Cable & Wireless Jamaica Ltd v Eric Jason Abrahams (Jamaica)

For a scheme of arrangement, class composition is determined by members’ legal rights against the company and the effect of the scheme on those rights. Different private interests do not ordinarily require separate meetings. However, materially different treatment under the scheme may make it impossible for members to consult together in a common interest and require separate classes. Conflicting interests remain relevant at the later sanction stage. A scheme that includes a reduction of stated capital must also comply with the statutory procedure and limits governing reductions of capital. A subsequent issue of shares does not undo an earlier cancellation and reduction. Where the statute authorises only specified forms of reduction, the court cannot sanction an unauthorised reduction through the scheme jurisdiction.

Cable & Wireless Jamaica Ltd proposed a scheme under section 206 of the Companies Act 2004 to cancel shares held by minority shareholders for cash and issue new shares to its majority shareholder, so that it would become wholly owned by Liberty Latin America Ltd. The Supreme Court of Judicature of Jamaica refused sanction, holding that the shareholders required separate classes and, alternatively, that sanction should await determination of a proposed derivative claim. The Court of Appeal affirmed on class constitution and fairness, leaving reduction of capital unresolved: [2022] JMCA Civ 44.

The Privy Council considered whether the meeting was properly constituted, whether the scheme involved an authorised reduction of capital, and whether the court should exercise its discretion to sanction the scheme.

The Board dismissed the appeal and advised His Majesty accordingly.

1. Class constitution. The Board approved the rights-based principles in UDL Argos Engineering & Heavy Industries Co Ltd v Li Oi Lin, subject to qualifications. The relevant comparison includes members’ rights before the scheme, rights released or varied by it, and any new rights conferred. Private interests or motives unrelated to legal rights do not ordinarily justify separate meetings.
2. Those principles do not prevent different interests from being relevant at the sanction stage. Conflicting interests within a class may be highly relevant, and sometimes decisive, when the court exercises its discretion whether to sanction.
3. Here, the minority shares were to be cancelled for J$1.45 per share, while the shares held by CWC Cala and Kelfenora were unaffected. Despite identical rights before the scheme, the shareholders received wholly different treatment. They therefore formed separate classes. Without approval by the statutory majority at a minority meeting and separate consent from CWC Cala and Kelfenora, the court lacked jurisdiction to sanction the scheme.
4. Reduction of capital. The cancellation of the minority shares reduced CWJ’s stated capital. The immediate issue of new shares did not alter that characterisation. The transaction was not an acquisition by CWJ of its own shares, so the exclusion in section 72(4) did not apply. If it had been such an acquisition, compliance with sections 58 or 59 would still have been necessary.
5. A scheme incorporating a reduction of capital must comply with the reduction procedure as well as the scheme procedure. Under section 71, the scheme lacked the required special resolution, statutory declaration and notices. More fundamentally, section 71 authorised only three specified forms of reduction, none applicable here. Sections 39(3) and 72(3) therefore prevented the proposed reduction from being sanctioned.
6. Because the Board found that the first-instance judge lacked jurisdiction, it was neither necessary nor appropriate to decide whether he could have refused sanction as a matter of discretion.

1. Privy Council: Appeal dismissed; the Board advised His Majesty that the appeal be dismissed.
2. Court of Appeal of Jamaica: Affirmed the refusal to sanction the scheme because the meeting was improperly constituted and the statutory majority had not been achieved: [2022] JMCA Civ 44. It considered the reduction of capital issue unnecessary to resolve.
3. Supreme Court of Judicature of Jamaica: Batts J refused sanction, holding that the majority and minority shareholders formed separate classes and, alternatively, that sanction should await determination of the proposed derivative claim: [2019] JMCC Comm 7.