Walls v P.J. Walls Holdings Ltd

• Jurisdiction: Ireland
• Judge: Mr Justice Finnegan
• Judgment Date: 31 July 2007
• Neutral Citation: [2007] IESC 41
• Court: Supreme Court
• Docket Number: [S.C.
• Date: 31 July 2007

[2007] IESC 41

THE SUPREME COURT

Fennelly J.

Kearns J.

Finnegan J.

Record No. 079/05

Walls v PJ Walls Holdings Ltd

IN THE MATTER OF WALLS PROPERTIES LIMITED

AND IN THE MATTER OF THORNHILL PROPERTIES LIMITED

AND IN THE MATTER OF THE COMPANIES ACTS 1963 -1983

BETWEEN

PATRICK JOSEPH WALLS

APPLICANT/APPELLANT

AND

P.J. WALLS HOLDINGS LIMITED

RESPONDENT/RESPONDENT

COMPANIES ACT 1963 S204(1)

COMPANIES ACT 1948 S209(1) (UK)

BUGLE PRESS LTD, IN RE 1961 CH 270

SUSSEX BRICK CO LTD, IN RE 1960 2 WLR 665

HOARE & CO, IN RE 150 LT 374

COMPANIES ACT 1929 S155(1) (UK)

PRESS CAPS LTD, IN RE 1949 CH 434

FITZWILTON PLC, IN RE 2000 2 ILRM 263

MCCORMICK v CAMEO INVESTMENTS LTD 1978 ILRM 191

LEE & CO LTD v EGAN WHOLESALE LTD UNREP KENNY 27.4.1978 1978/5

COMPANIES ACT 1963 S25(1)

HAWKS v MCARTHUR 1951 1 AER 22

HAFNER, IN RE; OLHAUSEN v POWDERLY 1943 IR 426

COMPANY

Amalgamation

Scheme for transfer of shares - Opposition by minority shareholder - Transfer of beneficial ownership - Statutory notice pursuant to offer to acquire shares by transferee company - Application by dissenting shareholder - Test to be applied - Factors to be taken into account - Discretion of court - Purchase order - Whether scheme unfair - Whether independent legal advice given - Whether conflict between legislative provisions and articles of association - Onus of proof - In re Fitzwilton plc [2000] 2 ILRM 263, In re Hoare and Company [1933] All ER 105, In re Press Caps Ltd [1949] Ch D 434, McCormick v Cameo Investments Ltd [1978] ILRM 191, In re Bugle Press Ltd [1961] Ch 270 and In re Sussex Brick Co Ltd [1960] 2 WLR 665 considered. Lee and Company (Dublin) Ltd v Egan Wholesale Ltd. (Unrep, Kenny J, 27/4/1978), Hawks v McArthur [1951] 1 All ER 22 and In Re Hafner, Olhausen v Powderly [1943] IR 426 followed - Companies Act 1963 (No 33), s 204(1) - Applicant's appeal dismissed (79/2005 - SC - 31/7/2007) [2007] IESC 41

Walls v PJ Walls Holding Ltd

The applicant sought inter alia a declaration pursuant to s. 204 of the Companies Act 1963 that the respondent was neither entitled nor bound to acquire the shares of the applicant in Walls Properties Limited.

Held by the Supreme Court (Fennelly, Kearns and Finnegan JJ) in dismissing the appeal that the Court had to have regard to the interest of all the shareholders in the company and the heavy onus on a dissenting shareholder had also to be borne in mind.

Reporter: R.W.

1 JUDGMENT of Mr Justice Finnegan delivered on the 31st day of July 2007

2 This is an appeal against the order of Smyth J. refusing the appellant the relief which he sought pursuant to the Companies Act 1963 section 204(1) thereof. Section 204(1) provides as follows -

"204(1) Subject to subsection (2), where a scheme, contract or offer involving the acquisition by one company, whether a company within the meaning of this Act or not (in this section referred to as "the transferee company") of the beneficial ownership of all the shares (other than shares already in the beneficial ownership of the transferee company) in the capital of another company, being a company within the meaning of this Act (in this section referred to as "the transferor company") has become binding or been approved or accepted in respect of not less than four-fifths in value of the shares affected not later than the date 4 months after publication generally to the holders of the shares affected of the terms of such scheme, contract or offer, the transferee company may at any time before the expiration of the period of 6 months next following such publication give notice in the prescribed manner to any dissenting shareholder that it desires to acquire the beneficial ownership of his shares, and when such notice is given the transferee company shall, unless on an application made by the dissenting shareholder within one month from the date on which the notice was given, the court thinks fit to order otherwise, be entitled and bound to acquire the beneficial ownership of those shares on the terms on which under the scheme, contract or offer, the beneficial ownership of the shares in respect of which the scheme, contract or offer has become binding or been approved or accepted is to be acquired by the transferee company."

3 On the application the appellant sought the following reliefs -

4 2 "1. A declaration pursuant to section 204 of the Companies Act 1963 that the respondent is neither entitled nor bound to acquire the shares (or any of them) of the applicant in Walls Properties Limited.

5 2. An order that the notice (pursuant to section 204(1) of the Companies Act 1963) dated 19th November 2003 served on the applicant in respect of the applicant's shareholding in Walls Properties Limited by the respondent be set aside.

6 3. A declaration pursuant to section 204 of the Companies Act 1963 that the respondent is neither entitled nor bound to acquire the shares (or any of them) of the applicant in Thornhill Properties Limited.

7 4. An order that the notice (pursuant to section 204(1) of the Companies Act 1963) dated 19th November 2003 in respect of the applicant's shareholding in Thornhill Properties Limited served on the applicant by the respondent be set aside."

8 Walls Properties Limited ( "Properties"), Thornhill Properties Limited ( "Thornhill") and P.J. Walls Holdings Limited ( "Holdings") are private companies in which the shareholders are members of the Walls family. The appellant holds ten ordinary shares in Properties amounting to 10% of the issued share capital and ten ordinary shares in Thornhill amounting to just under 10% of the issued share capital. The shareholding position in Holdings is somewhat more complex. The Memorandum of Association provides that the share capital of the company is €1,375,250 million divided into 1,100,000 ordinary shares and 200 12% non-cumulative preference shares of €1.25 each. The Articles of Association provide that the preference shares shall be preferential as to dividend and on winding-up as to repayment of capital but shall not confer on the holders any right to share in the property or assets of the company. The holders are entitled to receive notice of and to attend and vote at any general meeting of the company. Ordinary shares do not confer on the holders the right to receive notice of or to attend or vote at any general meetings. This share structure is reflected in the annual accounts for the year ended 31st December 2002 exhibited by the appellant. The appellant holds 20 of the 12% cumulative preference (voting) shares in Holdings amounting to 10% of those shares issued and 222,059 ordinary shares amounting to 22.2% of those shares issued. All three companies form part of a group the core business of which is construction. The core business is carried on through a number of subsidiaries of Holdings. Properties holds development and investment property. One such property relevant to this application is an office building and land at Northern Cross, Malahide Road, Dublin. Adjoining the office building and land is a site of 1.17 acres which is owned by Thornhill.

9 On the 7th October 2003 Holdings made offers to purchase the entire issued share capital in Properties and in Thornhill, the former being valued at €20,555,000 and the latter at €100. The offer required the immediate transfer of the shares but in the case of Holdings payment of the consideration was deferred being payable by six instalments, the first to be paid on the 24th December 2003 and the last on the 30th November 2009. The offers were open for acceptance until the 17th October 2003 but this was subsequently extended to the 10th November 2003. The offers were not accepted by the appellant but were accepted by the other shareholders in Properties and Thornhill.

10 The originating notice of motion sets out the grounds upon which the appellant sought relief pursuant to section 204(1) as follows -

11 (a) Properties

12 (i) The offer price was substantially below the true value of the shares.

13 (ii) The purchase consideration for the shares was to be paid in instalments over a period of six years from the proposed date of completion during which time the shareholders would be unsecured creditors of Holdings.

14 (iii) The time given for acceptance of the offer was of too short a duration to enable the shareholders to make an informed decision as to the offer.

15 (iv) The shareholders were not given a valuation of the company's worth nor any information which would enable them to reach a conclusion as to the company's worth.

16 (v) The shareholders were not given properly independent advice as to the offer and in particular were not advised to seek a valuation of the company's worth.

17 (vi) The shareholders were not informed as to the purpose of the scheme of which the offer formed a part or given proper particulars of the scheme generally.

18 (vii) The scheme of which the offer formed part was carried into effect in contravention and disregard of the contract of pre-emption contained in the Articles of Association and the rights of the appellant thereunder.

19 (b) Thornhill

20 (i) The offer price was substantially below the true value of the shares.

21 (ii) The time given for acceptance of the offer was of too short a duration to enable the shareholders to make an informed decision as to the offer.

22 (iii) The shareholders were not given a valuation of the company's worth nor any information which would enable them to reach a conclusion as to the company's worth.

23 (iv) The shareholders were not given properly independent advice as to the offer and in particular were not advised to seek a valuation of the company's worth.

24 (v) The shareholders were not informed as to the purpose of the scheme of which the...