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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Dyment v Boyden & Ors  EWCA Civ 1586 (26 November 2004)
Cite as:  1 BCLC 163,  1 EGLR 19,  1 WLR 792,  BCC 79,  EWCA Civ 1586,  WLR 792,  06 EG 142
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CARDIFF DISTRICT REGISTRY
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CLARKE
LORD JUSTICE KEENE
| AUDREY DYMENT
|- and -
|PATRICK MICHAEL BOYDEN
EVAN ELIAS BISHOP
PAUL EVAN BISHOP
Mr. David Chivers Q.C. and Mr. Jeremy Bamford (instructed by Messrs Roy Thomas, Begley & Co. of Swansea) for the Respondents
Hearing dates : 15 November 2004
Crown Copyright ©
Lord Justice Peter Gibson:
"The rental would have to show not only the valuation of the property but to consider the loss of earnings that would have been enjoyed."
Evan Bishop subsequently indicated that the rent would have to be £5,500 per month with upwards only rent reviews. This was never the subject of negotiation.
"151 Financial assistance generally prohibited
(1) Subject to the following provisions of this Chapter, where a person is acquiring or is proposing to acquire shares in a company, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place.
(2) Subject to those provisions, where a person has acquired shares in a company and any liability has been incurred (by that or any other person), for the purpose of that acquisition, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred."
S. 152(1)(a)(iv) defines "financial assistance" as meaning:
"any other financial assistance given by a company the net assets of which are thereby reduced to a material extent or which has no net assets."
"11. The rent payable under the lease was in substantially excess [sic] of what would have been an open market commercial rent for the Mount. By entering into the lease and agreeing to pay the rent thereunder the net assets of the Company were reduced to a material extent.
12. The excessive rent payable under the lease was at all times intended by both the [Bishops] and by [Mrs. Dyment] to provide payment to the [Bishops] for the value of their shareholding in the Company.
13. In the premises the Heads of Agreement and the lease contravened section 151 …. and all the obligations assumed by the Company under the lease and the rent payable thereunder constituted unlawful financial assistance. The lease was accordingly at all times wholly void and unenforceable and no rent was or is ever properly payable or recoverable thereunder."
"34. The fact that Evan Bishop's letter of 11th June 1991 had referred to the rent as being compensation for loss of earnings he would otherwise have enjoyed was, naturally, relied on by Mr. Hantusch as showing a link between the amount of the rent and the fact that the Bishops were giving up their shares. However, in my judgment, this overlooks the fact that the Bishops giving up their shares was a premise of the negotiation and not one of the elements over which there was, or could be, any negotiation. This was simply the effect of the requirements of the [Council] if the company was to continue to operate the business. To put the point in a different way, if the Bishops had at the outset transferred their shares at par, their ability to drive the hard bargain which they eventually did over the lease would not have been one whit impaired. It was their ownership of a 2/3 interest in the Mount, the company's need to take a 21-year lease if it was to continue in business, and the Dyments' desire to keep that business going which gave the Bishops the negotiating position which they exploited. Accordingly I have come to the conclusion that, while the company's entering into the lease can be said to have been "in connection with" (in the words of the old section 54 [of the Companies Act 1948]) the acquisition of the shares, it cannot fairly be said to have been "for the purpose" of that acquisition. It entered into the lease in order to obtain the premises, and agreed to pay what is now known to be an excessive rent because the owners of the freehold were in a position to exact that ransom."
"Q. But you weren't linking rent and the figure that was being put forward for rent with anything to do with shares. Your simple concern was, "from the Company's point of view and your point of view, can we afford to pay this rent?"
A. That's right.
Q. So there was no link, so far as you could see, between that and the shares.
Lord Justice Clarke:
Lord Justice Keene: