Hague v Nam Tai Electronics Inc. et Al
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hoffmann |
| Judgment Date | 20 November 2006 |
| Neutral Citation | [2006] UKPC 52 |
| Date | 20 November 2006 |
| Court | Privy Council |
| Docket Number | Appeal No 16 of 2005 |
[2006] UKPC 52
Privy Council
Present at the hearing:-
Lord Bingham of Cornhill
Lord Hoffmann
Lord Rodger of Earlsferry
Lord Walker of Gestingthorpe
Lord Mance
[Delivered by Lord Hoffmann]
The chief point in this appeal concerns the construction of a provision in the articles of association of Nam Tai Electronics Inc ("Nam Tai"), a company incorporated in the British Virgin Islands, listed on the New York Stock Exchange and carrying on business in China. Mr Robert Yuen, a resident of Hong Kong, and Tele-Art Inc ("TAI"), a BVI company with which he was associated, were respectively the registered owners of 122,727 and 700,908 shares in Nam Tai. On 10 November 1993, by two separate deeds, each charged their shares to the Bank of China ("the Bank") in support of a guarantee of the repayment of advances by the Bank to Tele-Art Limited ("TAL"), a Hong Kong subsidiary of TAI.
TAI seems to have been in some financial difficulties at the time when it charged its shares to secure TAL's indebtedness, because on the very same day as the charges were executed an Irish government agency obtained a judgment against TAI in the BVI High Court for US$799,079. In 1996 TAL defaulted on its payments to the Bank and on 5 August 1996 the Bank called TAI on its guarantee.
Events then took an unusual turn. Nam Tai took an assignment of the judgment debt, which had become vested in Forfás, another Irish government agency, and on 27 June 1997 presented a petition to the BVI Court to wind-up TAI on the grounds of insolvency. On 17 July 1998 the court made a winding up order. The appellant Mr David Hague was appointed liquidator. The position was therefore that both the Bank and Nam Tai were creditors of TAI, the Bank holding security over its shares in Nam Tai and Nam Tai itself being unsecured.
Nam Tai then devised a scheme to destroy the Bank's security. On 16 October it altered its articles of association to create a special power to redeem the shares of judgment debtors. The International Business Companies Ordinance 1984, under which Nam Tai is registered, provides in section 9 that "subject to any limitations or provisions to the contrary in…this Act" a company may "purchase, redeem or otherwise acquire and hold its own shares". There is a limitation on this power in section 33(1A), which provides that a company may not redeem its own shares "without the consent of the member whose shares are to be…redeemed" unless the company is permitted by its articles to do so "without that consent". Regulation 13 of Nam Tai's articles, as it stood before amendment, provided in general terms that, subject to the provisions of the Act, any shares might be redeemed "on such terms and in such manner as the directors may determine". But it said nothing which could be construed as permitting redemption without the consent of the member. The directors of Nam Tai resolved to add such a power as regulation 13.1. Paragraph (a) of this new regulation contains definitions and the substantive power is contained in paragraph (b):
"Without limiting the generality of Regulation 13 of these Articles, in the furtherance thereof and in addition to any other rights or remedies available to the Company at law or in equity, the Company may at any time and from time to time redeem, at the Redemption Price per share, all or any of its outstanding shares beneficially owned by any Person or registered in the name of any Person whose name is entered as a member in the share register, against whom the Company has a judgment. At least 30 calendar days before the date fixed for redemption as determined by the resolution of the directors (the "Date Fixed for Redemption"), a written redemption notice ("the Notice") shall be sent to each beneficial owner and registered holder (if different from the beneficial owner) whose shares are to be redeemed by first-class mail, postage prepaid, at the address of the beneficial owner and registered holder (if different from the beneficial owner) as shown on the records of the Company, stating: (i) the class(es) of shares and the number of shares in each such class to be redeemed from the beneficial owner, (ii) the Date Fixed for Redemption, (iii) information on the method to be used to determine Redemption Price in accordance with Regulation 13(1)(a) of these Articles, (iv) the Judgment Amount and (v) the address of the place where the certificates for the shares to be redeemed shall be surrendered for redemption. On or before the Date Fixed for Redemption, each beneficial owner and registered holder (if different from the beneficial owner) of the shares to be redeemed shall surrender the certificates representing these shares to the Company at the place so designated therefore in the Notice unless the judgment amount has theretofore been satisfied in full. On the Date Fixed for Redemption the Company shall pay the Redemption Price for the shares redeemed by offsetting the Fair Market Value of the shares redeemed against the Judgment Amount. If the Fair Market Value of the shares redeemed exceeds the Judgment Amount, then new certificates representing the number of shares determined by dividing such excess by the Redemption Price (and rounding the quotient down to the nearest whole share) shall be issued to the Person whose shares were redeemed. In lieu of any fractional shares otherwise issuable, the Company shall pay an amount equal to the Redemption Price multiplied by the fraction. If the Fair Market Value of the shares is insufficient to fully satisfy the Judgment Amount, the Company shall retained the right to pursue all of its rights and remedies otherwise available to satisfy the deficiency. If the Notice is given in the manner provided in this Regulation, whether or not the certificates covering these shares are surrendered, all rights with respect to the redeemed shares shall terminate except for the right of the Person whose shares are so redeemed to receive credit by offset against the Judgment Amount as herein provided. Unless the certificates covering these shares are received by the Company at the place so designated the Judgment Amount will not be deemed to have been satisfied in full."
On 18 December 1998 Nam Tai gave TAI notice of a resolution to redeem 138,500 of the shares registered in its name to satisfy the Forfás debt, which (with interest and costs) was said to amount to US$1,617,083. Nam Tai determined the Redemption Price at US$11.188 a share, resulting in a Redemption Price for the shares of US$1,549,538, rather less than the amount alleged to be owing. On 22 January 1999,...
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