Margaret Rose Nugent and Another (Petitioners) Benfield Greig Group Plc and Others (Respondents) Between Margaret Rose Nugent and Another (Petitioners) Benfield Greig Group Plc and Others (Respondents)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Arden |
| Judgment Date | 26 January 2000 |
| Judgment citation (vLex) | [2000] EWHC J0126-7 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 26 January 2000 |
| Docket Number | 003697 of 1999 |
[2000] EWHC J0126-7
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand
London WC2A 2LL
The Honourable Mrs Justice Arden Dbe
In The Matter of Benfield Greig Group Plc and In The Matter of The Companies Act 1985
003697 of 1999
003687 of 1999
Mr David Oliver QC and Mr Mark Cunningham (instructed by Messrs Gouldens, 22 Tudor Street, London EC4Y 0JJ) appeared on behalf of the Petitioners.
Mr David Richards QC and Mr David Chivers (instructed by Ashurst Morris Crisp, Broadwalk House, 5 Appold Street, London EC2A 2HA) appeared on behalf of the Respondents.
Hearing: 18, 19, 20 January 2000.
Judgment: 26 January 2000
The is an application by the first to eleventh respondents to these proceedings, who are Benfield Greig Group plc ("the company") and its directors. The twelfth respondent is Abacus Corporate Trustee Ltd, the trustee of the Benfield Greig Group plc Employee Benefit Trust. The application is made pursuant to Civil Procedure Rule 24.2 for an order striking out the petition. The petition is brought by Mrs Margaret Rose Nugent (Mrs Nugent) and Mr Mark John Killick (Mr Killick) , the executors of Matthew Charles Harding, who died on 22 October 1996.
Mr Harding was one of the founder members of the company. The company's principal business is in reinsurance broking. The original four founder members together with Mr Neil Eckert signed a statement of common belief in July 1992. This document affirms the signatories' belief that there should not be a separation of share ownership from the management and that accordingly directors should sell their shares on leaving the company. At the date of his death Mr Harding held ordinary shares conferring about 30% of the voting rights at general meetings of the company. In 1997, the company acquired Greig Fester Group Ltd ("Greig Fester") and in consequence the proportion of voting rights conferred by this holding was reduced to 24.9%. On the death of Mr Harding, a transfer notice in respect of his shares was deemed to be given by virtue of the provisions of the company's articles of association. Under these articles, the market value of the shares had to be fixed by an expert and the shares were then transferred in accordance with the articles. The compulsory transfer was not implemented in 1997 because of the acquisition of Greig Fester. Nor was it implemented in 1998. However, in May 1999, the directors implemented the provisions of the articles and in consequence all of the shares previously owned by the executors were transferred to the Benfield Employees' Share Plan and the company save for 10 shares. The executors now only hold 10 shares, which they have retained for the purpose of pursuing these proceedings. The proceedings are brought under section 459(1) of the Companies Act 1985, which provides as follows:-
"(1) A member of a company may apply to the court by petition for an order under this Part on the ground that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or of some part of its members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial."
The principal relief sought in these proceedings is the payment to the executors of the difference between the price paid to them on completion of the transfers, which was £2.10 per share, and a "just and fair price" fixed by the court.
As I have said, this application is pursuant to CPR Rule 24.2. This provides that the court may give summary judgment against a claimant on the whole of a claim or any particular issue if:-
"(a) it considers that:-
i. The claimant has no real prospect of succeeding on the claim or issue; … and (b) there is no other reason why the case or issue should not be disposed of at a trial."
This rule was considered by the Court of Appeal in Swain v. Hillman (Court of Appeal, Times 21 October 1999) . Lord Woolf MR held:-
"…that under rule 24.2 the court had a very salutary power to dispose summarily of claims or defences which had no real prospect of succeeding.
The words 'no real prospect of succeeding' did not need any amplification, they spoke for themselves. The word 'real' directed the court to the need to see whether there was a realistic, as opposed to a fanciful, prospect of success.
When the matter had been before the judge, paragraphs 4.1 and 4.2 of the practice direction supplementing Part 24 had dealt with the court's approach to an application for summary judgment.
Those paragraphs had since been deleted as it had been perceived that there was a conflict between paragraphs 4.1 and 4.2 and the provisions of Part 24.
The practice direction indicated that the judge could only exercise his power under Part 24 if he thought that a claim 'would be bound to be dismissed at trial'. That would be putting the matter incorrectly because it did not make clear the effect of the word 'real' to which his Lordship had already referred.
The judge had been misled by the language of the practice direction in its original form. He had looked at the matter on the basis that he had to be certain that the case could not succeed and was bound to fail before he could appropriately accede to the defendants' application.
Although the judge had, therefore, adopted the wrong approach, his Lordship was quite satisfied that he had come to the right decision.
It was important that a judge, in appropriate cases, should make use of the powers contained in Part 24. In doing so he or she gave effect to the overriding objectives contained in Part 1.
It saved expense; it achieved expedition; it avoided the court's resources being used up in cases where it would serve no purpose; and, generally, it was in the interests of justice.
If a claimant had a case that was bound to fail, then it was in the claimant's interests to know as soon as possible that that was the position. Likewise if a claim was bound to succeed, a claimant should know that as soon as possible."
Pill and Judge LLJ gave concurring judgments.
There are four groups of allegations in this case: first, the petitioners rely on breach of equitable considerations. In short they say that they were assured that there would be no compulsory sale and that they would participate in the valuation process. Second, the petitioners rely on an alleged breach of the relevant articles of association. They contend that article 13 of the company's articles of association required certain stages to be completed before 1 May 1999 and those stages were the appointment of the auditors, the completion of the valuation and the offer round in accordance with the procedure specified in the articles. Only the first of these stages had been completed by 1 May 1999. Third, the petitioners say that terms are to be implied into article 13 for the provision of information to them and for permitting them an opportunity to make representations to the valuer. Fourth, they contend that the value placed on the shares by the valuer, PricewaterhouseCoopers ("PWC") was such that no reasonable valuer could have arrived at and that it therefore does not constitute a valuation for the purposes of the articles.
The material allegations in the petition as supplemented by the points of reply and evidence are as follows.
During November and December 1996 and throughout 1997 and 1998, the executors held frequent and cordial meetings with directors of the company, in particular the chairman Mr Coldman and the chief executive Mr Chilton. As a result the executors came to trust the directors and to rely on them to act in the best interests of the company and the shareholding. There was a meeting on 18 April 1997 between Mr Killick and Mr Coldman to discuss the 1997 offer round of shares. At the end of July 1997, the executors had a lunch-time meeting with Mr Coldman. Mr Coldman spoke about the possibility of Mr Harding's shareholding or part of it being sold. He said that any such sale would have to be discussed with the executors beforehand, so the executors, the directors and the company could arrive at an agreed value. In his witness statement Mr Killick refers to the close relationship between the board and the executors. In relation to this meeting at the end of July 1997 he says that his expectation (following Mr Coldman's statement) was that the directors would not implement a compulsory sale because of the close relationship that existed. Mrs Nugent was also at this meeting and she supports Mr Killick's version of events.
There was a further meeting in the middle of September 1997 between the executors, the chairman, the chief executive and the chief financial officer (Mr Whiter) and the executors were then told of the proposed merger with Greig Fester. Further meetings in 1998 are pleaded. In particular there was a meeting on 16 April 1998 at the premises of the executors' solicitors. The meeting was attended by the executors, their solicitors Mr David Cooper and Ms Lucy Johnson, both of Gouldens, and the chairman, chief executive and chief financial officer. There was some discussion about the 1998 offer round. Mr Cooper said that the executors did not intend participating in the offer round unless they could agree a ...
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