrs Boyle
2.Proposal to acknowledge and approve the transfer of 912 shares from
existing shareholders to Gibbs-Palmer (Midlands) Limited".
David Onslow responded on 24 August 1998 to the Company Secretary stating inter alia that he and David Shaw supported the proposals. By fax, on 25 August 1998, David Onslow communicated to the Company in advance of the Board Meeting. On behalf of the petitioner inter alia he stated that the petitioner wished to purchase sufficient of the shares from existing shareholders to maintain the petitioner's "original equal investment" in the Company.
The fax of 25 August 1998 bears to proceed from Gibbs-Palmer (Holdings) Limited and is addressed to Mr A. Marr. The terms of the fax are as follows:
"Dear Alan,
The Directors of Gibbs-Palmer (Holdings) Limited have discussed your Board Meeting this morning...
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