Guinness Plc v Saunders and Another
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith of Kinkel,Lord Brandon of Oakbrook,Lord Templeman,Lord Griffiths,Lord Goff of Chieveley |
| Judgment Date | 08 February 1990 |
| Judgment citation (vLex) | [1990] UKHL J0208-3 |
| Date | 08 February 1990 |
| Court | House of Lords |
[1990] UKHL J0208-3
Lord Keith of Kinkel
Lord Brandon of Oakbrook
Lord Templeman
Lord Griffiths
Lord Goff of Chieveley
House of Lords
My Lords,
I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Templeman. I agree with it, and for the reasons that he gives I too would dismiss the appeal.
My Lords,
For the reasons given in the speech of my noble and learned friend, Lord Templeman, I would dismiss the appeal.
My Lords,
The appellant, Mr. Ward, admits receiving £5.2m., the money of the respondent company, Guinness, at a time when Mr. Ward was a director of Guinness. Payment of this sum to Mr. Ward was, he says, remuneration authorised by Mr. Saunders, Mr. Roux and Mr. Ward, who formed a committee of the board of directors of Guinness. It is admitted by Mr. Ward that payment was not authorised by the board of directors. In these proceedings Guinness claim £5.2m. from Mr. Ward and in this application, Guinness seek an order for immediate payment on the grounds that the Articles of Association of Guinness and the facts admitted by Mr. Ward show that the payment to Mr. Ward was unauthorised and must be repaid. The Vice-Chancellor, Sir Nicolas Browne-Wilkinson, made the order sought by Guinness and his decision was affirmed by the Court of Appeal (Fox and Glidewell L.JJ. and Sir Frederick Lawton) [1988] 1 W.L.R. 863. Mr. Ward now appeals.
On 19 January 1986 a meeting of the board of directors of Guinness attended by a quorum passed several resolutions. There were 10 directors present; they included the chief executive, Mr. Saunders, and two non-executive directors, Mr. Roux and Mr. Ward. Legal and investment advisers of Guinness were in attendance. The minutes of the meeting record that Mr. Saunders and Mr. Roux explained the background to a proposed recommended offer by Guinness for the issued share capital of The Distillers Company Plc. The board considered drafts of an underwriting agreement, a letter of authority to be signed by each of the directors of Guinness, two commitment letters by banks, and a merger agreement between Guinness and Distillers. Mr. Roux reported on the fees and commissions payable by Guinness pursuant to the underwriting agreement. There is no record of the possibility of any fees, commission or remuneration being payable to a director. The draft merger agreement contained an agreement by Distillers to pay the costs incurred by Guinness if the offer should not prove successful and an agreement by Guinness to indemnify the directors of Distillers should the court determine that it had not been appropriate for the directors of Distillers to enter into the merger agreement and to pay the expenses of Guinness. The board of Guinness resolved that an offer be made and approved the draft documents which had been considered. The board also resolved that "any three directors of the company be and they are hereby appointed a committee of the board with full power and authority" to settle the terms of the offer, to approve any revisions of the offer which the committee might consider it desirable to make and:
"(vi) to authorise and approve, execute and do, or procure to be executed and done, all such documents, deeds, acts and things as they may consider necessary or desirable in connection with the making or implementation of the offer and/or the proposals referred to above and any revision thereof. …"
It is common ground that Mr. Saunders, Mr. Roux and Mr. Ward established and constituted themselves a committee of the board for the purposes of the resolutions passed on 19 January 1986, that the committee carried the resolutions into effect and that a revised offer resulted in Guinness acquiring all the share capital of Distillers.
In these present proceedings, Mr. Ward pleads that in consideration of Mr. Ward "providing advice and services" to Guinness during the currency of the offer (which he refers to as "the bid") Guinness agreed, in the event of the success of the bid, to pay to Mr. Ward a sum equivalent to 0.2 per cent. of the ultimate value of the bid. The agreement is said to have been entered into by Mr. Saunders, Mr. Ward and Mr. Roux on behalf of Guinness and Mr. Ward on his own behalf. It is said that Mr. Saunders orally agreed about 19 February 1986, and that Mr. Roux orally agreed about the beginning of May 1986, and that the agreement was made or evidenced by an invoice delivered to Guinness by a company now admitted to be controlled by Mr. Ward. The invoice claimed £5.2m. for advice in respect of the successful acquisition of Distillers. The invoice was approved by Mr. Roux and the sum of £5.2m. was paid. Mr. Ward pleads in the alternative that an agreement by Guinness to pay Mr. Ward for his advice and services was made by Mr. Saunders who had implied actual authority, or ostensible authority, to do so. Mr. Ward pleads that he performed valuable services for the benefit of Guinness in connection with the bid. These services were rendered between 8 January 1986 (a day prior to the board meeting on 19 January) and 20 April 1986. These services as set out in particulars furnished by Mr. Ward were, in summary: (1) negotiations on behalf of Guinness at meetings and in the course of telephone conversations with directors and representatives of Distillers; (2) negotiations on behalf of Guinness at meetings and in the course of telephone conversations with officials of the Monopolies and Mergers Commission; and (3) discussions from time to time of the bid, the revised bid and the desirability of and implementation of the bid at meetings (including the board meeting held on 19 January 1986) and in the course of telephone conversations with members of the board of Guinness and professional advisers of Guinness.
Mr. Ward claims particular credit for persuading the Monopolies and Mergers Commission to allow Guinness to bid for Distillers, for persuading some reluctant directors of Guinness to persevere with the bid and for persuading Distillers to pay the costs of Guinness in connection with the bid should it prove unsuccessful.
Thus Mr. Ward admits receipt of £5.2m. from Guinness and pleads an agreement by Guinness that he should be paid this sum for his advice and services in connection with the bid. Mr. Ward admits that payment was not authorised by the board of directors of Guinness.
The articles of association of guinness provide:
"REMUNERATION OF DIRECTORS. 90. The board shall fix the annual remuneration of the directors provided that without the consent of the company in general meeting such remuneration (excluding any special remuneration payable under article 91 and article 92) shall not exceed the sum of £100,000 per annum. … 91. The board may, in addition to the remuneration authorised in article 90, grant special remuneration to any director who serves on any committee or who devotes special attention to the business of the company or who otherwise performs services which in the opinion of the board are outside the scope of the ordinary duties of a director. Such special remuneration may be made payable to such director in addition to or in substitution for his ordinary remuneration as a director, and may be made payable by a lump sum or by way of salary, or commission or participation in profits, or by any or all of those modes or otherwise as the board may determine."
Articles 90 and 91 of the articles of association of Guinness depart from the Table A articles recommended by statute, which reserve to a company in general meeting the right to determine the remuneration of the directors of the company. But by article 90 the annual remuneration which the directors may award themselves is limited and by article 91 special remuneration for an individual director can only be authorised by the board. A committee, which may consist of only two or, as in the present case, three members, however honest and conscientious, cannot assess impartially the value of its work or the value of the contribution of its individual members. A director may, as a condition of accepting appointment to a committee, or after he has accepted appointment, seek the agreement of the board to authorise payment for special work envisaged or carried out. The shareholders of Guinness run the risk that the board may be too generous to an individual director at the expense of the shareholders but the shareholders have, by article 91, chosen to run this risk and can protect themselves by the number, quality and impartiality of the members of the board who will consider whether an individual director deserves special reward. Under article 91 the shareholders of Guinness do not run the risk that a committee may value its own work and the contribution of its own members. Article 91 authorises the board, and only the board, to grant special remuneration to a director who serves on a committee.
It was submitted that article 2 alters the plain meaning of article 91. In article 2 there are a number of definitions each of which is expressed to apply "if not inconsistent with the subject or context." The expression "the board" is defined as
"the directors of the company for the time being (or a quorum of such directors assembled at a meeting of directors duly convened) or any committee authorised by the Board to act on its behalf."
The result of applying the article 2 definition to article 91, it is said, is that a committee may grant special remuneration to any director who serves on a committee or devotes special attention to the business of the company or who otherwise performs services which in the opinion of the committee are outside the scope of the ordinary duties of a director. In my opinion the subject and...
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