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

LORD JUSTICE LLOYD: This is an application for permission to appeal heard on notice on a much expedited basis, on the basis that an appeal would follow if permission were granted. The order under appeal was made by Warren J on Thursday 2 March. By the order, which was made under Section 425 of the Companies Act 1985, the court sanctioned what was called the Deferred Scheme, as modified in a respect which the court also approved by the same order, in relation to the Peninsula and Oriental Steam Navigation Company (“P&O” or “the Company”). Among the objectors at the hearing was a US company called Eller & Co Inc (“Eller”) which is the holder of ten units of deferred stock in P&O which were bought on 18 January 2006. Eller is the applicant for permission to appeal. P&O of course is the respondent to the appeal.

P&O is a company incorporated by Royal Charter, not one incorporated under the Companies Acts. Section 425 of the Companies Act 1985 nevertheless applies to it, because that section extends to any company liable to be wound up under part 5 of the Insolvency Act 1986; P&O is so liable as an unregistered company. The fact that P&O is not incorporated under the Companies Act gives rise to technical complications, as compared with a similar scheme, if it were to apply to a company which was so incorporated. It gives rise to a) the need to carry out certain aspects of the process under the terms of the charter of the company and its regulations, which are the equivalent of its Memorandum and Articles of Association, and b) the need to distinguish with care between matters proceeding under the charter alone and those governed by section 425.

P&O has four classes of stock but only one is really relevant to the appeal, which is called Deferred Stock. This is not in fact deferred. It is the equivalent of what would otherwise be called Ordinary Stock. I need not mention the other classes except that there is a class called Concessionary Stock, in relation to which a similar but separate scheme was also proposed and has been sanctioned. No question arises on that scheme or the order sanctioning it, except in one indirect way.

The two schemes together are part of a process by which P&O was proposed to become a wholly owned subsidiary of an entity governed by the laws of Dubai called Thunder FZE, (“the Offeror”). In relation to the deferred stock the economic effect of the offer to which effect is sought to be given by the scheme is the acquisition by the Offeror of all the deferred stock that it does not already own in consideration of the payment of an amount of cash, though with a loan note alternative as to which I need say no more. In technical terms this was to be given effect under the scheme of arrangement in the following manner.
(1) Upon the scheme becoming effective in accordance with its terms following the court order sanctioning it and delivery of the copy of the order to the Registrar of Companies for registration, the rights attached to the Deferred Stock would be varied in accordance with paragraph 1(A) of the Special Resolutions to be passed at an Extraordinary General Meeting of the Company. Two of the four points taken on this appeal turn on those special resolutions, to which I will therefore return.

There are therefore several separate operations involved in this process. First the alteration of the regulations so as to vary the rights attached to Deferred Stock for which a special resolution is required under the regulations; second, the reduction of capital under Article 10(A) of the Charter; third, the capitalisation of the resulting reserve in accordance with the Charter; and fourth the sanction of the court under section 425 in accordance with the 1985 Act.

The process became more complicated because of what happened to the offer after notice of the necessary meeting had been given. The scheme of arrangement (“the scheme”) is dated 20 December 2005, and that is also the date of the circular which includes the scheme, the chairman’s letter, the explanatory statement and supporting material and notices of all the necessary meetings, setting out the relevant resolutions. Notice was given of meetings to be held on 20 January 2006. An order had been made by Mrs Registrar Derrett on 16 December 2005 for the convening of separate meetings of the Deferred Stock Holders other than the Offeror, and separately of the Concessionary Stock Holders, to consider and, if thought fit, approve the two schemes, with consequential provisions as to how this was to be done.

For technical reasons, those two meetings would not satisfy the requirements of the charter and the regulations for operations governed by those provisions. Hence there needed to be separate class meetings under the charter and the regulations as well, and there also had to be an Extraordinary General Meeting to effect the alteration of the regulations. This is why five separate meetings were convened, all for the same day, at thirty-minute intervals.

At that stage on 20 December the offer from the Offeror was of 443 pence per unit of Deferred Stock. On 10 January 2006 the Board announced that it had received an approach from another possible bidder, which it was thought might lead to a higher offer. The Board announced and circularised to its members to say that the meetings which were due to be held on 20 January would be adjourned to allow time to see whether an offer would be forthcoming. The two meetings of the Deferred Stock Holders and the EGM were all duly adjourned to a date to be specified no later than 15 February.

A higher offer was forthcoming, and was announced on an agreed basis on the morning of 26 January at 470 pence per unit. That led to a prompt response from the original Offeror, who put forward the same day a bid of 520 pence per unit. All other terms remained the same. The Board of the Company recommended this latest offer and the rival offeror later withdrew. On 27 January 2006 the adjourned meetings were reconvened for 13 February. The notice of that was followed by a document setting out the revised proposals by way of a circular dated 1 February.

The five meetings were duly held on 13 February. All of the resolutions were passed by huge majorities. The appellant had acquired its holding of ten Deferred Stock Units on 18January. It was present, as I understand it, at the relevant meetings, in person or by proxy. It claims to have an interest in opposing the arrangement because of a contingent pecuniary claim through a subsidiary company both on its part and on that of P&O, but that is disputed by P&O and in any event in the present case is irrelevant.

On 14 February P&O presented its petition seeking the sanction of the court under section 425 to the scheme. It came on for hearing before Warren J on 27 February. The hearing took three days and the judge gave judgment on the afternoon of the next day. In his long and careful judgment he had to consider a much wider variety of points and objections than has been taken before us. The points which are taken on appeal, all having been taken before the judge and rejected by him, are four in number and can be grouped into two pairs. First, there are two points relating to the text of the special resolutions set out in the notice and the terms in which the resolution was, at least purportedly, passed on 13 February; secondly there are two points about undoubted irregularities in the process of giving notice of the meetings to Deferred Stock Holders. These concern two separate irregularities; the question in each case is whether on the facts what happened was an accidental omission. I will take first the points concerning the notice of the meetings and the terms in which the resolutions were put to the meetings and, on the face of it, passed.

In relation to a company incorporated under the Companies Act this would turn on the provisions of section 378(2) of the Companies Act 1985. In the case of P&O, it turns on the language of regulation 27(1) of the regulations governing the company. I now set out the whole of regulations 27(1) and (2), the latter because it is relevant to another point.

“27.

(1)  Fourteen clear days’ notice at the least or, in the case of an Annual General Meeting or a meeting convened to pass a Special Resolution, twenty-one clear days’ notice at the least (in all cases exclusive of the day on which the notice is served or deemed to be served and of the day for which the notice is given) shall be given in manner provided by these Regulations to such members as are, under the provisions of these Regulations, entitled to receive notices from the Company, to each of the Directors and also to the Company’s Auditors. Every notice of meeting shall specify the place, the day and the hour of meeting, and, in the case of special business, the general nature of such business. Every notice convening an Annual General Meeting shall specify the meeting as such and every notice convening a meeting to pass a Special Resolution or an Extraordinary Resolution shall also specify the intention to propose the resolution as a Special Resolution or an Extraordinary Resolution, as the case may be. Every notice of meeting shall state with reasonable prominence that a member entitled to attend and vote is entitled to appoint a proxy to attend and, on a poll, to vote thereat instead of him, and that a proxy need not be a member. The accidental omission to give notice of any meeting to, or the non-receipt of the notice of meeting by, any person entitled to receive the same, shall not invalidate the proceedings at the meeting.

(2)

For the purpose of giving notice of any General Meeting to members holding Uncertificated Stock, the Directors may determine that the members entitled to receive notice of the General Meeting in respect of such Stock are those persons entered on the relevant register of members at midnight on a day not more than twenty-one days before the day on which notice of the meeting is sent.”

The particular point comes from the words :

“Every notice convening a meeting to pass a Special Resolution shall … specify the intention to propose the resolution as a Special Resolution.”

In the case of Re Moorgate Mercantile Holdings Ltd [1980] 1 WLR 227, Slade J had to consider whether a special resolution was validly passed. The resolution as set out in the notice convening a meeting in that case was:

“… that the share premium account of the Company amounting to £1,356,900.48 be cancelled”.

It turned out that this was not justified. The resolution put to the meeting was:

“… that the share premium account of the Company amount to £1,356,900.48 be reduced to £1,356,321.17”.

Thus, the economic difference between the two was extremely slight. Nevertheless the judge held that the resolution as put to the meeting was not the resolution of which notice had been given, and the resolution had not been validly passed. He set out at page 242 of the report the relevant principles as he saw them in seven propositions. I do not need to read those out but I will read one sentence from the first of his propositions on which particular reliance was placed:

“In the case of a notice of intention to propose a special resolution, nothing is achieved by the addition of such words as ‘with such amendments and alterations as shall be determined upon at such meeting’.”

His reasoning is that the resolution as notified and the resolution as put to the vote must be identical in their substance. Apart from correcting obvious errors, for example, typography, or the possibility of recasting the text in different language without affecting the meaning or effect in any way, the two must be identical. In that case they were not and though the economic difference was slight, the judge said that there was no room for a de minimis principle or a limit of tolerance. In the present case Mr Downes, appearing for Eller, submits that there were not either, because of the revision to the offer. I must therefore examine just what was notified and what was put to the meeting.

Mr Downes’ point in general is that on 13 February those present were voting on an economically different proposition from that of which notice was given on 20 December, so that it would be surprising if the resolution was the same as had originally been notified. As I have mentioned three meetings had to be considered. First there was the Deferred Stock Holders meeting convened as directed by Mrs Registrar Derrett for the purposes of section 425 as such. It was a meeting of the holders of Deferred Stock other than the Offeror. The notice is in part 16 of the circular, dated 20 December. The business of the meeting, as set out in the notice, was:

“Considering and if thought fit approving, with or without modifications, the scheme of arrangement set out in the circular.”

Secondly there was the Deferred Stock Holders meeting convened by notice set out in part 18 of the circular, to consider and if thought fit pass a resolution, to be proposed as an extraordinary resolution. This was a meeting of all the holders of Deferred Stock and was held and convened in accordance with article 18 of the charter. The resolution was to sanction the variations of the class rights attached to Deferred Stock as involved in the passing of the first of the special resolutions set out in the notice of the Extraordinary General Meeting and in the implementation of the scheme set out in the circular. Third, there was the EGM itself

Mr Downes’ point relates to the first of the four special resolutions of which notice was given for this meeting. This resolution relates, relevantly, to the alteration of the company’s regulations. Its opening words were as follows:

“That the scheme of arrangement dated 20 December 2005 (the “Deferred Scheme”) between the Company and the holders of its Deferred Scheme Stock (as defined in the Deferred Scheme) a print of which has been produced to this meeting and for the purposes of identification has been signed by the Chairman of this meeting, be hereby approved and for the purpose of giving effect to the Deferred Scheme in its original form or with or subject to any modification, addition or condition approved or imposed by the court a) with effect from the passing of this resolution the regulations of the Company shall be altered”.

Then it goes on to set out at considerable length over somewhat more than two pages a number of alterations to the regulations. The first one is a definition of Deferred Scheme as a new regulation 1(1B). The second relates to the Special Deferred Stock and constitutes a new regulation 5(2A) and the third is a new regulation 125 headed “The Deferred Scheme”. This new regulation provided so far as relevant that if deferred stock is issued to any person other than a member of the scheme or to the Offeror it would be immediately transferred to the Offeror in consideration of and on condition of the payment to the new member, that is to say the person to whom the new stock was issued, of 443 pence per unit. As I understand it that was intended to deal with the possibility of persons taking up options for the issue of new Deferred Stock at a late stage in the exercise, after the scheme had become effective. The special resolution also dealt with the classification of the Special Deferred Stock and its issue in accordance with the scheme, the cancellation of the Deferred Cancellation Stock and the other steps necessary in accordance with the scheme. The special resolution dealt separately with the scheme relating to the concessionary stock and with other elements in the process which are not the subject of these proceedings. So those were the relevant notices given on 20 December.

On 27 January, as mentioned, the meetings which had been adjourned were reconvened for separate times on 13 February. The notice which was given to members of the new date and time referred to the recommended increased offer by the Offeror for 520 pence and referred to the fact that the various meetings had been adjourned. It said that further details of the revised offer would be sent to stockholders shortly, and it said that save in respect of the expected timetable of events there had been no changes to the other aspects of the proposals, in particular to the concessionary scheme. Then under the heading “New Timetable” it said this:

“Notice is hereby given that pursuant to the resolutions cast at the Meetings, the adjourned Meetings will now be held on 13 February 2006. These adjourned Meetings will take place to consider and if thought fit, approve the Revised Offer.”

Then notice was given of the place and time of the meetings.

As forecast, that notice was followed up by a circular, which I mentioned, dated 1 February describing the recommended revised proposals. The circular has a section 7 headed “Modification of the Deferred Scheme and related matters” from which I must read two paragraphs:

“7.1

Modification of the Deferred Scheme.

“The terms of the Deferred Scheme are to be modified to reflect the Revised Proposals. The number ‘443’ in clauses 4 and 6 of the Deferred Scheme set out in Part XIII of the Scheme Document, is to be deleted and replaced with the number ‘520’. A resolution to this effect will be put to the Deferred Stockholders Court Meeting and no other modification is necessary. Save in respect of the expected timetable of events [the modified version of which is set out later in the document] there are to be no other changes to the Deferred Scheme, and (save as mentioned in paragraph 7.3 below) in all other respects the proposals remain as set out in the Scheme Document.”

Then 7.3, headed “Special Resolution”:

“As a technical matter it is not possible to amend the Special Resolution 1(A)(iii)(C) set out in Part XX of the Scheme Document which states that each person to whom Deferred Stock is issued on or after the Deferred Capital Reduction Date (other than under the Deferred Scheme or to the Offeror or its nominee(s)) will be paid 443 pence per unit of Deferred Stock. However PCFC will, as soon as reasonably practicable following the Deferred Scheme becoming effective, enter into a deed poll under which such persons will also be entitled to the increased sum of 520 pence per unit of Deferred Stock.”

The circular was accompanied by proxy forms, which also contained poll cards for use at the meetings. Although these are not in our bundles, no doubt they were in evidence before the judge and even if they were not they have been shown to us as a matter of information. The proxy form relating to the Deferred Stockholders’ court meeting simply invites the voter to vote for or against the Deferred Scheme. The proxy form relating to the Deferred Stockholders’ Class Meeting invites the voter to vote for or against or abstain from voting in relation to the proposal to approve every variation or abrogation of the rights attaching to Deferred Stock as described more particularly in the notice in dealing with the Deferred Stockholders’ Class Meeting. The proxy form in relation to the Extraordinary General Meeting has four sets of boxes corresponding to the four special resolutions. In relation to special resolution 1, with which this case is concerned, the text opposite the three boxes, for, against or abstained, is as follows:

“To approve the Deferred Scheme and authorise the directors to take all such actions they consider necessary or appropriate to carry the Deferred Scheme to effect.”

Then at the bottom of the relevant part of the form one sees:

“As described more particularly in the notice convening the Extraordinary General Meeting.”

Mr Downes relies, among other things, on the minutes of the EGM, but before coming to those minutes I think I should refer to the result of the court meeting, which is the subject, as required by the statutory provisions, of a chairman’s report. That report, which is exhibited, reports the convening of the meeting and the passing of the resolution and, going into a little more detail, what the Chairman says is that after addressing the meeting and dealing with the questions he proposed a first resolution, which was, summarising, that the scheme of arrangement dated 20 December between the Company and the holders of the Deferred Scheme Stock, be modified by the deletion of the figure 443 in each of the clauses 4 and 6(i) and the substitution in each case of the figure 520. So that was the first resolution put and it was passed. The second resolution was that the scheme of arrangement, as modified in the way that I have just mentioned, “be and it is hereby approved”, and that was duly passed. The Chairman annexes to his report a print of the Deferred Scheme as approved in modified form at the Deferred Scheme Stockholders’ Court Meeting, and that is in the evidence; it bears the Chairman’s initials on the front page and it has the two amendments or modifications made in manuscript.

So far as the minutes of the EGM are concerned, that is not of course in the form of a report to the court. It refers to the Chairman speaking of the history of the matter, up to the point of the making of the revised final offer and the recommendation by the Board that stockholders vote in favour of it. Paragraph 5 of the minutes says:

“The board had written to stockholders on 27 January to give notice of the Meetings to be held on 13 February and had sent stockholders details of the revised terms of the offer on 1 February.”

Then at paragraph 8 it said:

“Therefore, the present meeting was being held to consider and if thought fit approve the revised offer.”

At paragraph 9 the Chairman summarised the offer. Paragraph 10:

“After dealing with questions, the Chairman proposed [special resolution 1]:

‘That the variation of the rights attaching to the Deferred Stock, as set out in the Notice of the meeting, be approved’.”

A vote was to be taken by poll. The resolution was put to the meeting, the poll was carried out and the result of the poll was announced with an overwhelming majority, whereupon the Chairman declared that the resolution had been passed. Then he proceeded to put the other three special resolutions to the meeting, which were also duly passed.

It is not surprising that at the meeting and within the minutes the first special resolution, which takes up some two and a half pages of close print, should be referred to by its number and by the words “as set out in the Notice of meeting”, or in the proxy form “as described more particularly in the notice convening the EGM”, rather than in its full terms or any summary or précis, which would be likely to be not strictly accurate.

It is plain that the resolution so put to the meeting in this respect was the first of the four set out in the notice of the meeting given on 20 December. There was only one notice of the meeting which contained special resolutions, namely the circular. Accordingly, as Mr Moore QC for the Company put it, it is plain that there is a complete and exact match between the terms of the special resolutions set out in the notice, and the terms of the special resolutions put to the vote at the meeting. His submission is that there is no divergence between the two, there is no scope for any divergence between the two, and no basis for Mr Downes’ submission that the two were not the same, so as to bring into play the Moorgate Mercantile principle as an objection to the validity of the resolution as passed.

Mr Downes however submits that the position is not so simple. He focuses on the opening words of the special resolution referring to the scheme and to a print having been produced at the meeting and signed for the purposes of identification by the Chairman. He says that, even if in some sense a copy of the print of the scheme as set out in the circular was produced to the meeting, which he questions, no such print was ever signed by the Chairman for identification purposes or otherwise. More substantively he said that this is not an idle or merely technical point, because there were by then two versions of the scheme, one as originally proposed referring to 443 pence and the other, as by then approved at the court meeting, referring to 520 pence.

The question of the production of the print of the scheme to the meeting was dealt with at a rather late stage of the proceedings at first instance by a fourth witness statement of Mr Long of Freshfields. The point had evidently arisen in the course of the hearing before the judge, and he asked that it be covered by the evidence. What Mr Long says is that he confirms that the Chairman produced to the meeting the copy of the circular sent to stockholders which contained the Deferred Scheme, and that neither of them had contained any manuscript amendment of any kind. The scheme document he says was the only document which the Chairman had at that meeting, although no doubt he had his own notes.

This point was dealt with at a very late stage. One can see from the transcript of the judge’s judgment in the unrevised form in which we have it, that it was handed up to him during his giving judgment, and he broke off to enquire about it. Mr Downes did not have the opportunity to make submissions to the judge about that. He told us that his solicitors asked Freshfields what was meant by “produced to the meeting” and that the answer was that the Chairman had a copy of it, and it would have been available to anyone on request if they had asked for it. It is not in dispute that the Chairman did not sign or initial a copy. Mr Downes also focuses on the words in the first part of the special resolution, referring to the scheme being approved and to giving it effect in its original form or with modifications; if I can abbreviate that passage which I have already quoted. Since the meeting was being invited to approve the final offer of 520 pence, he submits that the resolution must be taken to have referred to the higher price, not to the scheme as originally proposed with its reference to 443 pence, even though that figure remained in resolution 1(A)(iii)(C) relating to the rights to be conferred on those exercising options.

The language of the resolution however, as it seems to me, does not support that contention. The opening words of the resolution have only one substantive effect, namely to approve the scheme as identified and that is the effect of the words up to and including “be hereby approved”. I will come back in a moment to Mr Downes’ point about identification. The words next following in the resolution do not have substantive effect. They describe the purpose for which the sub paragraphs (A), (B) and (C) of the resolution are resolved upon. The operative effect of the resolution once the Deferred Scheme has been approved is limited to the alteration of the regulations as set out in (A) and the distinct effects of (B) and (C). Accordingly it seems to me that Mr Downes is not justified in his submission that the resolution purports to approve or give effect to the Deferred Scheme in an open-ended way, or otherwise than as originally circulated on 20 December, unless he is correct in his point about the failure of the resolution to identify the Deferred Scheme as being the original version of it. I have referred to Mr Long’s evidence on this point. Mr Moore QC submits that the failure of the Chairman to sign or initial the print is unnecessary, because that was purely for identification purposes, and that further identification is not necessary, because there was only one document to which reference could have been being made, namely the original text as printed on 20 December. The complication about this, as Mr Downes points out, is that at the first of the relevant meetings, the Deferred Stock Holders Court Meeting, the scheme had been put to and approved by the class relevant to that meeting in its modified form as I have mentioned.

In the learned judge’s judgment, of which we have as I say an unrevised transcript, the judge held at pages 19 to 21 of the transcript, as we have it, that the Deferred Stock Holders Court Meeting had power to approve this scheme as so modified for the purposes of Section 425 and did validly do so; there was no challenge to that finding. But Mr Downes says that as a result the Deferred Scheme that was approved at the first of the meetings had been amended to include the figure 520 instead of 443 and that thereafter at the EGM he asked rhetorically: how could stockholders not suppose that the resolution put to them for the approval of the scheme refer to anything other than the scheme as modified which had been approved a short time before by a class of them, namely the Deferred Scheme Stock Holders?

As the judge said at page 23 of his judgment, the approval of the scheme by the EGM was not necessary for the purposes of section 425. The approval necessary for that purpose was given by the court meeting. In the light of Mr Downes’ submission as to the significance of the scheme having been modified at the Deferred Stock Holders Court Meeting, it is necessary to consider what happened at that meeting, which I have briefly summarised. Once that meeting had approved the modifications to the scheme and approved the scheme as modified, neither in the Deferred Stockholders Class Meeting, nor in the EGM was any proposal put to modify the scheme, or to approve the scheme as modified. To the contrary, the proposal put in special resolution 1 was that the scheme as set out in the Notice of the meeting be approved, and the notice of the meeting refers to the scheme dated 20 December. Moreover, as mentioned in paragraph 7.3 of the circular of 1 February, the figure of 443 pence in resolution 1(A)(iii)(C) could not be modified, so the alteration of the regulations effected by this special resolution is expressly by reference to the original figures.

Mr Downes’ submission is that the approval of the scheme given by passing the special resolution at the EGM has to be taken as approval of the revised scheme by reference to the figure of 520 not 443 pence. He says that this was not the special resolution notified on 20 December, that it was not business that could have been transacted by the original meeting held on 20 January and therefore it could not have been considered at the adjourned meeting, given that the notice of that meeting was not in itself sufficient in time or in content to constitute sufficient notice of an intention to propose a different special resolution. If he is right the special resolution passed at the EGM would apparently be invalid, even though approval of the scheme at that meeting was not required. The judge rejected this submission at page 26 on the basis of the evidence that the special resolution as put to the EGM and the scheme as it was before the meeting was that set out in the circular, but not in any amended document. He regarded as immaterial that the Chairman had not initialled the copy of the scheme as produced to and approved by the EGM; see what he said at page 25.

With hindsight, it might have been better if either the special resolution and the notice of the Extraordinary General Meeting had not set out the meeting’s approval of the scheme or, perhaps better, if the Chairman had expressly identified the print of the scheme in its original form as that which had been produced to the Extraordinary General Meeting and was the subject of the resolution. I agree with the judge that there was nothing in the point about a print not being initialled, and so far as the question of production to the meeting was concerned, it seems to me that Mr Moore is right when he says that, given that the scheme in its original form at the meeting was available to be produced to any stockholder who wanted to know what was being talked about, it cannot make all the difference to the validity or otherwise of the exercise that the Chairman did not, assuming he did not, hold up the document and say, “This original document is what we are talking about”.

In my judgment there is no reasonable doubt but that the scheme as referred to as being approved at the EGM was the original text, for three reasons. The first is the evidence as to production by Mr Long, to which I have referred. The second is the contrast of the opening words of the resolution between the approval of the scheme, as the first resolution, and the words which follow referring to the scheme in its original form or as modified by the court, which was also reflected in the definition of the Deferred Scheme to be inserted as regulation 1(1B) by the first of the alterations to the regulations effected by the special resolution. That wording seems to me to be altogether incompatible with the idea that “the scheme as approved”, in the earlier part of the resolution, means anything other than the scheme in its original form. It would be an altogether extraordinary use of words to refer silently to the scheme as originally amended (without intervention by the court) by the way of the approval of the scheme, and then to speak of the scheme in its original form or as modified by the court, without also referring to the modifications, which on this hypothesis had already been approved by the meeting but not yet approved by the court.

The third point, less cogent by itself, but an indication to the same effect, is the continued presence in the special resolution at 1(A)(iii)(c) of the original figure of 443 pence.

All of these points seem to me to be inconsistent with Mr Downes’ contentions, and in my judgment the judge was right to reject his submission that the EGM special resolution was not validly passed. He indicated at pages 27 to 31 that he would alternatively have rejected the argument on the basis that even if reference in the special resolution was to the Deferred Scheme as modified as regards the price, he would have regarded that as being in substance the same as the resolution originally proposed. I do not need to decide on this any more than the judge did, but I should say that I have some doubts as to whether that would be right. It seems to me that, on the basis of the decision in Moorgate Mercantile, if the text of the special resolution refers to a document not itself set out in the resolution, it would be likely to follow that the same test of substantial identity has to be applied to that document as it was at the date of the notice and as it is the date on which the resolution is put to the meeting, as has to be applied to the text of the special resolution as such.

As it is I consider that the judge was plainly right to hold the scheme as approved at the EGM was the scheme in its original form and not the scheme as modified, even though the Deferred Stockholders Court Meeting had approved the modification of the scheme and had then approved the scheme as modified. I would quite understand it if it was said that the average stockholder may not have appreciated the fine details of this point; it is a highly technical point. Much of the procedure under a scheme of arrangement is highly technical; no doubt stockholders had clearly in view the magic figure of 520 rather than 443, and that is what they thought they were approving. It is indeed what they were approving, because without the effect of the special resolutions they could not have achieved the effect that they had voted for at the Court Meetings, the whole was bound together and had to be achieved each in its own particular way.

Mr Downes had a different point, which I have touched on, namely that the conditional or open-ended nature of the special resolution means that it is ineffective because it is uncertain. He refers to the words following “be hereby approved” in the text of the special resolution and for good measure he would refer to Clause 10 of the scheme which is in what, from my experience, is common form, and provides that the Offeror and the Company may jointly consent on behalf of all concerned to any modification of or addition to this scheme or to any condition which the court may approve or impose. Flexibility of that kind is a very common element of a scheme of arrangement of this kind and in my view there is nothing in that which offends against Moorgate Mercantile principle. The fact that not everything in a scheme is precisely identified or identifiable on the date on which the vote takes place to sanction it and that its effect will be measured and applied by reference to a number of facts which vary but in an entirely ascertainable way in the period after the vote and up to the effective date of the scheme, is absolutely nothing to do with the Moorgate Mercantile principle and is not objectionable in any way.

In the context of a statutory scheme such as one under section 425 it is known from the start that two things at least are needed: approval by the relevant class of members or, as the case may be, creditors, and approval by the court. A well-drawn scheme is likely to allow for some scope for negotiation between the one and the other, as this scheme does by clause 10, which I have read. One of the court’s functions is to be vigilant, so as to sanction the scheme only if its terms are appropriate, including any modifications. There may therefore be said to be an element of uncertainty in what the members commit themselves to by approving the scheme at the class meeting, but it is a limited and controlled degree of uncertainty. There is nothing intrinsically objectionable, still less invalid, in that aspect of this or any scheme, and Mr Downes’ submission that the possibility that the scheme as finally sanctioned in the court may be slightly different from that which is approved by the meeting has, as I say, nothing to do with Moorgate Mercantile. For those reasons it seems to me that the judge was right to reject the objections advanced by Mr Downes on behalf of Eller to the validity of the special resolution passed at the EGM on that score.

The other pair of points which he takes on appeal arise from what were undoubtedly procedural errors in the process of giving notice of the meetings. I must set out the relevant facts and start with those concerning notice to Australian stockholders. In order that 21 clear days notice of a meeting on 20 January could be given, notices had to be dispatched, we are told and no doubt this is right, by 28 December. By regulation 118, posting a letter containing a notice on that day would have led to service being deemed to be made on the following day, which would allow 21 clear days before the meeting. Originally the company intended that notices be posted in London on 28 December to the Australian as well as all other foreign stockholders. That was agreed between the Company and the registrars.

However, it transpired that Australian reply paid envelopes were not available in London at the time. Therefore what was done was that the registrar sent the envelopes intended for Australian stockholders en bloc by courier to its Australian counterparts, who maintain a local register that the company has in Australia. The envelopes were addressed and they contained everything that the stockholder needed to have, except for the reply paid envelope. The Australian local registrars were to insert a reply paid envelope, seal each envelope and post them locally. Assuming that was done by 28 December all would have been well. The instructions for this were given on 19 December. On 21 December the envelopes numbering, if I am right, some 441 were collected from a mailing agency in London by the couriers, TNT, and they were sent on the same day in 37 boxes to the address given for the Australian registrars. The latter had made a mistake in communicating their postal code in Sydney. It may be, we know not, that this contributed to the delay that then occurred, but it cannot have been the whole reason. Thirty of the boxes arrived in Sydney and were delivered to the registrars on Friday 30 December. That was therefore already too late. That day, the weekend and Monday 2 January were holidays as regards the Australian post, so the envelopes in those 30 boxes could not be posted until 3 January, and they were posted on that date.

The other seven boxes had been sent by mistake to Brisbane. They were not located by the courier until 3 January. They were delivered to the Australian registrars in Sydney on 5 January and were completed and posted on that day. The question is whether that failure to observe the requirements of regulation 27 as regards the period of notice was an accidental omission. If the courier’s delivery starting on 21 December had gone as it should, the envelopes would have reached the Australian registrars in time to be posted no later than 28 December and service would have valid. The judge dealt with this point at pages 34 to 44 of his judgment. At the bottom of page 43 he said:

“So in the present case the registrars deliberately sent the documents by courier. They did not intend them to arrive late but they did so, so that non-service, an unintended result, was the result of actions being actions designed and reasonably expected to achieve the intended result of service, in cases quite different from Musselwhite, accordingly the failure to serve notices in time to members on the local register was in my judgment an accidental omission.”

Musselwhite is a case to which I will revert shortly.

So far as the Australian problems are concerned, it seems to me that the position is reasonably plain. We do not know what it was that went awry after the couriers had collected the envelopes on 21 December. So far as the company, its solicitors, its registrars, its UK mailing agents and for that matter the Australian registrars are concerned, this was contrary to what was intended, was not in any sense deliberate, and can in my judgment fairly be characterised as accidental. I would consider that to be the case even if someone within the courier’s organisation had deliberately delayed or misdelivered the boxes for whatever reason. Mr Downes’s submission is that it is necessary to consider exactly why the boxes went astray or were not delivered as promptly as they should have been, and only if one could see that there was some, for example, physical mishap, some wholly adventitious crisis, could it be said that it was accidental. In other words, he would say it has to be accidental as regards the courier, just as also as regards everyone else in the line of responsibility from the company. If the company, he submits, chooses a method of delivery that is inherently subject to a risk of not being delivered on time, the company must take the consequences.

He submits that the allocation of risk by the accidental omissions provision which, as he points out, is a very common provision in this and similar contexts, is one that should so far as possible favour the stockholder who has not been served or who has had short service, and should not be construed over-liberally in favour of the company and in favour of the validity of the notice. It seems to me that it would be wrong to attribute to the company the acts of, for example, a rogue or inefficient employee in the course of the courier’s operation, and it seems to me that the misdelivery or delay of this kind is, from the point of the view of the company above all, accidental and I agree with the judge on that point.

The facts as regards the other procedures are rather different. As already mentioned, regulation 27(2) allows the company to set a record date for giving notice of any general meeting to the holders of uncertificated stock, but not to holders of certificated stock. Acting on this basis, the decision was taken to set a record date of the close of business, not in terms of a precise time, on 18 December for the signing of notice to holders of uncertificated stock. In relation to certificated stock, the former practice would be followed whereby the registrar would supply the names and addresses as at the latest convenient time for printing and delivery and would not register any transfers thereafter until after the notices had been posted. This was reflected in the directions as to the service of notice of the court meeting set up in Mrs Registrar Derrett’s order of 16 December.

Miss Ajimal, an associate at Freshfields, sent the draft of the registrar’s order to the company’s registrars by email on 14 December, and she said in her witness statement, orally explained the position as regards the cut off date at about the same time. On 22 December Miss Beeson at the registrars asked Miss Ajimal by email what the position was for new stockholders coming onto the register after the initial data had been sent to the printers. Miss Ajimal’s immediate answer was that the register as at 18 December is the cut off; in addition Mr Leonard of the company contributed to this email by saying the registrars would send to the printers the file of those who joined the register between 15 and 18 December, with the clear indication that notice need to be given to them as well, but not to those coming onto the register thereafter. Unfortunately, Miss Beeson at the registrars did not appreciate that the terms of the draft order were to be taken as instructions for the posting process, and did not pick the point up from the emails on 22 December that the mailing of the circulars should have gone to those who came onto the register up to 18 December. The registrars had followed their normal practice of agreeing a date a few days ahead of the date of posting that the date when the names and addresses were to be sent to the printers. This date was to be the 16^th; that is to say, the printers were sent all the names and addresses as at 15 December, as is reflected in Mr Leonard’s email on 22 December. That is what happened; so far so good. But what was not done was to update that information by sending to the printers the changes to the register up to 18 December. As a result the original mailing on 20 December went to those ascertained by reference to the registrar as at 15 December rather than 18 December and the opportunity to correct this, which arose when the point was referred to in the emails on 22 December, was not taken, because the relevance of what Mr Leonard said and its inconsistency with what had happened by then was not noticed.

The consequence as explained in the evidence was that notice was not sent to ten holders of uncertificated stock, holding 422,000 units in all, who came onto the register between 15 and 18 December, nor to 36 holders of certificated stock, of whom nine held 10,000-odd units of deferred stock and 27 held 15,000-odd units of concessionary stock, who came onto the register between 15 December and the date of posting. Again the question is whether the mistake which was that of the registrar was an accidental omission.

In relation to this, the decision in the case of Musselwhite v Musselwhite & Co Ltd [1962] Ch 964 is more directly relevant. That case concerned a small family company. In consequence of disputes within the shareholders, two of the shareholders had agreed to sell their shares to another for a price to be paid by instalments over a period of years. The vendors executed share transfers and deposited them with the company’s solicitors, to be held until payment had been made in full, but the vendors remained on the register. At the relevant time the instalments that were already due had been paid but more was yet to fall due. A general meeting of the company was convened without notice having been given to the vendors, as shareholders. The failure to give them notice was deliberate and was based on the company’s solicitor’s mistaken opinion that they were not entitled to notice, and indeed that they were no longer members of the company. Russell J referred to the facts and said that it could not be regarded as an accidental omission to give notice and indeed, reflecting a submission by Mr Conrad Dehn, he said, “it would have been an accident if they had got notice”.

By contrast in Re West Canadian Collieries Ltd [1962] Ch 370 notice of the general meeting was sent to members, but was not sent to a small number of members whose address details had been taken out of the mailing list arrangements that were set up on the occasion of a previous mailing, for entirely innocuous reasons, but should have been put back for the purposes of the notice of the meeting. That was inadvertently overlooked at the time of giving notice of the meeting and the details were not added back, so they did not get their notices. Plowman J held that that was an accidental omission.

Neither of those cases contains a great deal of analysis of the point. One distinction between Musselwhite and the present case is that there the solicitor acting for the company took the view consciously and deliberately that notice should not be served on the vendor on the erroneous basis that he was not entitled to notice. In the present case the instructions from the company and its solicitors to the registrar were correct, by reference to the 18 December cut off day, but they were not carried out correctly due to failure by the registrar to appreciate what the instructions were, both originally and on 22 December. From the point of view of the company it intended and instructed that the correct steps be taken. From its point of view it was an unintended, unforeseen and unknown mistake and omission. Is that sufficient to qualify it in the context of Article 27(1) as an accidental omission? The judge thought it was. At page 42 he said he would not proceed on the basis that something which is not deliberate is accidental. But at page 44 he referred to the absence of a decision by P&O, or even by the registrar, not to serve notice on people who were entitled to notice. He identified the error as being a mistake as to the record date as an administrative decision designed to achieve an efficient procedure for notifying members.

Mr Downes submits that the omission was not accidental, it was the inevitable consequence of a deliberate decision by the registrars as to the record date to be taken, albeit that that was inconsistent with the decision that had been taken by the company and communicated to the registrars which, it turns out, was not as effective as one would have wished. He submits that the registrars are the agents of the company for this purpose and that their intention to use 15 December was to be attributed to the company. He submits that if a company is not to find itself stuck with the consequences of its agent’s acts in this way, the way is opened to wholesale evasion of the need to be strict about sending notices to the right people. He submitted that a company would be safe on that basis if it said: we intend to serve notice to everyone entitled to notice, but we delegate to the registrars or to the solicitors or to whoever it may be, the task of deciding who they are, and getting it right and carrying it out. That seems to me an entirely different situation in which it would be right to say that the company would have attributed to it the consequences of a decision by the registrar or the delegate, whoever it might be, even if it was a deliberate decision against the intention of the company.

But in the present situation where the company had taken a decision and had given instructions accordingly, and the registrars failed to give effect to that, it seems to me that it would not be correct to attribute that decision and the intention behind that decision to the company. To the contrary, it seems to me that the judge was right to hold that from the point of view of the company, which is the point of view that matters, this was an accident. The company and its solicitors took the decision to proceed in the correct way, they gave instructions accordingly, those instructions were inadvertently not carried out, and in my judgment the error in giving effect to the correct instructions is, on the part of the company, properly to be characterised as an accidental omission.

I should say that Mr Moore, in a respondent’s skeleton argument, would have taken a point as to the locus standi of the objector having regard to the fact of the date of the acquisition of its shares and the fact that it attended the meetings, but it seems to me that it is unnecessary to go into those matters.

For the reasons that at some length I have set out it seems to me that the matter is plain, and for my part I would dismiss the application for permission to appeal. I would add that, for what it may be worth, this decision may be cited pursuant to the Practice Direction (Citation of Authorities) dated 9 April 2001, [2001] 1 WLR 1001, as it does to some extent extend the law in relation to accidental omissions.

LORD JUSTICE MOORE-BICK: I agree, and there is nothing I would wish to add.

LORD JUSTICE NEUBERGER: I also agree and there is nothing that I can reasonably add.