Jersey Unreported Judgments

[2008]JRC192

royal court

(Samedi Division)

13^th November 2008

Before     :

Commissioner J. A. Clyde-Smith sitting alone.

 

Advocate E. C. P. Mackereth appeared for the Plaintiff.

Advocate F. B. Robertson appeared for the Defendant

The Parties Cited were not convened to the summons

judgment

the commissioner:

1.        The plaintiff seeks a declaration as to the proper interpretation of a consent order entered into between the parties on 14^th October, 2008.

2.        The Court was asked to sit as a matter of urgency on 7^th November, 2008 against a background of processes due to be completed at noon that day and 9.00 a.m. on 10^th November in relation to two Extraordinary General Meetings due to be heard on 13^th and 14^th November, 2008.

Background

3.        The plaintiff is a bank which holds shares in the defendant ("MIP"), a Jersey incorporated company, on behalf of certain investors.  The investors hold what are called Austrian Depository Certificates ("ADCs"), the terms of which give the holder of each ADC the unilateral right to be registered as a holder of one ordinary share in MIP.  The plaintiff brought these proceedings on behalf of those investors. 

4.        The amended Order of Justice of the plaintiff outlines concerns of the investors in relation to the conduct of MIP and others and seeks declarations in relation to certain resolutions passed at EGMs of MIP held on 28^th July, 2008, which meetings it says were conducted irregularly.

5.        The plaintiff's application for interim injunctions is due to be heard on 19^th December, 2008, and in the interim, the parties have entered into the consent order governing matters pending that hearing. 

The consent order

6.        The consent order prohibits MIP from undertaking certain steps unless approved by a poll or polls of the shareholders of MIP at general meetings held after the consent order.  The following provisions were set out in relation to any such future meetings that are so held:-

"4.       In the event of a meeting as referred to in paragraph 3 the Plaintiff shall be entitled to select up to seven independent scrutineers drawn from any of the offices of one of the following accountancy practices: PwC, Deloitte, KPMG, Ernst & Young, Grant Thornton and/or BDO Stoy Hayward.

5.        The scrutineers, once selected by the Plaintiff, shall be appointed by the Defendant to attend the meeting of the shareholders and to scrutinise all aspects of the meeting concerning the registration, admissibility and counting of votes.  Without prejudice to the generality of the foregoing, this shall include the registration and voting of proxies, verification of identify of proxies, counting of votes, and any operations carried out in the 'back office' for which purposes each scrutineer will be allowed unfettered access to all areas and to all documents connected with the registration, admissibility and counting of votes at the meeting including proxy documentation and any recordings made at the meeting.  The foregoing is without prejudice to the right of the chairman of the meeting to take legal advice in private concerning the registration, admissibility and counting of votes.

6.        The Defendant shall instruct the scrutineers to provide a written report following the meeting simultaneously to the Defendant and to the Plaintiff which the Defendant will make available to all ADC holders.

7.        The costs of the scrutineers (including for the avoidance of doubt the costs of the preparation and provision of the written report referred to at paragraph 6 above) shall be paid for by the Plaintiff.

8.        In the event of a meeting as referred to in paragraph 3, the Defendant shall:

(a)       provide to the Plaintiff (in its capacity as registered shareholder of shares of the Defendant) not less than 21 days notice of the meeting, and a form of appointment of proxy including all necessary documentation and instructions for the use of such proxy will be displayed on the Defendant's website at least 19 days prior to the meeting and retained on the website for the period prior to the meeting;

(b)       provide that each ADC holder must submit to the Defendant at least four working days prior to the date of the meeting their form of appointment of proxy signed by the ADC holder and countersigned by the relevant account holding bank.  The Defendant shall send within 1 working day thereafter to the Plaintiff a list ("the List") of ADC holders who have duly submitted and signed forms of appointment of proxy;

(c)       accept as a valid appointment of proxy an instrument of proxy deposited by personal delivery or sent by post or facsimile to the Defendant by the Plaintiff (in its capacity as registered shareholder of shares of the Defendant) not less than 48 hours prior to the commencement of the meeting, which instrument shall appoint as proxies those people who the Defendant has identified in the List as having submitted valid forms of appointment of proxies in accordance with paragraph 8(b) above;

(d)       provide to the meeting a full list of proxies which have been duly appointed including the extent to which any such proxies may transfer votes, including without limitation to the chairman of the meeting;

(d)       for identification purposes register any ADCs or shares previously repurchased by or on behalf of the Defendant, the votes for which repurchased ADCs or shares shall be voted as abstentions at any such general meeting; and

(f)        provide that the location of such meeting shall be in Vienna."

EGMs

7.        EGMs of MIP have now been called for 13^th and 14^th November, 2008, and accordingly these provisions are in play.

8.        In accordance with paragraph 4 of the consent order, the plaintiff has nominated Grant Thornton to act as scrutineer but Grant Thornton have yet to be formally appointed by MIP pursuant to paragraph 5.

9.        It is necessary to set out the steps that have to be undertaken before an investor can attend an EGM and vote:-

(i)        The investor must complete and sign a form of proxy in the form provided by MIP in its website.

(ii)       The duly completed and signed form of proxy must then be submitted by the investor to the plaintiff in order for the investor's ADC account to be blocked (i.e. the ADCs cannot be dealt with until completion of the EGM), confirmation of the number of ADCs held by the investor and signature by the plaintiff.

(iii)      The completed form of proxy carrying the signatures of both the investor and the plaintiff is then sent to Computershare, which is an independent company to whom MIP have delegated the proxy registration process, to arrive no later than 4 working days before the holding of the EGM.

(iv)      Computershare, on behalf of MIP, collects all validly completed proxy forms received by the deadline, produces a list of all validly completed proxy forms received by it and sends this list to the plaintiff within 1 working day after the proxy deadline.

(v)       The plaintiff then signs a "global proxy" to which it attaches the list prepared by Computershare of all validly registered ADC holders.  It then sends the global proxy with the attached list to MIP, to be received no later than 48 hours before the holding of the EGM.

(vi)      Only investors on the list attached to the global proxy by the plaintiff are entitled to attend and vote either in person (if he or she has named himself or herself on the form of proxy) or by a named third party at the EGM in respect of the ordinary shares to which each investor's ADCs relate.

(vii)     The original of the completed form of proxy is presented by the relevant investor or person representing him at the registration desk at the venue of the EGM.  The original of the completed form of proxy held by the investor is checked off against the list attached to the global proxy form previously prepared by Computershare.

The issue

10.      Even though not yet formally appointed, Grant Thornton contacted Computershare, explained their role as scrutineers and requested access to the processes being undertaken by Computershare in relation to the proxies.  Access has not been granted.  The plaintiff says this is in breach of MIP's obligations under clause 5 of the consent order and seek a declaration that the scrutineer is entitled under paragraph 5 to unfettered access to the work of Computershare.  Mr Mackereth explained to me that this was important from the plaintiff's point of view so that the scrutineers could check the treatment of proxy forms by Computershare for consistency, ensure that the rejected forms have been properly rejected, check the final list of proxies, detect mistakes and observe any possible manipulation.  MIP submits that the role of the scrutineer is limited to the meeting and does not extend to the work being undertaken by Computershare.

11.      Bearing in mind the role of a scrutineer is to provide independent scrutiny of a process, one might wonder why MIP would not authorise access to the work of Computershare, subject of course to the scrutineer's formal appointment.  However, it is clear that each party is suspicious of the other and my task is limited to declaring whether MIP is obliged under the consent order to give the scrutineer, once appointed, access to the work of Computershare or not.

12.      No case law was cited to me, but in interpreting the consent order I had regard to the approach set out by Page, Commissioner, in In re Internine Trust [2005] JLR 236 at page 255 which is, in brief summary:-

(i)        The aim is to establish the presumed intention of the parties to the document from the words used.

(ii)       The words must however be construed against the background of the surrounding circumstances or 'matrix' of facts existing at the time when the document was executed.  The circumstances relevant and admissible for this purpose are those that must be taken to have been known to the parties at the time. 

(iii)      Evidence of subjective intention, drafts and negotiations of the matters extrinsic to the document in question are inadmissible as are evidence of events subsequent to the making of the document.

(iv)      All words and phrases have to be read in the context of the document as a whole.

(v)       Words should as far as possible be given their ordinary meaning.  This last precept may however have to give way if the consideration of the document as a whole, having regard to the principles set out above or common sense, points to a different conclusion.

The arguments

13.      Mr Robertson starts with the ordinary meaning of the words used in paragraph 5 of the consent order.  The scrutineer is appointed to attend 'the meeting' and to scrutinise all aspects 'of the meeting'.  There are three further references to 'the meeting'.  On the face of it, He submits that it is clear that the role of the scrutineer is limited to the meeting.

14.      Mr Mackereth argues that 'and' in the first sentence of paragraph 5 has to be read disjunctively and the expression 'meeting' should be broadly interpreted to include the formal processes involving Computershare which investors have to go through in order to attend and vote at the meeting.  There is specific reference in paragraph 5 to the registration of proxies and proxy documentation.  Mr Robertson counters that the reference to registration is the registration procedure that is undertaken at the commencement of the meeting.  This is described as it operated at the July EGMs in an affidavit sworn in support of the Order of Justice by Doctor Albert Adametz on 8^th October, 2008, the New York attorney acting for the investors:-

"In operation at the entry door to the Meetings was an automatic entry/exit registration system whereby on entering the auditorium, an attendee presented his or her voting card which was scanned electronically and a sticker placed on it in order to demonstrate that that card reflected an entitlement to the stated number of votes which were thereby "active" for the purposes of the meeting.  Upon exiting the auditorium it was explained that attendees holding voting cards must return each voting card in order that the card could be re-scanned such that the registration system would record the attendee as being absent from the meeting and the votes attributable to the voting card held by that attendee not active for voting purposes.  It was further explained that ADC holders who left the meeting without returning their voting cards or without granting a power of attorney would be deemed to have approved a resolution.  At the time when a vote was to be taken, the total number of votes capable of being cast in the room was to be calculated by reference to the number of active votes recorded on the automatic entry/exit registration system". 

15.      Mr Robertson further submitted that the consent order must be seen in the context of the issues in the proceedings.   In his affidavit, Doctor Adametz expresses concerns for the system in place for the filing of proxies for the July EGMs which involved a very tight timetable and which was susceptible to mistakes.  The investors were concerned that the system may have been put in place in order to undermine independent voting at the meeting.  Apparently, a number of ADC holders were prevented from being able to vote at the July EGMs.  Mr Robertson says that those issues were specifically addressed in paragraph 8 of the consent order (set out above). 

16.      The main thrust of the affidavit and of the amended Order of Justice, however, relates to the conduct of the July EGMs.  I do not have time in this Judgment to detail the complaints about the way those meetings were conducted but the plaintiff would say that they were chaotic at the very least.  I do note however that paragraph 27(a) of the amended Order of Justice makes reference to an unknown individual, apparently voting as a proxy, who, when challenged, was allowed access across the stage and through to "the back office".  I raise this only because reference to "the back office" is made in paragraph 5 of the consent order.  Mr Robertson says the plaintiff suggested and MIP agreed to the attendance of scrutineers at future meetings in order to address these concerns as to the conduct of the meetings.

Decision

17.      I am persuaded by Mr Robertson's arguments.  Giving paragraph 5 of the consent order its ordinary meaning, it is clear that the scrutineers are appointed to attend the meeting and to scrutinise all aspects of the meeting.  Within the meeting, they have broad powers including unfettered access to all areas and in particular "the back office" but their mandate is limited to the meeting itself.  I agree that the reference to "registration" in paragraph 5 means the process by which investors register at the meeting.  The processes involving Computershare are out with the mandate of the scrutineers.

18.       I therefore find against the plaintiff.

Authorities

In re Internine Trust [2005] JLR 236.