Russell v Northern Bank Development Corporation Ltd and Others
| Jurisdiction | UK Non-devolved |
| Judge | Lord Griffiths,Lord Jauncey of Tullichettle,Lord Lowry,Lord Mustill,Lord Slynn of Hadley |
| Judgment Date | 11 June 1992 |
| Judgment citation (vLex) | [1992] UKHL J0611-1 |
| Date | 11 June 1992 |
| Court | House of Lords |
[1992] UKHL J0611-1
House of Lords
Lord Griffiths
Lord Jauncey of Tullichettle
Lord Lowry
Lord Mustill
Lord Slynn of Hadley
My Lords,
For the reasons given by my noble and learned friend Lord Jauncey of Tullichettle I, too, would allow this appeal.
My Lords,
During the 1970's the Northern Bank Limited and its wholly owned subsidiary the Northern Bank Development Corporation Limited ("the corporation") lent or invested substantial sums of money to or in two brick making companies in Killough, County Down, and Dungannon, County Tyrone. The former company was unsuccessful and incurred huge losses whereas the latter company prospered exceedingly. In 1979 the corporation devised a scheme whereby the contol of both companies came to be vested in a new holding company whose name after some changes became Tyrone Brick Limited ("T.B.L.") with an authorised share capital of £1000 divided into 1000 shares of £1 each. An essential part of the scheme was that the four executives who ran the Dungannon brick works should manage T.B.L. and to that end 20 shares in T.B.L. were alloted to each of them. A further 120 shares were alloted to the corporation but no allotment was made of the remaining 800 shares. On 14 November 1979 a Shareholders Agreement was executed by the four executives, who were, Mr. Samuel Russell, the plaintiff, Mr. Edward Winston Napier and Mr. John Andrew Topping, the second and third defendants, and Mr. Kenneth Calderwood Gore Mcllgorm, now deceased, whose personal representative is the fourth defendant and by T.B.L. Although the corporation bore to be a party to the agreement it never executed it. The agreement provided inter alia as follows:
" WHEREAS:
1. The Corporation and the Executives (hereinafter collectively called 'the Shareholders') are the holders of the entire issued share capital of the Company.
2. The shareholders have agreed to regulate the relationship between them with regard to the management and control of the Company so long as they shall remain shareholders of the Company.
" NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:
1. The terms of this Agreement shall have precedence between the shareholders over the Articles of Association and the parties agree to do, execute and perform such further acts, deeds, resolutions, consents, documents and things as may be necessary to give effect to this clause. Where the Articles of Association are silent on any matter, the provisions of this Agreement shall operate between the parties. Where there is conflict between the provisions of this Agreement and the Articles of Association the parties hereto shall co-operate where necessary to have the Articles amended from time to time to take account of the provisions of this Agreement and any subsequent consequential changes. Where this Agreement requires any future action to be taken by the Board of Directors or by the members of the Company the shareholders as such shareholders or as the parties entitled to nominate the Board of Directors of the Company will co-operate and do all such things as are necessary to implement such future action.
2. The provisions of this Agreement shall not be amended without the written consent of each of the parties hereto.
3. No further share capital shall be created or issued in the Company or the rights attaching to the shares already in issue in any way altered (save as is herein set out) or any Share Transfer of the existing Shares permitted, save in the following manner, without the written consent of each of the parties hereto.
4. Save as hereinafter provided the shareholders (or a person entitled to any share in the Company in consequence of a transfer as hereinafter provided) may at any time transfer any share registered in the name of such shareholders subject to the following terms and conditions:
(a) Any of the shareholders (or a Company entitled to a share in consequence of a transfer as provided for in Clause 6 hereof) (hereinafter called 'the proposing Transferor') desiring to transfer any share in the Company shall give notice in writing (hereinafter called the "the transfer notice") to the Company of its desire to transfer the same. Such notice shall constitute the Company its agents for the sale of such share in accordance with the provisions following at the "fair value" to be fixed by the auditors for the time being of the Company in manner laid down in Clause 5 hereunder. The transfer notice may include more than one share and in such case shall operate as if it were a separate notice in respect of each such share.
(b) ….
(c) ….
(d) ….
(e) ….
5. The auditors for the time being of the Company acting as experts and not as auditors shall on the application of the Directors certify in writing the "fair value" of such Shares in the Company…
6. The Shareholders may at any time transfer any share registered in the name of such Shareholder to:
(i) In the case of a Shareholder being a body corporate to a body corporate which is in relation to such Shareholder a holding Company or a subsidiary Company or a subsidiary Company of the same holding Company or in the case of a statutory body any other statutory body established as its successor; or
(ii) In the case of an individual to any wife, widow, husband, widower child or lineal descendant of such member.
7. While the Corporation remains a Shareholder in the Company it shall have the right on written notice to the Board of Directors of the Company to require the Board of Directors forthwith to co-opt such additional Directors to the Board of the Company which together with the then existing Directors of the Company nominated by the Corporation would constitute a majority of the Board of the Company. The Executives as Directors of the Company further hereby jointly and severally covenant with the Corporation to do all things necessary within their powers as Directors to implement the provisions of this Clause."
On 10 March 1933 the Board of T.B.L. gave notice to the shareholders of an extraordinary general meeting to be held on 30 March 1988 to consider the following two ordinary resolutions:
"1. That the Capital of the Company be increased from £200 to £4,000,000 by the creation of 3,999,800 Ordinary Shares of £1 each ranking pari passu with the existing issued Ordinary Shares in the capital of the Company.
2. That upon the recommendation of the Directors it is desirable to capitalise the sum of £3,999,800 being part of the amount standing to the credit of the Company's Reserves and accordingly that the Directors be authorised and directed to appropriate the said sum for distribution to the holders of the Ordinary Shares of £1 each on the Register at the close of business on 31st day of December 1987 in proportion to the amounts paid up on the issued Ordinary Shares of £1 each then held by them respectively and to apply such sum on behalf of such holders in paying up in full 3,999,800 of the unissued Ordinary Shares of £1 each in the capital of the Company such shares to be allotted and distributed as fully paid up to and amongst such holders in the proportion of 19,999 new Shares for every 1 Ordinary Share held on that date and that such shares shall rank for all purposes pari passu with the existing issued Ordinary Shares of the Company PROVIDED that this authority shall expire 5 years from the...
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