Guernsey Law Reports 2005–06 GLR 176
IN THE MATTER OF THE WESTBURY PROPERTY FUND LIMITED
ROYAL COURT (Hancox, Lieut. Bailiff): July 4th, 2005
Civil Procedure—judgments and orders—declaration—Royal Court has discretion to grant declaration in respect of uncontested application, in exercise of paramount duty to do justice to applicant, if no prejudice to persons not before court—immaterial that no other remedy sought
Companies—special resolutions—delivery to Greffier—compliance with 15-day delivery requirement under Companies (Guernsey) Law 1994, s.73(2) if credible evidence of proper posting within time-limit—presumption in Interpretation (Guernsey) Law 1948, s.11 extended and by Companies Law, s.116(4) deemed received by Greffier on third day after posting
The applicant company applied for a declaration that a copy of special resolutions was deemed to have been received by H.M. Greffier in accordance with the requirements of the Companies (Guernsey) Law 1994, s.73(2).
At an Extraordinary General Meeting of the applicant company on December 17th, 2004, special resolutions redesignating and increasing share capital and adopting new Articles of Association were passed. The company was required, by law, to send a copy of the special resolutions to H.M. Greffier within the statutory time-limit of 15 days. According to the company secretary, minutes of the E.G.M., detailing the special resolutions, were sent to H.M. Greffier on December 20th, having been delivered to the Guernsey Post Office by the company’s messenger on that date. There was no evidence that the minutes were ever received by H.M. Greffier, which would ordinarily have caused the special resolutions to be rendered null and void by virtue of the Companies (Guernsey) Law 1994, s.73(3). Given the consequences, the applicants applied to the court for a declaration that they be deemed to have been received within the statutory time frame.
The applicant submitted that (a) there was ample evidence that the documents had been posted to H.M. Greffier within the statutory time-limit; (b) although s.116(7) of the Law provided that no document to be delivered to the Greffier would be deemed delivered until received by him, the penalty in s.73(3) of the Companies (Guernsey) Law 1994 for non-delivery, i.e. rendering the special resolutions null and void, was
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unjustifiably harsh; and (c) the consequences of making the special resolutions null and void would be manifestly unfair to those who had entered into transactions concerning the newly designated shares in the company in good faith, believing the special resolutions to have been passed validly.
H.M. Procureur, as amicus curiae, submitted that (a) s.73(2) of the Companies (Guernsey) Law 1994 could be read with s.116(4) of that Law, which provided that a document sent to an address in the Channel Islands would be deemed to have been received on the third day after posting, so that it would be acceptable to extend the presumption of good delivery “in the ordinary course of post” in s.11 of the Interpretation (Guernsey) Law 1948 to cover the situation where there was sound evidence that the document had been properly posted; (b) there was credible evidence upon which the court could conclude that the documents had been delivered to the post office and then received by H.M. Greffier; and (c) the court had no power to grant a declaration except as a cause under r.9 of the Royal Court Civil Rules 1989—and no such cause was possible here, as the only other possible party to the application was H.M. Greffier; nonetheless, in these exceptional circumstances, it would be proper to follow the English practice of making declarations whether or not any other remedy was also sought.
Held, granting the declaration sought:
(1) Despite s.116(7), the presumption in s.11 of the Interpretation (Guernsey) Law 1948 could reasonably be extended to conclude that, if the requirements of that section were satisfied, the presumption might, in the discretion of the court, apply so that there would be deemed to be good delivery if there was credible evidence that the document had been properly posted. There was sufficient evidence that this was the case, and the court could therefore conclude that the document had been delivered to H.M. Greffier “in the ordinary course of post” and that, by s.116(4) of the 1994 Law, he had received it “on the third day after posting.” The special resolutions had therefore been delivered well within the time-limit stipulated in s.73(2) (paras. 6–7; para. 22).
(2) It was proper for the court to hold that it could regulate its own procedure and adopt English practice, fairness being the ultimate justification for doing so. It therefore had the power to make a declaration whether or not the matter before it was contested, provided that there was no prejudice to persons not before the court. It was appropriate to make a declaration in the present case, the factual presumptions required having been made out and the benefits of granting the declaration far outweighing any disadvantages (paras. 14–15; para. 20; paras. 22–23).
Cases cited:
(1) Financial Servs. Auth. v. Rourke, English Ch. D., October 19th, 2001, unreported, dicta of Neuberger, J. applied.
(2) Hanby (Victor) Associates Ltd. v. Oliver, 1990 JLR 337, followed.
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(3) King-Emp. v. Benoari Lal Sarma, [1945] A.C. 14; [1945] 1 All E.R. 210, dicta of Lord Simon, L.C. considered.
(4) News Intl. PLC v. Clinger, Royal Ct., May 10th, 1996, unreported, dicta of Carey, Deputy Bailiff applied.
Legislation construed:
Companies (Guernsey) Law 1994, s.73:
“(2) A copy of every special resolution of a company shall be delivered by the company to the Greffier within the following period—
. . .
(b) in any other case, a period of 21 days immediately following the day upon which it was passed;
and the Greffier shall, as soon as is reasonably practicable, enter the resolution in the Register of Companies.
(3) If there is a failure to comply with any provision of subsection (2) in respect of a special resolution of a company then, without prejudice to any provision of this Law requiring the resolution to be approved by the Court—
(a) the resolution shall be void ab initio; and
(b) the company is guilty of an offence.”
s.116(4): “A document sent by post shall, unless the contrary is shown, be deemed for the purposes of this Law to have been received—
(a) in the case of a document sent to an address in the United Kingdom, the Channel Islands or the Isle of Man, on the third day after the day of posting . . .”
s.116(7): The relevant terms of this sub-section are set out at para. 7.
Interpretation (Guernsey) Law 1948, s.11:
“Where an enactment . . . authorises or requires any document to be served by post, whether the expression ‘serve’ or the expression ‘give’ or ‘send’, or any other expression is used, then, unless the contrary intention appear, the service shall be deemed to be effected by properly addressing, prepaying, and posting a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.”
J.P. Greenfield and Ms. K.M. Le Cras for the applicant;
J.N. van Leuven, Q.C., H.M. Procureur, as amicus curiae.
1 HANCOX, LIEUT. BAILIFF: On December 17th, 2004, at an Extraordinary General Meeting of the Westbury Property Fund Ltd., held at Admiral Park, Guernsey, the following special resolutions, in summary, were passed:
(i) to convert and re-designate its authorized but unissued 10p. Income Shares into 10p. Ordinary Shares;
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(ii) to convert and re-designate all authorized but unissued 10p. Capital Shares as 10p. Ordinary Shares;
(iii) to convert all issued 10p. Income and 10p. Capital Shares into redeemable Preference Shares;
(iv) to increase the authorized share capital from £15m to £22,500,001 as stated in Special Resolution 2(f); and
(v) to adopt revised Articles of Association in substitution for the existing ones.
There was also a provision authorizing the directors of the company to do all necessary acts for giving effect to Resolutions (i) to (iii).
2 Section 73(2)(b) of the Companies Law 1994 provides that a copy of every special resolution of a company (other than under para. (a)) shall be delivered to H.M. Greffier within 15 days, with the sanctions for not doing so being specified in sub-s. (3). The company has now applied to this court for a declaration that the special resolutions concerned shall be deemed to have been received by H.M. Greffier in accordance with the relevant statutory provisions.
3 According to the affidavit of Serena Tremlett, the Business Manager of Mourant (Guernsey) Ltd., who acts as secretary to the company and manages its business affairs, certified minutes of the meeting of December 17th, containing particulars of the special resolutions and the revised articles, were transmitted to H.M. Greffier under cover of her letter of December 20th, 2004, by the normal method employed by Mourant, namely placing a sealed envelope with the postage rate marked thereon in the tray for outgoing post. It is then franked by Mourant’s messenger and physically delivered to the Guernsey Post Office.
4 An affidavit from Simone Simon, the company’s messenger, confirms that she collected the post, franked it and delivered it to the Guernsey Post Office in the normal course of her duties on December 20th, 2004. She does not, understandably, depose that she recalls that the letter in question, with its accompanying contents, was specifically delivered by her to the post office.
5 In most systems of law, and Guernsey is no exception, there is to be found in the interpretation legislation a provision that documents which are authorized or required to be served, given or sent by post shall be deemed to have been served in the ordinary course of post by properly addressing, prepaying and posting the letter in question.
6 Section 73(2) does not mention the act of posting, but requires the documents to be “delivered.” The Procureur, in the course of his submissions, invited comparison with s.116(4). Having regard to this, it is, in my view, a reasonable extension of the presumption in s.11 of the Interpretation
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(Guernsey) Law 1948 to hold that if the requirements of that section are satisfied, the presumption may, in the discretion of the court, apply so that there would be good delivery if there is credible evidence that the document was properly posted.
7 However, a difficulty presents itself in the instant case because of the provisions of s.116(7) of the Companies Law, to which the applicant quite properly drew the court’s attention in the supporting affidavit. That sub-section states:
“Notwithstanding the provisions of this section and of any other rule of law in relation to the service of documents, no document to be given or delivered to or served on the Greffier under or for the purposes of this Law shall be deemed to have been given, delivered or served until it is received.”
8 The terms of the sub-section are so specific, commencing as they do with the words, “Notwithstanding the provisions of this section and of any other rule of law in relation to the service of documents . . .”, that I confess to a first impression that they formed an insurmountable obstacle in the path of the applicant, especially in view of the words of Lord Simon, L.C. in King-Emp. v. Benoari Lal Sarma (3) ([1945] 1 All E.R. at 216):
“Again and again, this Board has insisted that in construing enacted words we are not concerned with the policy involved or with the results, injurious or otherwise, which may follow from giving effect to the language used.”
9 According to para. 6 of the affidavit of the non-executive director of the company and of Mourant, Mr. Stokes, the results, if the special resolutions are null and void (let alone the possibility of the company being guilty of an offence, as to which H.M. Procureur specifically reserved the Crown’s position), will indeed be severe, nay, catastrophic. This will be so especially if the further consequences adumbrated by Advocate Greenfield in his address on June 28th, which include de-listing on the L.S.E., ensue.
10 Am I therefore entitled to take these consequences into account in interpreting the provision in question? Mr. Greenfield submitted that the court can, in view of the manifest injustice that will occur to shareholders (and others) who have acted in perfect good faith, and have concluded transactions in the newly designated shares during the period since December 20th in the genuine belief that the special resolutions were validly passed. In resolving this difficult question, I am indebted to H.M. Procureur for his invaluable assistance to the court at the hearing on July 1st, for which purpose the application was adjourned on June 28th.
11 As I indicated in my ex tempore ruling on June 28th, I felt some hesitation as regards the form of the application, inasmuch as there is no
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specific provision in the Royal Court Civil Rules 1989 enabling the court to grant a declaration simpliciter, as opposed to a prayer seeking the relief at the conclusion of a cause tabled under r.9. H.M. Procureur has allayed those doubts by drawing to my attention a passage from the commentary in the Civil Procedure Rules 2005 in relation to r.40.20 of the new Civil Procedure Rules, which permits the court to make binding declarations whether or not any other remedy is claimed.
12 Rule 40.20 is to the same effect as the former O.15, r.16 of the Rules of the Supreme Court, the 1999 version of which is still followed in the Royal Court. Although claims for declarations alone are unusual, it is perfectly clear that the High Court has a discretionary power to grant such relief if it regards this as a proper course: see the commentary in 1 Supreme Court Practice 1999, para. 15/16/2, at 267–268. The power to exercise this discretion stems from the paramount duty of the court to do the fullest justice to the plaintiff, or applicant, as the case may be.
13 This aspect of the English court’s jurisdiction is exemplified by the decision of Neuberger, J. in Financial Servs. Auth. v. Rourke (1) in which the Financial Services Authority sought, inter alia, declaratory relief against the defendant, who had been carrying on an unauthorized deposit business for some years. Neuberger, J. said: “. . . [O]f course the court has to be particularly careful before it grants a remedy which is discretionary and which can [here I interpolate ‘could’] have a wide-ranging effect, at a summary stage.”
14 In the Jersey case of Hanby (Victor) Associates Ltd. v. Oliver (2), the Court of Appeal said in relation to a discovery application that unless there was something in the language of the relevant rule which compelled a contrary conclusion, it was open to the Royal Court to develop its own practice as to the circumstances in which it allowed a party to challenge his opponent’s list of documents. Again, in News Intl. PLC v. Clinger (4), in the following passage, Carey, Deputy Bailiff, as he then was, said:
“. . . I find nothing incompatible with adopting English principles of equity and affording relief to plaintiffs who claim their money has got into a bank account in another person’s name as a result of ‘fraud or other wrong doing’ . . .”
15 In the present case, as the Procureur has said, the only other possible party to the application is the Registrar of Companies, that is H.M. Greffier. There is no suggestion that there is a risk of prejudice to persons not before the court. Accordingly, having regard to the authorities I have just mentioned, without wishing to be taken as indicating that the court would necessarily entertain this unusual type of application in other cases, I am prepared to accept that the English remedy is capable of being adopted in Guernsey in an appropriate case.
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16 The other aspect of this application requiring the court’s consideration is whether, despite the wording of sub-s. (7), to adopt the phraseology of Neuberger, J. in the F.S.A. case (1), that “[the court] . . . [can be] satisfied, nonetheless on [its] own view that it is appropriate to make the order.”
17 H.M. Procureur traced the history of the companies legislation in Guernsey, from the original Law in 1883, through the 1908 Law and down to the present statute. He submitted that it was a reasonable inference that the 1883 Guernsey law was intended by the then legislature to follow the English Companies Act 1862, s.53 of which matches Guernsey’s s.73(2), and similarly provided that a copy of any special resolution passed should be printed and forwarded to the counterpart of the Greffier, namely the Registrar of Joint Stock Companies, and recorded by him. Here, it has to be entered in the Register of Companies within 21 days of being passed.
18 However, instead of that which Mr. Greenfield described as the Draconian provisions of sub-s. (3), s.53 of the 1862 Act provides that if default is made after the expiry of 15 days from the confirmation of the special resolution, then the company and its directors and managers who knowingly authorize or permit the default would incur a £2 penalty for each day of the default. Mr. Greenfield suggested that a much fairer provision would be a penalty similar to s.53, or that there should be a late filing fee—even if stringent.
19 The Procureur is on record as stating that if ever there was a case where a declaration on the lines of that sought in the instant case would be considered appropriate, it is this one. In many cases, of course, the default could be cured by the simple expedient of passing fresh resolutions. But here, the shareholders were in blissful ignorance of the reality of the situation until the company received an advice of supposed inaccuracies in the annual return from the Greffe on or about April 29th, followed by Mr. Dorey’s letter of June 2nd. Accordingly, the transactions I referred to in para. 10 above that have been carried out bona fide, as described in para. 6 of Mr. Stokes’ affidavit, cannot be unravelled.
20 Given the massive support for this course by H.M. Procureur, coupled with Mr. Stokes’s expressed belief that Westbury has acted in accordance with shareholders’ wishes, it seems to me that it is a proper course for the court to hold, as Neuberger, J. did in the F.S.A. case (1), that the power to make declarations is unfettered and that the court can so act if the facts have been established to the court’s satisfaction.
21 It is impossible to speculate as to what might have happened to the letter of December 20th, 2004, and the minutes of the shareholders’ meetings enclosed, from the moment the package was placed in the company’s outward tray. The considerable expense and anxiety occasioned by the lapse which occurred here behoves those who are charged
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with the duties of ensuring the safe transmission of a company’s records, especially ones of the importance which has been attached to those in the instant case, to leave no stone unturned in the process of ensuring that they are duly received by the Registrar of Companies and entered in his records. By not diligently following the transmission through, the officer concerned was obviously asking for trouble.
22 Nevertheless, as H.M. Procureur says, there is credible evidence on the record, on which the court is entitled to conclude that the letter of December 20th and its enclosures were received by H.M. Greffier, and there is nothing to set against Miss Simon’s testimony that she collected the contents of the outward box and delivered them to the post office on that day. Neuberger, J. makes it crystal clear that the court should not grant declarations merely because the right, facts or principles, as the case may be, have been established and one party asks for a declaration. It must be satisfied that, in all the circumstances, it is appropriate to make the order in question.
23 After considering the submissions of H.M. Procureur and of very experienced counsel, together with the material adduced, I find myself satisfied that the factual basis for the declaration sought has been made out. The considerations which move me to acceding to the application overwhelmingly transcend the mischief that will occur if it is rejected. For these reasons, the declaration sought in the application of June 20th, 2005, down as far as the words “section 73(2)” and “of the Companies (Guernsey) Law 1994” is granted. The remainder is, in my view, surplusage.
24 The declaration will therefore go in the following terms:
“That the special resolution dated December 17th, 2004 is deemed to have been received by H.M. Greffier in accordance with the requirements of s.73(2) of the Companies (Guernsey) Law 1994.”
Order accordingly.
2009
Law Report
None
Guernsey Law Reports 2005–06 GLR 176