Peninsular & Oriental Steam Navigation Company v Eller & Co & Anor

A special resolution is valid where the resolution put to the meeting is the resolution contained in the notice. A court-approved alteration to a scheme of arrangement does not alter a separate resolution which, on its true construction, approves the original scheme.

A scheme may permit limited modifications or conditions approved by the court. That controlled flexibility does not offend the requirement that a notified special resolution and the resolution voted on be substantively identical.

An omission to give meeting notice may be accidental where the company intended to notify all entitled members and gave correct instructions, but a courier or registrar inadvertently failed to carry them out. A deliberate decision not to give notice, even if based on an erroneous view of entitlement, is different.

Warren J sanctioned, under section 425 of the Companies Act 1985, a scheme by which The Peninsular and Oriental Steam Navigation Company would become a wholly owned subsidiary of Thunder FZE. The scheme involved variations to Deferred Stock rights, a cancellation and reissue of stock, and payment to affected holders.

Eller, which held ten units of Deferred Stock, sought permission to appeal. It challenged the validity of the special resolution passed at the extraordinary general meeting and alleged that failures to give timely notice to some stockholders invalidated the meetings. The central questions were whether the resolution differed from that notified, and whether the notice failures were accidental omissions within the company’s regulations.

1. Application refused. Lord Justice Lloyd, with whom Lord Justice Moore-Bick and Lord Justice Neuberger agreed, held that the proposed appeal had no reasonable prospect of success.

2. The special resolution passed at the extraordinary general meeting was the same resolution as that set out in the notice of 20 December 2005. Its reference to the scheme identified the original scheme, not the scheme subsequently modified at the separate court meeting to substitute the increased price. The evidence concerning the document available at the meeting, the language of the resolution, and the retained reference to 443 pence led only to that conclusion. The absence of the chairman’s signature or initials on the copy did not invalidate the resolution.

3. The court accepted the substantive-identity principle in Re Moorgate Mercantile Holdings Ltd [1980] 1 WLR 227. That principle did not make the resolution uncertain or invalid because the scheme allowed the company and offeror to consent to modifications or conditions approved by the court. Such flexibility was limited and controlled by the statutory scheme and the court’s supervisory role.

4. The late Australian notices resulted from an unintended courier delay. The failure was accidental from the company’s perspective, notwithstanding that the precise cause of the courier’s error was unknown. Likewise, notices omitted after the registrar failed to implement the company’s correct record-date instructions were accidental omissions. The company had not decided that entitled holders should receive no notice. This differed from Musselwhite v Musselwhite & Co Ltd [1962] Ch 964, where notice was deliberately withheld on an erroneous view that the registered shareholders were not entitled to it.

5. The order sanctioning the scheme therefore stood, and permission to appeal was refused.

• Court of Appeal (Civil Division): By [2006] EWCA Civ 432, refused Eller’s application for permission to appeal.
• High Court, Chancery Division, Companies Court: Warren J sanctioned the deferred scheme, as modified, under section 425 of the Companies Act 1985 on 2 March 2006. The citation is not stated in the judgment.