Harman v BML Group Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE LEGGATT,LORD JUSTICE HENRY |
| Judgment Date | 28 March 1994 |
| Judgment citation (vLex) | [1994] EWCA Civ J0328-4 |
| Docket Number | No. CHANF 94/0241/B |
| Court | Court of Appeal (Civil Division) |
| Date | 28 March 1994 |
[1994] EWCA Civ J0328-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
(ON APPEAL FROM THE HIGH COURT)
(CHANCERY DIVISION)
(His Honour Judge Paul Baker Qc) (Sitting as a High Court Judge)
Before: Lord Justice Dillon Lord Justice Leggatt and Lord Justice Henry
No. CHANF 94/0241/B
MR. N. MERRIMAN QC and MISS C. ROBERTS (instructed by Messrs. Scates Rosenblatt, London) appeared on behalf of the Appellants.
MR. P. HOWELL QC and MR. L. MICHAELSON (instructed by Messrs. Blazer Mills, London) appeared on behalf of the 1st Respondent.
MR. MILLS appeared in Person.
This is an appeal against a decision of His Honour Judge Paul Baker QC sitting as a Deputy Judge of the High Court given on 8th February 1994, whereby he ordered that a meeting of the company BML Group Ltd., be held pursuant to section 371 of the Companies Act 1985 whereat any two members of the company do constitute a quorum of the members of the company.
The company is a company whose shareholding consists of A and B shares. The applicants to the Judge, on whose application he made the order convening a meeting (Mr. Harman and Mr. Mills) hold between them 260,000 A-Ordinary shares. Mr. Harman holds 210,000 and Mr. Mills 50,000. There are three other members of the company. Mr. Lees and Mr. Boyle, who each hold 25,000 A-Ordinary shares and Mr. Blumenthal, who holds 190,000 B-Ordinary shares. So Mr. Blumenthal is the sole holder of the B-Ordinary shares and the others are holders of A-Ordinary shares. But it so happens that in the disputes that have broken out Mr. Lees and Mr. Boyle at present side with Mr. Blumenthal. Nonetheless Mr. Harman and Mr. Mills, between them holding 260,000 out of 500,000, hold over 50% of the Ordinary shares.
The history of the matter is that there was a company which has for some time carried on an active business which is now a wholly owned subsidiary of this company, BML Group Ltd. It came into business in effect to acquire the share capital of the subsidiary. The back history was that Mr. Harman and Mr. Mills, Mr. Lees and Mr. Boyle, were engaged in the running of the business. A director who had the control of the business to a very substantial extent, 80%, a Mr. Humphreys, desired to retire. At some stage around the beginning of 1988 he retired and a company, called Team Leasing Ltd., came in to hold the B-Ordinary shares. There was a shareholders agreement at that time, but that came to an end after Team Leasing had dropped out and Mr. Blumenthal had acquired the B-Ordinary shares.
We therefore have the current shareholders agreement between all the present shareholders which deals with all sorts of matters, including the rights attached to the different classes of shares.
The company's Articles are basically Table A. It is provided that the A shares and the B shares rank pari passu in all respects, save certain pre-emption rights which are set out. Furthermore, it is provided that Mr. Blumenthal shall be entitled to transfer the B shares in their entirety to a company controlled by him and members of his immediate family. It is also provided that Mr. Blumenthal shall be entitled to remain in office as a director of the company for so long as he or any company referred to, that is to say family company to which he has transferred his shares, owns the B shares. Such rights shall be personal to Mr. Blumenthal, except that he may appoint an alternate director.
Then, in clause 3.1.4, it is provided that a shareholders meeting shall not have a quorum unless a B shareholder or proxy is present.
There are then provisions for Mr. Blumenthal to have quarterly management accounts and to receive at least 14 days notice of any board meeting. There are various things that are not to be done without Mr. Blumenthal's written consent. That is the general nature of the agreement.
Unfortunately, difficulties arose last year when Mr. Blumenthal came to suspect that Mr. Harman and Mr. Mills were paying themselves more than they were entitled to under the shareholders agreement. Therefore, various meetings were held in July, which purported to be board meetings, at which Mr. Blumenthal, with the support of Mr. Lees and Mr. Boyle, terminated the employment of Mr. Harman and, later, Mr. Mills with the company. There was furthermore provision taken, purportedly under the shareholders' agreement, for notices to be given purporting to terminate Mr. Harman's and Mr. Mills' directorships of the company by resignations signed on their behalf. We are not concerned with the validity of those steps.
There was then a very strange Extraordinary General Meeting of the company on 3rd August last year, convened for the purpose of removing the majority shareholders, Mr. Harman and Mr. Mills, from office as directors of the company. Possibly not Mr. Mills but merely Mr. Harman. It does not matter.
The meeting began at three o'clock. It ended at one minute past three. Before the meeting began Mr. Harman's solicitor, who attended, had been refused permission to remain. A show of hands was held on the removal of Mr. Harman and it was carried on a show of hands three to two —Mr. Blumenthal, Mr. Lees and Mr. Boyle against Mr. Harman and Mr. Mills. The meeting was declared closed immediately afterwards before any reaction in the way of calling for a poll had time to take place. That is said to have been effective.
It seems to me extra ordinarily difficult to see how it could have been.
Behind all this lies the fear that Mr. Harman and Mr. Mills had been taking money improperly from the company. To find out about that a firm of chartered accountants were instructed by the company, under the control of Mr. Blumenthal, Mr. Lees and Mr. Boyle, to prepare an investigation. The accountants made a report. That includes a number of matters which amount to serious allegations against Mr. Harman in particular.
That being the state of affairs it is fairly apparent —indeed Mr. Harman and Mr. Mills purported to hold a meeting in the car park which was invalid in the absence of Mr. Blumenthal that there would be difficulty in holding any meeting of the company which was for the purpose of transacting any business that was not acceptable to Mr. Blumenthal.
Section 371 of the Companies Act 1985 provides as follows:
"(1) If for any reason it is impracticable to call a meeting of a company in any manner in which meetings of that company may be called, or to conduct the meeting in manner prescribed by the articles or this Act, the court may, either of its own motion or on the application-
(a)of any director of the company, or
(b)of any member of the company who would be entitled to vote at the meeting, order a meeting to be called, held and conducted in any manner the court thinks fit.
(2) Where such an order is made, the court may give such ancillary or consequential directions as it thinks expedient; and these may include a direction that one member of the company present in person or by proxy be deemed to constitute a meeting.
(3) A meeting called, held and conducted in accordance with an order under subsection (1) is deemed for all purposes a meeting of the company duly called, held and conducted".
There are statutory antecedents of that section going back to the Companies Act 1862.
The wording of the section is wide. The sort of circumstances in which it was commonly invoked, so far as my experience goes, up until 1958, were where for instance a company with a large number of shareholders or members had failed to comply with the provisions of the Articles as to the retirement of directors by rotation and thus by the operation of the rule in Re. Consolidated Nickel Mines...
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