Azevedo & Anor v Imcopa Importacao, Exportacao E Industria De Oleos Ltd & Ors

A company may offer a cash payment to members of a class of noteholders who vote in favour of a restructuring resolution, provided the offer is available to all members and its terms are fully disclosed. Such a payment is not necessarily a bribe or unlawful discrimination. The distinction arises from each holder’s voluntary voting choice, not from a pre-ordained division of the class. The pari passu principle applies only where the governing instruments so provide; here it governed money held by the trustee, not consent-payment funds paid directly by the issuer. Class-majority powers remain subject to bona fide exercise and protection against unfairness or oppression, but no such case was pleaded. The appeal, including the costs challenge, was dismissed.

The appellants held notes issued by Imcopa U, guaranteed by Imcopa B and later subject to the substitution of Imcopa C as issuer. During a restructuring, resolutions were proposed to noteholders with cash payments offered only to those who voted in favour. The appellants challenged the payments and the resulting resolutions, alleging breach of the pari passu principle and illegality under English company law.

Mr Justice Hamblen rejected the claims on summary applications in the Commercial Court: [2012] EWHC 1849 (Comm). The appeal concerned the validity of disclosed consent payments, the application of the trust deed, the liability of Imcopa U after substitution, and the consequential costs order.

1. Disposition. Lord Justice Lloyd delivered the judgment, with Aikens and Beatson LJJ agreeing. The appeal and the appeal against the costs order were dismissed.
2. Contractual effect. The consent solicitation constituted an offer on an if-contract basis. A noteholder accepting the offer by giving valid voting instructions in favour, followed by the passing of the resolution, would be entitled to payment. This analysis was supported by analogy with Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256.
3. Pari passu. Clause 6.1.2 of the trust deed applied to money held by the trustee as specified in that clause. The consent-payment funds were to be paid directly by the issuer and did not pass through the trustee. Condition 3 and the other documents therefore did not require the payments to be made rateably to all noteholders.
4. Company law. Menier v Hooper’s Telegraph Works (1874) LR 9 Ch 350 concerned a pre-ordained exclusion of the minority and did not govern a payment available to every class member. Goodfellow v Nelson Line (Liverpool) Ltd [1912] 2 Ch 324 and British American Nickel Corporation Ltd v M J O’Brien Ltd [1927] AC 369 did not establish that special treatment was lawful only where a holder had a distinct special interest. The relevant distinction was between an undisclosed bargain securing a vote and a proposal openly disclosed to the whole class.
5. A consent payment offered to all members, conditional on voting in favour, was not inherently a bribe or unlawful discrimination. The company could participate in soliciting the votes needed for a restructuring and could offer an incentive, provided the arrangement was open and above board. Assénagon Asset Management S.A. v Irish Bank Resolution Corporation Ltd [2012] EWHC 2090 (Ch) involved a materially different exit-consent mechanism and was too remote to assist.
6. The no-action clause did not require separate determination because its operation depended on the merits of the alleged breach. The court also agreed that Imcopa U had been validly replaced and released as issuer. The claimants were properly ordered to pay the defendants’ costs.

• Court of Appeal (Civil Division). The appeal from the Commercial Court and the appeal concerning costs were dismissed: [2013] EWCA Civ 364.
• High Court of Justice, Queen’s Bench Division, Commercial Court. Mr Justice Hamblen rejected the appellants’ claims on summary applications and ordered costs: [2012] EWHC 1849 (Comm).