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||Neutral Citation Number:  EWHC 3466 (Ch)
||No: 8690 of 2011
IN THE HIGH COURT OF JUSTICE
Royal Courts of Justice
London, EC4A 1NL
B e f o r e :
MR. JUSTICE DAVID RICHARDS
|| IN THE MATTER OF COROIN LIMITED
IN THE MATTER OF THE COMPANIES ACT 2006
No 8690 of 2011
||- and -
||MISLAND (CYPRUS) INVESTMENTS LIMITED
(a company registered in Cyprus)
(3) ELLERMAN CORPORATION LIMITED
(a company registered in Jersey)
(4) B OVERSEAS LIMITED
(a company registered in Jersey)
(5) RICHARD FABER
(6) MICHAEL SEAL
(7) RIGEL MOWATT
(8) COROIN LIMITED
||.Claim No: HC11C03437
||SIR DAVID ROWAT BARCLAY
SIR FREDERICK HUGH BARCLAY
MISLAND (CYPRUS) INVESTMENTS LIMITED
ELLERMAN CORPORATION LIMITED
(5) B OVERSEAS LIMITED
(6) MAYBOURNE FINANCE LIMITED
(7) THE TRUSTEES OF THE SIR DAVID AND SIR FREDERICK BARCLAY FAMILY SETTLEMENTS
(8) RICHARD FABER
(9) MICHAEL SEAL
(10) RIGEL MOWATT
Mr Robert Miles QC, Mr Richard Hill and Mr Gregory Denton-Cox (instructed by Herbert Smith LLP) for the Petitioner/Claimant
Mr Sa'ad Hossain and Mr Edmund Nourse (instructed by Weil Gotshal & Manges) for the 1st and 4th Respondents/3rd and 5th Defendants
Mr Stephen Auld QC and Mr Michael D'Arcy
(instructed by Quinn Emanuel LLP) for the 2nd Respondent
Mr Richard Snowden QC and Mr Nigel Dougherty
(instructed by DLA Piper UK LLP) for the 8th Respondent
Hearing dates: 14 and 15 December 2011
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice David Richards:
- This is the trial of preliminary issues in a petition presented under section 994 of the Companies Act 2006 and an associated action. The issues concern the application of pre-emption provisions in relation to shares in a company called Coroin Limited (the company) in circumstances where a company beneficially and legally owning shares in the company has itself been sold.
- The company was formed in 2004 for the purpose of acquiring companies owning four well-known hotels in London, the Savoy, Claridge's, the Connaught and the Berkeley. They were purchased for £750m. The purchase price and associated costs were funded by loan facilities of £675m and the subscription of £110m by the initial investors for shares and loan stock of the company.
- As appears from the shareholders agreement, to which I refer below, the underlying business plan envisaged an early sale of the Savoy Hotel and the Berkeley Hotel. The Savoy Hotel was sold at an early stage. The group continues to own and manage the remaining hotels. The company's loan facilities have altered since 2004 and now comprise a senior debt loan facility of £660 million.
- The petitioner and claimant is Patrick McKillen, one of the initial investors in the company. He currently owns 36.23% of the equity capital of the company. He is and has since September 2005 been a director of the company.
- The proceedings arise out of a plan by Sir David Barclay and Sir Frederick Barclay ("the Barclay brothers"), publicly acknowledged by them, to acquire complete control and ownership of the company and the hotels which it owns. The Barclay brothers have widespread business interests, including the Ritz Hotel in London. Mr McKillen is opposed to this takeover plan. The Barclay brothers, through companies and family trusts controlled by them ("the Barclay interests"), have taken a number of steps, summarised briefly below, to achieve their object.
- For those with a historical perspective, it may be noted that this is by no means the first time that these hotels have attracted hostile takeover interest. In the 1950s, Sir Charles Clore and later Land Securities Limited under Lord Samuel attempted to gain control of the Savoy Group. A detailed account and analysis of the measure taken by Sir Hugh Wontner and his fellow directors which succeeded in thwarting these attempts is to be found in the Report of Sir Edward Milner Holland QC (14 June 1954 HMSO) who was appointed as an inspector under section 165(b) of the Companies Act 1948. For most of the 1980s Trusthouse Forte plc sought to obtain control. The decision in Re Savoy Hotel Limited  Ch 351 was an early battle in that campaign.
Investment in the company
- There were initially five investors, or blocks of investors, in the company, who subscribed for ordinary shares, preference shares and loan stock. They were Mr McKillen, John McColgan and Moya Doherty (JCMD), Misland (Cyprus) Investments Limited, Derek Quinlan, and a number of individuals who invested through a nominee company called Quinlan Nominees Limited.
- Misland (Cyprus) Investments Limited ("Misland") was owned by A&A Investments Limited, a Bermudian company through which Peter Green and his family control their business interests. It is the sale of Misland to the Barclay interests which gives rise to the preliminary issues. Mr McKillen's petition pleads that the Green family invested in the company "through their vehicle Misland". It is not however suggested by Mr McKillen that Misland was at any time anything other than the sole beneficial owner of the shares registered in its name. The Barclay brothers and their associates for their part admit in their Defences that "Misland was a 'vehicle' for investment in the company by Peter Green and his family".
- Each of the investing groups was issued with a separate class of shares (A to E ordinary shares): Mr McKillen (A shares), JCMD (B shares), Misland (C shares), Mr Quinlan (D shares) and Quinlan Nominees Limited (E shares). The different classes of ordinary shares rank pari passu in all respects and enjoy the same voting rights, save as regards directors. Each of the A, B, C and D shares confer the right to appoint one director. The E shares carry no such right. The maximum number of directors is six, of whom two may be co-opted by the board. The number of votes which each director may cast at board meetings differs as follows: A director (70 votes), B director (7 votes), C director (48 votes), D director (70 votes), while each of the co-opted directors can cast 1 vote each. Between 2004 and the end of 2010 some of the initial investors sold their interests to other shareholders or new investors in accordance with the applicable pre-emption provisions so that the equity holdings, including preference shares, as at December 2010 were: Mr McKillen (36.23%), Mr Quinlan (35.4%), Misland (24.78%) and Kyran McLaughlin (3.58%).
- Shortly before the acquisition of the Savoy group of hotels by the company, the initial investors entered into a shareholders agreement dated 14 May 2004 (the shareholders agreement). The company was named as a party to the agreement. A significant number of provisions assumed that the company was a party and conferred rights or imposed obligations on it. It does not appear, however, to have executed the agreement. Mr Miles QC for Mr McKillen submitted that the company was nonetheless properly to be treated as a party. Given that (i) the company was clearly intended to be a party to the agreement, (ii) all its members were parties to the agreement on that basis, (iii) the agreement regulates relations between the company and its members and between the members among themselves and (iv) there were no other parties to the agreement, the company is, in my judgment, properly considered a party by virtue of the principle in In re Duomatic Ltd  2 Ch 365 and other authorities. I should record that counsel for the company, which was not represented in court during the main part of the argument, has raised reservations on this point, at least as regards subsequent amendments to the shareholders agreement and the composite version to which I refer below. The subsequent amending agreements are not in evidence and the composite version is stated not to be a legally binding document. In these circumstances my decision on this point is restricted to the purposes of the preliminary issues.
- There were seven amendment agreements between December 2004 and October 2009, principally taking account of changes in shareholders. A composite version of the agreement, incorporating these amendments, was prepared. The front sheet states that it is not a legally binding document but for convenience counsel used it for their submissions and I will do the same in this judgment.
Background to the present proceedings
- The Barclay brothers have been unable to reach agreement with Mr McKillen for the acquisition of his shares. They have decided to obtain control and ownership of the company by other means and have set out on a course to achieve that end.
- The principal steps so far taken are as follows.
- In January 2011, the issued share capital of Misland was sold by A&A Investments Limited to B Overseas Limited, a company forming part of the Barclay interests, for £70m, thereby giving the Barclays interests control of the C shares. The C director was immediately replaced by an employee of Ellerman Investments Limited, one of the companies comprising the Barclay interests. There have been two subsequent C directors and both have been associates of the Barclay brothers.
- In February 2011, the Barclay interests acquired from Bank of Scotland (Ireland) loans made to Mr Quinlan and secured by charges over his shares, including in particular the D shares and some B shares. Those shares were transferred to and registered in the name of Ellerman Corporation Limited. It is said by the Barclay interests, but denied by Mr McKillen, that this was a permitted transfer under the pre-emption provisions, as being a transfer of security to the security holder. This is not the subject of the preliminary issues. In May 2011 Mr Quinlan was replaced as the D director by an employee of Ellerman Investments Limited.
- In February 2011, Mr McLaughlin's shares and loan stock, including a holding of B shares, were offered to shareholders under the pre-emption provisions. Mr McKillen did not take up his pre-emption rights and all the shares and loan stock were purchased by Misland. In March 2011, Mr McLaughlin was replaced as the B director by an employee of Ellerman Investments Limited.
- In September 2011, the Barclay interests acquired other loans made to Mr Quinlan and the related security over certain of his B, E and special redeemable preference shares and loan stock. The acquiring company has been registered as holder of the shares in question as a security holder, to which Mr McKillen's objects on a number of grounds, including that a pre-emption offer should first have been made.
- In September 2011, Maybourne Finance Limited, another company within the Barclay interests, acquired the company's senior debt of £660m and associated security. Mr McKillen asserts, and the Barclay interests deny, that this assignment was made in breach of the loan facility agreement. The senior debt became repayable on 30 September 2011. Immediately after its acquisition, Maybourne Finance Limited made proposals to the company for a refinancing of the debt including a rights issue to raise £200m. Mr McKillen alleges that the Barclay interests acquired the senior debt with a view to procuring a rights issue so as heavily to dilute his equity holding in the company.
- Mr McKillen has a personal loan facility with Anglo Irish Bank and has granted security over shares in the company to secure the facility. Since October 2011 the Barclay interests have been seeking to persuade Anglo Irish Bank to sell the benefit of the loan and security to them.
- In his petition under section 994, presented on 5 October 2011 and amended on 29 November 2011, Mr McKillen alleges that all or most of the steps described above were in breach of the provisions contained in the articles of association or the shareholders agreement or other agreements. He alleges that all or most of the steps, together with the alleged conduct of the directors appointed by the Barclay interests, constitute unfairly prejudicial conduct of the affairs of the company. In his Part 7 action, he alleges a conspiracy to cause loss by unlawful means.
The preliminary issues
- The preliminary issues are directed to determining whether the sale of Misland to the Barclay interests in January 2011 triggered the pre-emption provisions contained in clause 6 of the shareholders agreement and article 5 of the company's articles of association.
- The preliminary issues are as follows:
"1. Does the registration by a shareholder of a transfer of the shares in itself constitute a transfer of interest in Shares for the purposes of clause 6.1 of the Shareholders' Agreement and Article 5.1.
2. Is a holder of shares in any registered holder of Shares a Shareholder within the meaning of the Shareholders' Agreement.
3. Is a desire by a holder of shares in any registered holder of Shares to transfer the shares held by it in the registered holder a desire to transfer an interest in Shares within clause 6.1 of the Shareholders' Agreement and Article 5.1
4. If the answer to any of issues 1), 2) or 3) is 'yes', in the event of a proposed transfer of the shares in the registered holder, must notice be given pursuant to clause 6.1 of the Shareholders' Agreement?
5. If, as alleged, in January 2011, Misland desired to transfer Shares in Coroin or an interest in Shares in Coroin, was Misland required to give a Transfer Notice to the Company in respect of such Shares?
6. If, as alleged, in January 2011, the Green family desired to transfer Shares in Coroin or an interest in Shares in Coroin, was Misland required to give a Transfer Notice to the Company in respect of such Shares?
7. As a result of the failure to serve a Transfer Notice, was and/or is the purported transfer ineffective vis a vis Coroin and the other shareholders, by reason of Clauses 6.17 of the Shareholders' Agreement."
- The terms of these issues were formulated on behalf of Misland, as the respondent and defendant directly affected by the issue. Mr McKillen specifically made no comment on the formulation of the issues, but equally raised no objection to their terms before or during the hearing.
- The application for the determination of these preliminary issues was made by Misland and B Overseas Limited. Alternatively, they sought summary judgment or an order striking out this part of Mr McKillen's case.
- The application was supported by the company. The company takes a neutral stance on the issues raised in the proceedings, but its own commercial position and interests as the holding company of a group owning and operating substantial hotel businesses, with their own creditors and employees, and as the borrower under a senior debt facility of £660m is directly affected by the proceedings.
- The day to day business of the company is conducted by a chief executive who is independent of any of the parties. He gives instructions on behalf of the company to its solicitors and counsel. In my judgment it is right in this case that the company's own interests are separately represented and that its separate concerns in relation to the proceedings are brought to the attention of the court.
- The company's particular concern in relation to the issue as regards Misland is the validity of the appointments of directors nominated during 2011 by Misland as holder of the C shares and as holder of the shares acquired from Mr McLaughlin.
- I acceded to the application, first, because the preliminary issues raised only points of construction of the shareholders agreement and the articles which appeared capable of separate and early determination at a relatively short hearing and, secondly, because of the company's concern for their early determination.
- Mr Miles QC on behalf of Mr McKillen submitted that they were not suitable for determination as preliminary issues, on the grounds that there was substantial and controversial evidence admissible on them. I accordingly gave directions for service of the evidence on which Mr McKillen would rely and gave him liberty to submit at the hearing, in the light of such evidence, that the issues were not fit for determination as preliminary issues.
- In accordance with these directions, witness statements of Mr McKillen and Raymond Murphy, his tax advisor, were served. Misland has not responded to this evidence and submits that it is for the most part inadmissible on an issue of construction.
- Mr Miles submitted that the evidence was admissible and showed that there should not be a preliminary determination of the issues.
Mr McKillen's application for disclosure
- In preparation for the hearing, Mr McKillen requested disclosure of documents. The company agreed and, through its solicitors, provided disclosure of the documents on the files of A&L Goodbody, solicitors in Dublin and London who had acted for the company in 2004 and since.
- It appeared to Mr McKillen's advisors that Mr Quinlan would have further documents. For what appeared to me to be reasonably practical considerations, Mr Quinlan was not prepared, or indeed in a position, to give specific disclosure ahead of the standard disclosure in the proceedings as a whole ordered for 13 January 2012.
- An application was issued by Mr McKillen, returnable for the hearing fixed for the preliminary issues, for specific disclosure by Mr Quinlan and for adjournment of the preliminary issues either to the trial of the whole proceedings or at least until after Mr Quinlan had given disclosure.
- Mr Miles submitted that disclosure was necessary for a fair trial of the preliminary issues and, additionally, because Mr McKillen does not now have access to many of his own documents, principally because they were in electronic form and had been deleted, and so he may have forgotten material facts which may become apparent from documents disclosed by Mr Quinlan.
- In my judgment this application for disclosure was misconceived. Insofar as it sought documents to support evidence already given by Mr McKillen, it was premature and unnecessary. If there is evidence which is admissible on the question of construction raised by the preliminary issues and the evidence is disputed, the issues are not fit for determination as preliminary issues in the circumstance of this case. Disclosure will not assist in reaching that decision. Insofar as Mr McKillen relies on disclosure to identify allegations as to the circumstances of or background to the shareholders agreement and articles, it is simply a case of hoping that something will turn up. As the Court of Appeal made clear in ICI Chemicals Polymers Ltd v TTE Training Ltd  EWCA Civ 25, this is not a proper ground for resisting the determination of a point of construction on a summary judgment application. The same consideration must apply when such a point is to be determined as a preliminary issue. Moore-Bick LJ said at [13-14]:
"13. In cases where the issue is one of construction the respondent often seeks to persuade the court that the case should go to trial by arguing that in due course evidence may be called that will shed a different light on the document in question. In my view, however, any such submission should be approached with a degree of caution. It is the responsibility of the respondent to an application of this kind to place before the court, in the form of a witness statement, whatever evidence he thinks necessary to support his case. Where it is said that the circumstances in which a document came to be written are relevant to its construction, particularly if they are said to point to a construction which is not that which the document would naturally bear, the respondent must provide sufficient evidence of those circumstances to enable the court to see that if the relevant facts are established at trial they may have a bearing on the outcome.
14. Sometimes it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial. In such a case it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction."
- Accordingly, I dismissed the application for disclosure against Mr Quinlan.
The shareholders agreement
- Recital B to the shareholders agreement records that the initial investors entered into the shareholders agreement:
for the purpose of the subscription for shares and loan stock as therein set out, for regulating the future conduct of the business of the company and its subsidiaries and for the purpose of regulating their relationship with each other."
- Clauses 2.2, 2.3 and 2.4 provide for the subscription by the initial investors for shares and loan stock of the company. Clause 2.6 provides that the funds raised by the issue of shares and loan stock should be applied solely in connection with "the relevant business" defined as "
the acquisition and thereafter the holding and management of the Target Group together with such ancillary and related activities as the Board may from time to time determine".
- Clause 3.1.1 provides:
"The primary objective of the Company in undertaking the Relevant Business is to manage and turnaround the Primary Assets. It is acknowledged that this is likely to be achieved by initial self management of the Primary Assets followed by entry into management contracts with international hotel operators and ultimately the sale of some or all the Primary Assets (other than Claridge's Hotel). It is agreed that the Company shall initially seek to sell the Savoy Hotel and the Berkeley Hotel or their respective holding entities."
- Clause 3.2 imposes a series of "business covenants" on the company for the benefit of the investors' interests. Clause 3.4 contains a series of 19 "protective covenants" whereby the shareholders agreed to procure the company not to take various steps without the prior consent in writing of the holders of a majority of the voting shares. These steps include the creation or issue of share or loan capital, the appointment of additional directors and changes to the nature or scope of the relevant business. Clauses 3.5 and 3.6 contain detailed provisions dealing with the application of the proceeds of sale of any of the hotels or other significant assets and the order of redemption of loan stock and preference shares.
- Clause 3.7 provides as follows:
"New Shareholders: Each of the Shareholders covenants that he shall take all steps within his power and procurement to ensure that:
3.7.1. any allottee of Shares who is not already a party to this Agreement enters a Deed of Adherence in the form set out in the Fourth Schedule;
3.7.2. any transferee of any Shares or Loan stock from him who is not already a party to this Agreement enters a Deed of Adherence in the form set out in the Fourth Schedule;
3.7.3. any Permitted Transferee under clause 6.16 who is not already a party to this Agreement enters a Deed of Adherence in the form set out in the Fourth Schedule."
- Clause 4 deals with the composition of the board of directors, voting rights and other matters relating to board and general meetings.
- Clause 5 confers pre-emption rights on the allotment of new shares or convertible securities.
- Clause 6 contains pre-emption provisions as regards the transfer of existing shares, to which I will return in detail.
- Clause 8 contains a number of miscellaneous provisions, including the following:
"8.2 Each of the Shareholders hereby covenants with each other that he or it shall take all necessary steps, and exercise such voting rights at general meetings of the Company as he may from time to time have in the Company so as to procure (in so far as lies within his power or procurement individually or collectively with others) that the Company and any member of the Board appointed by him shall comply in full with each and all of its obligations under this Agreement.
8.3 In the event of any inconsistency between any terms in this Agreement and any matter set out in the Articles of association including, without limitation, the provisions of clause 6, the terms of this Agreement shall prevail and the Shareholders shall make such amendments as may be necessary to the Articles of Association to permit the Company, its affairs and the transfers permitted by clause 6 to be administered as provided in this Agreement.
8.5 Each of the Shareholders agrees that:
8.5.2 each of them shall at all times act in good faith towards the others and shall use all reasonable endeavours to ensure the observance of the terms of this Agreement;
8.5.4 each of them will do all things or desirable to give effect to the spirit and intention of this Agreement.
8.13 This Agreement and all relationships created hereby will in all respects be governed by and construed in accordance with the laws of Ireland and the parties hereby submit to the non-exclusive jurisdiction of the courts of Ireland.
8.14 Each of the parties hereby confirms that it or he has had the opportunity of obtaining independent advice as to the provisions and effect of this Agreement.
8.15 This Agreement shall not be deemed to create any partnership between the parties in relation to the Company or otherwise."
- While Clause 8.13 provides that the agreement is to be governed by and construed in accordance with Irish law all parties accept that there is no relevant difference between English and Irish law for the purposes of the preliminary issues. No party raises any objection to the jurisdiction of this court.
The articles of association
- Clause 2.1 of the shareholders agreement provided that the company would adopt articles of association in the form of the draft scheduled to the agreement, which it duly did. The articles currently in force were adopted on 19 October 2009 but no suggestion has been made of any changes material to the determination of the preliminary issues.
- The articles, apart from incorporating Table A in the Companies Act 1985, set out the rights attached to the shares, reiterate the pre-emption rights on the allotment of new shares, and contain provisions dealing with directors, including their appointment and other matters also contained in the shareholders agreement. The only other substantive provisions are in article 5 which contain the pre-emption provisions as regards existing shares. They are in largely the same terms as clause 6 of the shareholders agreement.
Pre-emption provisions: clause 6 of the shareholders agreement
- Clause 6 is a long and complex provision. It has 24 sub-clauses, some of which are divided into anything up to five further sub-clauses. It covers over five pages of single-spaced print. It contains some provisions which have no direct bearing on the questions raised by the preliminary issues, such as the "drag along rights" in clauses 6.86.13, the permitted transfer by individual shareholders to relations and family trusts in clause 6.16, the "tag along rights" in clause 6.20 and the provisions as regards third party offers in clause 6.21.
- The key provisions for present purposes are as follows.
- Clause 6.1 provides:
"Except in respect of a transfer made pursuant to clauses 6.14, 6.15 and/or 6.16, a Shareholder (the Proposing Transferor) desiring to transfer one or more Shares (or any interest therein) (the Transfer Shares) may at any time give notice in writing to the Company (Transfer Notice) of his desire to transfer the Transfer Shares and the sale price thereof and other sale terms, as fixed by him. For the purposes of this clause 6, "Share" shall be deemed to include Loan Stock and any other debt or other instruments convertible into share capital of the Company."
Clauses 6.26.5 set out the machinery to be followed for offering round the shares comprised in a transfer notice given under clause 6.1 and for transferring shares not taken up under the pre-emption rights.
- Clause 6.6 provides, so far as relevant:
"6.6 If any Shareholder
6.6.3. attempts to deal with or otherwise dispose of any Shares or interest in Shares in the Company otherwise than in accordance with the provisions of this Agreement;
such Shareholder or as the case may be, his personal representatives, if so notified by the Company following a determination by the directors at any time within a period of one month after the occurrence of any such event, shall be deemed to have given a Transfer Notice in respect of all Shares held by it or him on the date of such notice and the provisions of clause 6.7 shall apply."
Clause 6.7 contains provisions for determining the price applicable to the shares comprised in a transfer notice deemed to have been given under clause 6.6.
- Clause 6.15 provides:
"Each Shareholder (being a body corporate) shall be entitled to transfer the entire legal and beneficial interest in all or any part of the Shares held by it to any member for the time being of its Shareholder Group PROVIDED THAT in any such event, any such transferee shall first enter into an agreement under or supplemental to this Agreement whereby it undertakes all of the liabilities and responsibilities of the transferring Shareholder under this Agreement and that, on such transferee proposing to cease to be a member of that Shareholder's Group, it shall first re-transfer all its interest in the Shares held by it or on its behalf to the original transferor under this clause or another member of its Shareholder Group or as otherwise may be agreed in writing by the other Shareholders.
"Shareholder Group" is defined in clause 1.1 to mean
"a) in relation to any Shareholder (other than Misland (Cyprus) Investments Limited), that Shareholder and any subsidiary or holding company of that Shareholder for the time being or any member of its Shareholder Group; and
b) in relation to Misland (Cyprus) Investments Limited, that company and any subsidiary or holding company of such company, or for as long as that company is a subsidiary of A&A Investments Limited, any other body corporate, fund, trust, partnership or limited liability partnership which is controlled by the controller of A&A Investments Limited; "
- The definition of Shareholder Group must be read with clause 1.12 which provides:
"For purposes of paragraph (b) of the definition of Shareholder Group, "control" of an entity shall mean the power, direct or indirect, (i) to vote or direct the voting of fifty (50) per cent. or more of the securities having voting power, or (ii) to direct or cause the direction of the management and policies of such entity whether by agreement or otherwise, or (iii) to elect the majority of the directors of such entity, and the words "control" and "controlling" shall be construed accordingly. For purposes of this Agreement, a person or entity shall be the controller of another if it, either alone or together with third parties, whether by agreement or otherwise, is able to exercise control over such person or entity."
- Clause 6.17 provides:
"No Share nor any interest therein shall be transferred, sold or otherwise disposed of save as provided in this clause 6."
Pre-emption provisions: article 5 of the articles of association of the company
- This too is a long and complex provision, with 19 sub-clauses and a number of further subordinate clauses. The substance, and to a considerable extent the form, is identical or similar to clause 6. Articles 5.1 to 5.7 are the same as clauses 6.1 to 6.7. Article 5.16 is the same as clause 5.16.
- The terms of article 5.15 are the same as clause 6.15, but the definition of "Shareholder Group" does not contain provisions expressly applicable to Misland and reads as follows:
"Shareholder Group means, in relation to any Shareholders, that Shareholder and any subsidiary or holding company of the Shareholder for the time being;."
- There is accordingly no definition of "control" such as that in clause 1.12 of the agreement.
Relevant principles of construction
- There was disagreement between the parties as to whether the applicable pre-emption provisions were those in clause 6 of the shareholders agreement or those in article 5 of the company's articles of association. Misland argued for the latter and it relied on the authorities which establish that the factual background admissible in the construction of contracts is for the most part not admissible in the construction of articles of association. In the alternative, Misland submitted that even if all the relevant background admissible in the construction of contracts was taken into account, the sale of Misland did not trigger the pre-emption provisions.
- The particular position of articles of association was considered by the Court of Appeal in Bratton Seymour Services Co Ltd v Oxborough  BCLC 693. It was held that a term might be implied into articles by way of constructional implication but not from extrinsic circumstances.
- Articles of association have a special status as a "statutory contract", adopted pursuant to the Companies Act, requiring public registration and capable of amendment by special resolution. By reason of these provisions, the court has no jurisdiction to order rectification of articles or to set them aside on grounds of misrepresentation.
- While these features are important, none of them is sufficient to explain why extrinsic evidence is not admissible in the construction of articles. In my judgment, the reason for excluding such evidence as an aid to construction is as stated by Sir Christopher Slade and Steyn LJ. The articles govern relations between the company and its members and between the members. The members are a fluctuating body of persons. Persons will become members on the basis of the registered articles and without, in most cases, any knowledge of the circumstances existing when the articles were adopted or were subsequently amended, perhaps on many occasions.
- Sir Christopher Slade said at p.699:
"I accept that, in construing the articles of association of a company, evidence of surrounding circumstances may be admissible for the limited purpose of identifying persons, or places or other subject matter referred to therein. Mr Asprey, however, has not invoked extrinsic evidence of surrounding circumstances in the present case for that limited purpose. He has sought to invoke it for the purpose of imposing additional financial obligations on the members far beyond those which the language of the articles of association of the company, read fairly on its own, would impose on them, because, he says, such an implication is required to give the articles business efficacy. No authority has been cited to us which begins to support the proposition that extrinsic evidence is admissible for that wide purpose in construing the statutory contract created by the articles of association of a company. In my judgment, the admission of such evidence for such purpose would be quite contrary to the principles governing this type of statutory contract. If it were to be admissible, this would place the potential shareholders in a limited company, who wished to ascertain their potential obligations to the company, in an intolerable position. They are in my judgment entitled to rely on the meaning of the language of the memorandum and articles of association, as such meaning appears from the language used."
- Similarly, Steyn LJ said at pp 698 699:
neither the company nor any member can seek to add to or to subtract from the terms of the articles by way of implying a term derived from extrinsic surrounding circumstances. If it were permitted in this case, it would be equally permissible over the spectrum of company law cases. The consequence would be prejudicial to third parties, namely potential shareholders who are entitled to look to and rely on the articles of association as registered."
- This exclusionary rule has subsequently been applied by the Court of Appeal in Rose v Lynx Express Ltd  1 BCLC 455 at  and BWE International Ltd v Jones  EWCA Civ 298 at  and by the Privy Council in HSBC Bank of the Middle East v Clarke  UKPC 31 at [4-5] and A-G of Belize v. Belize Telecom Ltd  1 WLR 1988 at [35-37]. In the latter case, which concerned the articles of the monopoly telecommunications company in Belize, designed to achieve a measure of public control over an otherwise commercial undertaking, Lord Hoffmann said in  that a term could be implied:
"The Board does not consider that this principle has any application in the present case. The implication as to the composition of the board is not based upon extrinsic evidence of which only a limited number of people would have known but upon the scheme of the articles themselves and, to a very limited extent, such background as was apparent from the memorandum of association and everyone in Belize would have known, namely that telecommunications had been a state monopoly and that the company was part of a scheme of privatisation."
- Contrary to Mr Miles' submissions, I do not consider that the last sentence of  ("it cannot include extrinsic facts which were known only to some of the people involved in the formation of company") can be read in its context as suggesting that extrinsic facts known to all the people involved in the formation of the company would be admissible.
- There are some special features of this case not present in any of the authorities referred to above. The articles of the company were adopted pursuant to the shareholders agreement. Both documents were negotiated by the initial investors and both documents were intended to, and did, govern relations between the investors as members of the company. Many of the provisions of the articles are contained also in the shareholders agreement and, by clause 8.3, the latter are agreed to have primacy. New members, whether in respect of new shares or as transferees of existing shares, are required by clause 3.7 to become parties to the shareholders agreement by entering into a deed of adherence in the form of a draft scheduled to the agreement. With its definition of "Shareholders" ("any holders of shares for the time being
") and with the rights and obligations under the agreement attaching to "Shareholders", the agreement is clearly intended to bind all present and future shareholders.
- In these circumstances, it is somewhat artificial to construe the articles in isolation from the shareholders agreement and from the background admissible to the construction of that agreement. Nor would it conflict with the reasons for the usual exclusionary rule to take account of the shareholders agreement and its background. It might be said that the factual background at the date of the agreement should not be taken into account in construing the agreement as new shareholders have become parties at later dates, as contemplated by the agreement. The judgments of Carnwath LJ in KPMG LLP v. Network Rail Infrastructure Ltd  Bus LR 1336 at [38-43] and Lord Hoffmann in Chartbrook Ltd v. Persimmon Homes Ltd  AC 1101 at  establish that the background facts should nonetheless in general be taken into account.
- It is not, however, necessary to reach a final conclusion on this point. Misland is a party to the shareholders agreement and is bound to give effect to its terms, which include the pre-emption provisions in clause 6. If the sale of Misland triggered the obligation to give a transfer notice under clause 6, it is bound to do so, irrespective of whether it was also obliged to do so under article 5. If clause 6, but not article 5, required Misland to give a transfer notice, Misland and the other shareholders would be bound by clause 8.3 to alter the articles to achieve conformity. It is not disputed that in construing the shareholders agreement, evidence of background facts is admissible.
- There is no significant difference as to the principles of construction applicable to the shareholders agreement. In Rainy Sky SA v Kookmin Bank  1 WLR 2900, Lord Clarke of Stone-cum-Ebony said at , after referring to authorities such as Investors Compensation Scheme Ltd v West Bromwich BS  1 WLR 896 and Chartbrook Ltd v Persimmon Homes Ltd,
those cases show that the ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. As Lord Hoffmann made clear in the first of the principles he summarised in the Investors Compensation Scheme case  1 WLR 896, 912H, the relevant reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract."
- At , Lord Clarke said:
"The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other."
- A principle applicable to pre-emption articles which has been repeated in the authorities is that, as the right to deal freely with a share is an important attribute of ownership and the prima facie right of a shareholder, the existence and extent of any restriction on transfer, such as pre-emption provisions, must be clearly stated: see in re Smith and Fawcett Ltd  1 Ch 304 at 306, Greenhalgh v Mallard  2 All ER 234 at 237. I would not take this principle too far when construing provisions in an agreement, where the background circumstances are admissible, as opposed to provisions in articles, where generally they are not. In the case of an agreement, the court's function is to discern objectively the meaning of the provision against the relevant background facts. This fundamental principle applies as much to an ambiguously framed pre-emption provision as it does to any other. If, applying that approach, the court considers that, on the proper construction of the agreement, the right of pre-emption has arisen, the court should not reject it because there is a lack of clarity in the language used.
- It is, however, right to say that pre-emption provisions are generally drafted with precision, as befits provisions dealing with property rights. As appears from authorities to which I later refer, commonly used phrases have distinct legal meanings and superficially small variations can have significant legal effects. This is a relevant consideration when construing pre-emption provisions, particularly when as in this case they are complex and have been professionally drafted, using and adapting well-known standard provisions.
- As to the principles governing the admissibility of evidence, there should be no room for real disagreement. Evidence is admissible to prove the background knowledge which was, or would reasonably have been, available to the parties at the time of the contract. Evidence, such as previous documents, will be admissible to ascertain objectively the commercial, or business, object of the agreement. Lord Wilberforce so stated in Prenn v Simmonds  1 WLR 1381 at 1384 in a passage cited by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd (supra) at :
"It may be said that previous documents may be looked at to explain the aims of the parties. In a limited sense this is true: the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact.
But Lord Wilberforce in the same passage went on to warn:
"Far more, and indeed totally, dangerous is it to admit evidence of one party's objective - even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition, and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised."
- I accept the submission of Mr Hossain for Misland, not I think directly challenged by Mr Miles, that evidence is not admissible on an issue of construction as to (i) the subjective intentions of the parties, (ii) facts not known to, or reasonably available to, all parties, (iii) the course of negotiations or (iv) post-contractual conduct.
Evidence adduced by Mr McKillen
- In the light of the evidence given by Mr McKillen and Mr Murphy in their witness statements, Mr Miles submitted that the construction of the pre-emption provisions was not suitable for determination as a preliminary issue and should therefore be decided at the trial. As I have earlier said, if he is right that there is contentious admissible evidence, Mr Miles is correct in his submission. The question is therefore whether there is any such evidence.
- In the course of his able submissions, Mr Hossain argued that most if not all of the evidence of Mr McKillen and Mr Murphy is inadmissible. I agree with his submission. In paragraphs 8, 9, 12, 13, 15 and 16 of his witness statement, Mr McKillen gives evidence of the origin of his involvement in the acquisition of the hotels and of his discussions with Mr Quinlan and with Anglo Irish Bank. None of this sheds light on the issue of construction but it is in any event inadmissible as evidence of pre-contract discussions, held with some but not all of the parties. In paragraphs 11, 14 and 16 he gives evidence of his own views and intentions and hearsay evidence of the views and intentions of other parties. In paragraph 1821 he purports to give evidence about the views, intentions and expectations of the Green family, and of his own understanding of those matters. None of it derives from anything said by the Green family or their representatives, but in any case, as with evidence of his own or other parties' subjective intentions and motives, it is inadmissible. In paragraphs 2224, Mr McKillen again gives evidence of his own subjective views and understanding at the time of the agreement. In paragraphs 2529, Mr McKillen gives evidence of pre-contract discussions with Mr Quinlan concerning the overall proposal and the terms of the agreement, including in particular the pre-emption provisions. In paragraphs 3537 he gives evidence of the operation of the pre-emption provisions in 2004 and 2005. Paragraphs 3853 deal with events in 2010 and 2011.
- Virtually none of the evidence given by Mr McKillen is admissible, most of it falling within one or more of the categories of inadmissible evidence listed above. Mr Murphy's witness statement covers much the same ground and likewise contains little admissible evidence.
Background to the shareholders agreement
- The admissible evidence of the background to the shareholders agreement can for the most part be gleaned without difficulty from the terms of the agreement itself. Clause 3.1 states the business purpose of the company. It is clear that this was a venture between a small group of investors most of whom were to have rights of participation in management through the appointment of directors. They were to act in good faith towards each other (clause 8.5.2) and to do all things [necessary] or desirable to give effect to the spirit and intention of the agreement (clause 8.5.4). Their rights of disposing of their shares were restricted by the pre-emption provisions. Evidence is admissible to identify the Green family as the ultimate controller of Misland referred to in the definition of "Shareholder Group". The purposes of the shareholders agreement were as stated in recital B.
Construction of clause 6 of the shareholders agreement
- Clause 6.1 identifies as the person who may give a transfer notice "a Shareholder desiring to transfer one or more Shares (or any interest therein)". Each word of significance in that phrase carries a legal meaning.
- First, "Shareholder" is defined in clause 1.1 as "any holder of Shares for the time being and shall as the context permits include any beneficial owner of shares for the time being." A "holder" of shares is the person registered in the company's register of members as the holder of the shares. He holds the legal title to the shares. He may or may not own the beneficial interest in the shares, as the second part of the definition recognises. If company A owns the beneficial interest in shares registered in its name, it alone is the beneficial owner of the shares. This remains the case even though company A is wholly-owned by company B or by one individual, in accordance with basic principles of legal personality: Salomon v. A. Salomon & Co Ltd  AC 22, J H Rayner (Mincing Lane) Ltd v. Department of Trade and Industry  2 AC 418.
- Secondly, what constitutes a "desire", or an intention, to transfer shares has been considered in a number of authorities: Lyle & Scott v. Scott's Trustees  AC 763, Safeguard Industrial Investments Ltd v. National Westminster Bank Ltd  1 WLR 589, Theakston v. London Trust plc  BCLC 389.
- Thirdly, a "transfer" of shares means the transfer of the legal title to the shares, by providing a signed stock transfer form or other similar instrument and by registration of the transfer in the register of members: see Lyle & Scott Ltd v. Scott's Trustees (supra), Safeguard Industrial Investments Ltd v. National Westminster Bank Ltd (supra), Scotto v. Petch, Re Sedgefield Steeplechase Co (1927) Ltd  BCC 889 (CA).
- Fourthly, "any interest therein" means a proprietary, i.e. beneficial, interest in the shares, as opposed to the legal title. These words are included so as to broaden the effect of clause 6.1, which without them would be confined to the legal title. It is nonetheless the language of property, and a precise use of it.
- There can, in my judgment, be no dispute that, read on its own, clause 6.1 has no application to the case where company A is the legal and beneficial owner of shares in the company and the issued shares of company A are sold. Such a sale involves no change in company A's legal and beneficial ownership of the underlying shares, nor evidences a desire to transfer those shares or any interest in them.
- No doubt for this reason, Mr Miles' submissions do not start with clause 6.1, but with clause 6.17:
"No Share nor any interest therein shall be transferred, sold or otherwise disposed of save as provided in this clause 6."
He submits that the words "any interest therein" are, as a matter of language, ambiguous. They may carry their legally accurate meaning of a proprietary interest or they may carry, as Mr Miles submits they do, a broader, commercial meaning which would include the sale of a company owning the shares.
- Mr Miles points out that, in an appropriate context, authority establishes that ownership of a company which is the legal and beneficial owner of shares can constitute an interest in the underlying shares. The decision of the House of Lords in British American Tobacco Co Ltd v. IRC  AC 335 concerned the liability of the appellant taxpayer companies to tax on profits computed in accordance with schedule IV to the Finance Act 1937. Paragraph 7(b) provided, so far as relevant,
"in the case of
a trade or business carried on by a body corporate, the profits shall include all income received by way of dividend or distribution of profits from any other body corporate in which the first-mentioned body corporate has a controlling interest
Clearly if company A beneficially owned the share capital of company B, the chargeable profits of company A would under this provision include dividends paid by company B. The issue was whether, where company B beneficially owned company C, company A had a "controlling interest" in company C.
- The appellants' argument addressed both the meaning of control and the meaning of "interest". As to the meaning of "interest", counsel's argument is summarised in the report as follows:
"One company can only have "a controlling interest" in another by itself being the beneficial owner of a number of shares, registered either in its own name or in that of a nominee, sufficient to control that company. The words "controlling interest" import a proprietary right, and it is not possible to look beyond the direct shareholding of the appellants. If the legislature had intended that "controlling interest" should include an indirect interest it would have said so expressly, as it did in the Finance Act, 1920, s.53, sub-s. 2 (b). In using the words "a controlling interest" it was not adopting a phrase which was well understood to bear the meaning contended for by the respondents. The question is not whether the appellants control, or have the ability to control, a particular company, but whether they have "a controlling interest" in it, which is not the same thing. Generally speaking, shareholding or stockholding alone constitutes an interest in a company limited by shares."
- Rejecting this argument, Viscount Simon LC in the only reasoned speech said:
"The case turns on the meaning of the words "controlling interest" in the context in which they are used. The appellants argue that, in order that one company should have "a controlling interest" in another, it must be the beneficial owner of a requisite number of shares in that other company, either registered in its own name or in the name of its nominees, and that, if company No. 1 owns all the shares in company No. 2 which in turn owns all the shares in company No. 3, company No 1 has no interest, controlling or otherwise, in company No. 3. It is true that in such circumstances company No. 1 owns none of the assets of company No. 2, and a fortiori owns none of the assets of company No. 3, but that is to treat the phrase "controlling interest" as capable of connoting only a proprietary right, that is, an interest in the nature of ownership. The word "interest", however, as pointed out by Lawrence J., is a word of wide connotation, and I think the conception of "controlling interest" may well cover the relationship of one company towards another, the requisite majority of whose shares are, as regards their voting power, subject, whether directly or indirectly, to the will and ordering of the first mentioned company. If, for example, the appellants own one-third of the shares in company X, and the remaining two-thirds are owned by company Y, the appellants will none the less have a controlling interest in company X if they own enough shares in company Y to control the latter. In my opinion, this is the meaning of the word "interest" in the enactment under consideration, and, where one company stands in such a relationship to another, the former can properly be said to have a controlling interest in the latter. This view appears to me to agree with the object of the enactment as it appears on the face of the Act. I find it impossible to adopt the view that a person who (by having the requisite voting power in a company subject to his will and ordering) can make the ultimate decision as to where and how the business of the company shall be carried on, and who thus has in fact control of the company's affairs, is a person of whom it can be said that he has not in this connexion a controlling interest in the company.
- I would accept that in appropriate contexts the words "interest in shares" can include an indirect interest, such as that described by Viscount Simon. It is important to note that Viscount Simon stressed both the phrase "controlling interest" and the object of the legislation as the relevant context.
- Mr Miles submitted that the relevant context for present purposes was as follows. The company was the vehicle for a venture between a restricted number of shareholders who, as appears from clause 6.24, were effectively committed to the venture for a minimum of four years. The investors had rights to appoint directors, which made them business partners in a real, but non-technical, sense.
- The original investors wished and agreed to prevent disposals of shares or interests in shares except either to very restricted classes of permitted transferees or after a pre-emption procedure had been followed. The principal investors were all either individuals who held the shares in their own names or in the name of a nominee or, in the case of Misland, a corporate vehicle for investment by the Green family. The conduct of the venture would depend on the individual investors, including, in the case of Misland, the Green family.
- The pre-emption provisions served to preserve the personal nature of the venture. Even where none of the existing shareholders acquire shares under the pre-emption procedure, they have the right under clause 6.5 to nominate a third party buyer in preference to the selling shareholder's choice of transferee.
- Given that the individuals who were shareholders could not dispose of their shares, save to permitted transferees, without going through the pre-emption procedure, it was not as a matter of commercial commonsense to be expected that the Green family could in effect do so simply by selling Misland. It would leave a gaping hole in the pre-emption provisions and render them toothless. The commercial parties would regard the Green family as having no less an "interest" in the shares owned by Misland than the individual shareholders had in the shares owned by them.
- This view, Mr Miles submits, is fortified by the proviso to clause 6.15. Its effect is that, while Misland or any other corporate shareholder may transfer its shares in the company to a member of its Shareholder Group (as defined), if the transferee proposes to cease to be a member of the Shareholder Group "it shall first re-transfer all its interest in the Shares held by it or on its behalf to the original transferor" or another member of its Shareholder Group. This is consistent with an intention that the shares would be kept under the ownership of the original investors.
- As a sale of the transferee triggers an obligation, under the proviso to clause 6.15, to re-transfer the shares to the original transferor, Mr Miles submitted that it would be very surprising if a sale of Misland would not trigger the pre-emption provisions. There was no commercial justification for the inclusion of the proviso if this were not the case.
- In the light of these circumstances and considerations, Mr Miles submits that "interest therein" in clause 6.17 should be construed as including the type of indirect interest in the shares held by Misland enjoyed by the owner of the share capital of Misland. A sale of the share capital of Misland therefore triggers an obligation to give a transfer notice under clause 6.1 or gives rise to a deemed transfer notice under clause 6.6. Those sub-clauses should be construed in a manner consistent with this construction of clause 6.17.
- In my judgment, there are insuperable difficulties with this construction. The ambiguity, if there is one, lies in clause 6.17. The resolution of any such ambiguity requires an examination of the other provisions of the agreement, particularly clause 6, and the factual background to the agreement.
- For the reasons already given, there is no ambiguity in the definition of "Shareholder" or in clause 6.1. The references there to "interest" in the shares are to direct proprietary interests in the shares. Clause 6.6 applies only where a "Shareholder" has attempted to deal with shares or any interest in shares, and then deems the "Shareholder" to have given a transfer notice. Clause 6.15 permits each corporate Shareholder "to transfer the entire legal and beneficial interest" in shares held by it.
- These unambiguous provisions resolve any ambiguity which may be said to exist in clause 6.17. The clause must be read as a whole, and the earlier provisions of the clause show that the reference to an interest in shares in clause 6.17 is to the same direct proprietary interests as appear in those provisions.
- The various commercial considerations on which Mr Miles relies might, if the parties had so wished, have provided good reasons for including clear provisions to the effect that a disposal of Misland would trigger the pre-emption procedure. The absence of any such provisions in what is a complex clause, providing for many eventualities, itself tells against the suggested construction. It is a reasonable objective assumption that these sophisticated investors in a large commercial venture, and their advisers, did not overlook the possibility of a sale of Misland, particularly in the light of both the definition of "Shareholder Group" with its special provisions for Misland and the proviso to clause 6.15. The absence of provisions dealing with a sale of a corporate shareholder is, objectively speaking, consistent with a decision by the parties not to include them. Unlike Aberdeen City Council v. Stewart Milne Group Ltd  UKSC 56, on which Mr Miles relied, this is not a case which fits within the description given by Lord Hope at ,
"It seems to me that the position here is quite straightforward. The context shows that the intention of the parties must be taken to have been that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation. In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into. The fact that this makes good commercial sense is simply a makeweight. The words of the contract itself tell us that this must be taken to have been what they had in mind when they entered into it. The only question is whether effect can be given to this unspoken intention without undue violence to the words they actually used in their agreement."
- Nor is this a case like Aberdeen City Council v. Stewart Milne or Investors Compensation Scheme v. West Bromwich BS or indeed Rainy Sky where something appears obviously to have gone wrong with the drafting of the contract.
- There is the further difficulty of identifying the provision which the parties would have negotiated to include. Mr Miles submits that it is enough for him to say that "interest" in the shares includes the interest of the owner of Misland. But once one indirect interest is included, why not others? What if A&A Investments Limited sold 49% or 51% of the share capital of Misland or if the Green family sold A&A Investments Limited? What if, without a sale, there was a disposal of control? Mr Miles submitted that the concern of the investors was to know that the Green family would continue to control Misland. While the concept of control is used, in relation to A&A Investments Limited, in the definition of Shareholder Group and "control" is defined for that purpose in clause 1.12, there are no provisions requiring Misland to give a transfer notice on a change of control. The absence of such provisions is the more striking because change of control provisions are a familiar feature of joint venture and other commercial agreements.
- For all these reasons, I conclude that the sale of the share capital of Misland in January 2011 was not made contrary to clause 6.17 of the shareholder agreement and did not trigger the other shareholders pre-emption rights. I reach the same conclusion on the articles and do so whether or not reference may be made to background facts. Accordingly, I answer the preliminary issues numbered 1, 2, 3 and 7 in the negative. Issue numbered 4 does not therefore arise. There was no real argument about issues 5 and 6. Clause 6.1 uses the word "may", not "shall". If a shareholder does no more than desire to transfer shares or an interest in them, he may but need not give a transfer notice. However, he must not go on to transfer, sell or dispose of his shares or any interest therein without going through the pre-emption procedure. Issues numbered 5 and 6 should also therefore be answered in the negative.
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