COMPANY

Directors' powers and duties - dividends - minority shareholders - share purchases - unfairly prejudicial conduct

Lawrie Grace v (1) Marcello Biagioli (2) Stephen Van Loggerenberg (3) Cathleen Johannessen (4) Titanium Electrode Products Ltd (2005): CA (Civ Div) (Lords Justice Mummery, Mance, Mr Justice Patten): 4 November 2005



The appellant petitioner (G) appealed against the court's decision not to order the respondents to purchase G's shares in a company (T) despite having found that there had been unfairly prejudicial conduct in relation to T's affairs for the purposes of section 459 of the Companies Act 1985.


G and the first and third respondents (R) each held one quarter of the shares in T. All three were directors. G had presented a petition under section 459, alleging unfairly prejudicial conduct in the conduct of T's affairs. The conduct relied on was R's decision not to pay an agreed dividend but to distribute the relevant profits to R alone as management and other fees, and R's decision to remove G as a director.


The judge had held that unfair prejudice had been established in respect of the failure to pay the agreed dividend, but that the decision to remove G as a director had been justified because he had been negotiating to acquire a company in the same line of business as T and had therefore put himself in a position of actual or potential conflict with his duties as a director. The judge declined to order R to purchase G's shares and decided that the appropriate relief for non-payment of the dividend was to order T to make an appropriate payment to G with interest.


G submitted that the judge had been wrong to conclude that G's removal as a director of T was not unfair in the circumstances, and the judge had taken the wrong view of the seriousness of the non-payment of the dividend, which was not an isolated incident and was symptomatic of a complete breakdown in relations between G and R, and should have made the share buyout order which G sought.


Mark Hubbard (instructed by Brethertons) for the appellant; Malcolm D Warner (instructed by Wards) for the respondents.


Held, on the evidence the judge had been entitled to conclude that G's conduct had justified his removal as a director, notwithstanding the history of relations between the parties and the effect that his absence from the board would have on his ability thereafter to scrutinise the decisions that were taken in relation to T and its profits.


Although G's negotiations to purchase a related business never came to fruition, G's dismissal as a director was justified by his willingness to embark on such negotiations without any prior disclosure or discussion with his fellow directors and shareholders and his attempts to conceal the existence of the negotiations by making statements that were untrue or became untrue and remained uncorrected.


The judge had been wrong to decline to order R to purchase G's shares and instead to order payment by the company of the dividend that was due to him. Non-payment was not simply a breach of the agreement between the parties. The money had been distributed to the other shareholders as management or other expenses to which they had no entitlement and T's accounts had been mis-stated as a consequence. Under section 461 of the 1985 Act, the court's discretion as to remedy was not limited to merely reversing or putting right the immediate conduct that had justified the making of the order. The most appropriate order to deal with intra-company disputes in small private companies would normally be a buyout order, since anything less than a clean break was unlikely in most cases of proven fault to satisfy the objectives of the court's power to intervene, O'Neill v Phillips [1999] 1 WLR 1092 considered. G's own conduct could not be used to support the rejection of a buyout order.


The judge erred in his consideration of whether some form of unfair prejudice was likely to recur. Having made the finding of unfair prejudice that he did, the judge should then have considered the position more generally and should have concluded that a share purchase order was the sure and fair way of dealing with the situation that had occurred. The fact that G was not an active manager of the business was not a reason for refusing a share buyout order. Nor was it necessary to show, as the judge had suggested, that the petitioner's shareholding had been intended to provide him with a capital gain.


The right order was for R to purchase G's shares at a price to be determined by the court and the case was remitted to the Chancery Division for that purpose.


Appeal allowed.






AVIATION



International law - sale of goods air waybills - international carriage by air - interpretation - limit of liability - notices

(1) Fujitsu Computer Products Corporation (2) Fujitsu Ltd (3) Fujitsu Europe Ltd v Bax Global Inc & 5 Ors: QBD (Comm) (Mr Justice Christopher Clarke): 9 November 2005


The court was asked to determine preliminary issues in a claim concerning a house air way bill.


Under the bill, the defendant (B) had acknowledged the shipment of a consignment of cargo. The third claimant (F) was the consignee. B had subcontracted the carriage to an airline and the consignment was stolen. The contract of carriage between F and B was governed by the Warsaw Convention on International Carriage by Air 1929. B sought to limit its liability under article 22(2) of the convention.


The face of the way bill stated that the consignment was accepted for carriage 'subject to the conditions of contract on the reverse hereof' and that 'the shipper's attention is drawn to the notice concerning carrier's limitation of liability'.


The issues for determination were whether the way bill contained a notice that complied with article 8(c) of the convention, and, if it did, whether the notice was to the effect specified in article 8(c).


B argued that it was sufficient that the information required by article 8(c) was contained somewhere within the waybill, so that anyone who chose to read it was given appropriate notice, and that such information was contained in the conditions on the reverse of the way bill, taken with the words on the face of the bill.


John Russell (instructed by Clyde & Co) for the claimants; Michael McLaren QC (instructed by Holmes Hardingham) for the defendants.


Held, article 8(c) required an air way bill to contain what was recognisable as 'a notice', which meant a discrete form of words warning the reader of the potential applicability of the convention and its effect, namely to govern and limit liability. The expression 'a notice' was not the same as a statement, indication, notification or even notice. The term 'a notice' consisted of words of ordinary language and should be given the meaning that they would convey to the ordinary reader. The ordinary reader of the way bill in this case would not regard it as containing on the reverse the notice promised on its face, or containing by a combination of the face and reverse something that could be described as 'a notice'.


Furthermore, the purpose of articles 8(c), as well as 3(1)(c) and 4(1)(c), which had similar provisions, was to provide a warning to consignors and passengers that the convention may apply, and thus govern and limit liability.


In the event that the way bill did contain a notice, the provisions relied upon did not satisfy the requirements of article 8(c). The way bill gave notification that the convention may be applicable and that it was governed by the rules relating to liability in the convention. The face of the way bill incorporated into the contract of carriage the conditions of contract on the reverse and drew attention to 'the notice' concerning a carrier's limitation of liability. However, nothing in those words indicated that the limitation was derived from the convention, as required by article 8(c), rather than the conditions imposed by the carrier, Samuel Montagu & Co Ltd v Swiss Air Transport Co Ltd [1966] 2 QB 306 considered. Accordingly, the way bill failed to comply with notice requirements of article 8(c).


Preliminary issue determined in favour of claimant.







INTELLECTUAL PROPERTY



Civil procedure - implied repeals - patent proceedings - Patents Court - permission to appeal

Smith International Inc V Specialised Petroleum Services Group Ltd: CA (Civ Div) (Lords Justice Mummery, Jacob, Neuberger): 17 November 2005


The applicant (S) sought permission to appeal against a decision ([2005] EWHC 686 (Ch)) that a patent owned by the respondent (P) was novel and had not been anticipated by prior art.



The judge had set aside the hearing officer's order that the claim in P's patent was invalid for lack of novelty. S wished to appeal. Its proposed appeal fell within both of the exceptions in section 97(3) of the Patents Act 1977 to the general prohibition on appeals to the Court of Appeal from the Patents Court on appeal from a decision of the comptroller since the comptroller's decision had been given under section 72 of the 1977 Act. S's case was that the judge's decision was wrong in law as he had misconstrued the patent in suit or the prior art or both.



If the provisions of section 55 of the Access to Justice Act 1999 in relation to second appeals, and rule 52.13 of the Civil Procedure Rules (CPR), applied to the proposed appeal, S would have to show that the proposed appeal raised an important point of principle or practice, or that there was a compelling reason to grant permission. But if section 97(3) and rule 52.3 applied, permission could be granted if there was a real prospect of success or some other compelling reason why the appeal should be heard.



The issue was whether section 97(3) had been impliedly repealed, or whether its scope had in some other way been limited, by section 55 of the 1999 Act.



Richard Miller QC (instructed by Bird & Bird) for the applicant; Guy Burkill QC (instructed by Wragge & Co) for the respondent.



Held, section 97(3) of the 1977 Act was a specific procedure laid down by Parliament for patent appeals and section 97(3) had not been expressly or impliedly repealed by the general words of section 55 of the 1999 Act concerning second appeals to the Court of Appeal. The effect of applying the general requirements of section 55 would be to cancel or render meaningless the power of the Patents Court under section 97(3) to grant permission to appeal to the Court of Appeal.



It was difficult to imply a legislative intention to repeal an earlier enactment (section 97(3)) which was particular, where the later (section 55) was general in nature. That conclusion was supported by the fact that the 1999 Act had expressly repealed a similar provision for appeals from the conveyancing appeals tribunal in order to apply the new second appeal regime.



Section 55 had not superimposed on section 97(3) an additional requirement that the permission of the Court of Appeal had to be obtained in accordance with rule 52.13; Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2001] QB 388 applied.



Permission to appeal was granted, as the proposed appeal had a real prospect of success.







PLANNING



Advertisements - freedom of expression - planning control - public display of banners - classification of banners - announcements - directions - political protests

Butler v Derby City Council: DC (Mr Justice Collins, Sullivan): 22 November 2005


The appellant (B) appealed by way of case stated against his convictions for breaches of planning control.



Information had been laid by the respondent local authority that B had displayed an advertisement on property, without the consent of the local authority or the secretary of state, contrary to regulations 5 and 27 in the Town and Country Planning (Control of Advertisements) Regulations 1992, and regulation and section 224 of the Town and Country Planning Act 1990.



The purported advertisement was a banner approximately two metres by one metre in size, which bore the words 'Save Five Lamps' along with a logo and contact details of a group opposed to certain land development proposed by the local authority. The contact details consisted of a telephone number and a Web site address.



The judge held that the contact details on the banner constituted a direction and that as such the banner was an advertisement. The judge further held that, as B had not applied for consent to display the banner as an advertisement, his rights under article 10 of the European Convention on Human Rights were not engaged.



The questions stated for the opinion of the High Court were whether, on the evidence, the judge was entitled to find that the banner constituted an advertisement within the meaning of the 1992 Act and the 1992 regulations; on the basis that the banner did constitute an advertisement, the judge was correct in determining that the commencement of the criminal proceedings did not engage B's rights to freedom of expression, since he had neither applied for nor been denied consent to display the banner.



Lord Kingsland QC, Philip Petchey, Jeremy Pike (instructed by Taylor Simpson & Mosley) for the appellant; no appearance or representation for the respondent.



Held, considering the banner as a whole, the judge was entitled to conclude that it constituted an advertisement. Parliament had intended that the word 'advertisement' was to be given a very broad meaning for the purposes of the 1992 Act and the 1992 regulations. The words advertisement, announcement and direction were not mutually exclusive and an announcement could be a direction or an advertisement and vice versa; Westminster City Council v Haw [2002] EWHC 2073 (QB) considered (obiter). Whether a banner displaying only a message or political message such as 'Save the whales' or 'Ban the bomb' could fairly be described as announcements and therefore advertisements fell to be considered in another case.



The judge was correct in determining that the commencement of the criminal proceedings did not engage B's rights to freedom of expression, since he had neither applied for nor been denied consent to display the banner. The statutory control on the display of advertisements did not prevent members of the public from holding opinions and receiving and imparting information. Information could be imparted in a wide variety of ways and the 1992 regulations did no more than interfere with one particular method of imparting information, and only then to the extent that such an interference was justified in the interests of amenity and public safety.



Appeal dismissed.







CIVIL PROCEDURE



Place of business - residential property let to tenants - service of proceedings

O'Hara & anor v McDougal: CA (Civ Div) (Lords Justice Waller, Dyson, Neuberger): 22 November 2005


The appellant (O) appealed against a decision setting aside judgment made in his favour against the respondent (M).



O had issued proceedings against M. The address for service was a residential property owned by M but rented out to tenants, which was stated to be M's place of business. Judgment in default was entered against M and damages were assessed.



M became aware of the proceedings when he was served with an order for sale. His application to have the judgment set aside was refused. M's appeal against that decision was allowed on the grounds that he was being sued personally so proceedings should not have been served at his place of business, and further that a property owned by M and rented out to tenants was not a 'place of business' as envisaged by rule 6.5 of the CPR.



O argued that, while the mere letting did not render that address a place of business, the fact that M or his agent visited the property regularly to collect rent was capable of rendering it a place of business.



J Gruffydd (instructed by E Rex Makin Solicitors) for the appellant; Gordon Exall (instructed by DLA Piper Rudnick Gray Cary) for the respondent.



Held, the contention that property rented to tenants could become a place of business because the rent was collected from the premises on a regular basis was untenable. The mere renting out of a property did not make the address a place of business and it could not change to a place of business by the collection of rent from the premises on a regular basis.



Furthermore, as a landlord, M had very limited rights to enter the property and service of proceedings on a property to which M had no rights of entry was an extraordinary proposition. The CPR should be interpreted and applied to obtain clarity and certainty, and to accede to O's contentions would be to depart from practicality.



Appeal dismissed.