Read the full judgment text of HCMP 000873/1991 on BabelCite. This High Court CFI judgment was delivered on 2 July 1991 before The Hon. Mr. Justice Nazareth.
Companies Ordinance (Cap 32) s.166 and s.166A – scheme of arrangement – privatisation of IEP by majority shareholder BIL through share exchange (3 BIL shares for every 2 IEP shares) – petition for court's sanction – sole objector shareholder holding 0.006% of shares – overwhelming majority approval at single meeting (85.74% by value, 90.27% by number) – first issue: whether class of shareholders for s.166 meeting properly constituted – whether IEP shareholders who also held BIL shares, particularly major institutional shareholders, should have been excluded as a separate class – held: class determined by dissimilarity of rights, not dissimilarity of interests, following dictum of Bowen L.J. in Sovereign Life Assurance Co. v. Dodd (1892) 2 QB 573 at 583 – weight of authority (re Alabama, New Orleans, Texas and Pacific Junction Railway Co.; re Hellenic and General Trust distinguished; Chevron (Sydney); Jax Marine; Borgelt v. Millman) confirms that conflict of interest is a matter for the sanctioning court, not the constitution of classes – second issue: whether scheme fairly presented and all information reasonably necessary disclosed – ten specific complaints considered including failure to disclose TKM and MCI asset backing, future dividend policy, FIF tax regime review, BIL's 120 million share issue, BIL indebtedness, position of major institutional shareholders, Magnum disposal, reduction in Sir Ron Brierley's shareholding, Jardine Fleming's disclaimer of independent verification, and connections of the Independent Board Committee members (Mr. Heath and Mr. Sutherland) to the BIL Group – court took a critical view of the failure to disclose with reasonable prominence the limited scope of Jardine Fleming's investigation and the connections of the IBC members (Heath and Sutherland were officers of TKM, a BIL subsidiary) – held: most complaints individually did not constitute information reasonably necessary; the consolidated balance sheet was ordinarily sufficient; the unsupported claim of the IBC's 'independence' was however misleading and unfair – court applied four-fold test from Re C M Banks Ltd as endorsed in Re Australian Foundation Investment Co. Ltd. – notwithstanding unhelpful aspects of the petitioner's conduct, the overwhelming shareholder approval and absence of evidence that shareholders would have voted differently meant the court exercised its discretion to grant sanction – outcome: petition granted, scheme sanctioned and capital reduction confirmed.
Legal issues: Proper constitution of class of shareholders under s.166 Companies Ordinance · Whether the Scheme was fairly presented and all reasonably necessary information disclosed
Outcome: Petition granted; the Scheme of Arrangement sanctioned and the reduction of capital of IEP confirmed.