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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 >> Azevedo & Anor v Imcopa Importacao, Exportacao E Industria De Oleos Ltd & Ors  EWCA Civ 364 (22 April 2013)
Cite as:  BCC 611,  1 BCLC 72,  QB 1,  1 QB 1,  3 WLR 1124,  EWCA Civ 364,  2 All ER (Comm) 97
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR JUSTICE HAMBLEN
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE AIKENS
LORD JUSTICE BEATSON
| (1) SERGIO BARREIROS AZEVEDO
(2) VERA CINTIA ALVAREZ
|- and -
|(1) IMCOPA IMPORTAÇÃO, EXPORTAÇÃO E INDÚSTRIA DE OLEOS LTDA
(2) IMCOPA INTERNATIONAL S.A.
(3) IMCOPA INTERNATIONAL CAYMAN LTD
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Ben Valentin (instructed by Shearman & Sterling (London) LLP) for the Respondents
Hearing date: 11 March 2013
Crown Copyright ©
Lord Justice Lloyd:
Introduction and summary
"6.1 All moneys received by the Trustee in respect of the Notes or amounts payable under the Trust Deed will, despite any appropriation of all or part of them by the Issuer or the Guarantor, be held by the Trustee on trust to apply them:
6.1.1 [first, in payment of costs, charges, expenses etc. of the Trustee,]
6.1.2 second, in payment of any amounts owing in respect of the Notes pari passu and rateably"
"to sanction any proposal by the Issuer, the Guarantor or the Trustee for any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the Noteholders against the Issuer or the Guarantor, whether or not those rights arise under the Trust Deed"
"The Notes constitute (subject to Condition 4) direct, unconditional, unsecured and unsubordinated obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Notes and of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4, at all times rank at least equally with all their respective other present and future unsecured and unsubordinated obligations."
The issues as pleaded
The effect of the consent solicitation as an offer, and its acceptance
The pari passu principle
Are consent payment arrangements unlawful under English company law?
"It appears to me that the term "bribery" cannot be used appropriately in connection with this case. The powers conferred by the trust deed on a majority of the debenture-holders must, of course, be exercised bona fide, and the Court can no doubt interfere to prevent unfairness or oppression, but, subject to this, each debenture-holder may vote with regard to his individual interests, though these interests may be peculiar to himself and not shared by other debenture-holders. No one could have objected to the Trust voting for a scheme merely because its operation would put an end to all liability under the guarantee, or against a scheme merely because its operation might put an end to all payments accruing under the guarantee. Further, where, as in this case, there is, as between different holders, a diversity of interest, it may be necessary or advisable, as a matter of business fairness, to make special provision for special interests, and I do not think there is any equity precluding a debenture-holder voting for or against a scheme containing such special provision merely because he is interested thereunder.
A secret bargain by one debenture-holder for special treatment might be considered as corrupt and in the nature of bribery, but, in my opinion, there can be no question of bribery where a scheme openly provides for the separate treatment of persons with special interests. The only question is whether these persons are incapacitated from voting on the scheme, and I can see no grounds in equity for so holding. I think, however, that, where there are diverse interests, and none the less where those diverse interests are specially provided for, the Court ought to consider carefully the fairness of any scheme by which a majority of debenture-holders seeks to bind a minority."
"To give a power to modify the terms on which debentures in a company are secured is not uncommon in practice. The business interests of the company may render such a power expedient, even in the interests of the class of debenture holders as a whole. The provision is usually made in the form of a power, conferred by the instrument constituting the debenture security, upon the majority of the class of holders. It often enables them to modify, by resolution properly passed, the security itself. The provision of such a power to a majority bears some analogy to such a power as that conferred by section 13 of the English Companies Act of 1908, which enables a majority of the shareholders by special resolution to alter the articles of association. There is, however, a restriction of such powers, when conferred on a majority of a special class in order to enable that majority to bind a minority. They must be exercised subject to a general principle, which is applicable to all authorities conferred on majorities of classes enabling them to bind minorities; namely, that the power given must be exercised for the purpose of benefiting the class as a whole, and not merely individual members only. Subject to this, the power may be unrestricted."
"It has been suggested that the decision in these two cases on the last point is difficult to reconcile with the restriction already referred to, where the power is conferred, not on shareholders generally, but on a special class, say, of debenture holders, where a majority, in exercising a power to modify the rights of a minority, must exercise that power in the interests of the class as a whole. This is a principle which goes beyond that applied in Menier v. Hooper's Telegraph Works, inasmuch as it does not depend on misappropriation or fraud being proved. But their Lordships do not think that there is any real difficulty in combining the principle that while usually a holder of shares or debentures may vote as his interest directs, he is subject to the further principle that where his vote is conferred on him as a member of a class he must conform to the interest of the class itself when seeking to exercise the power conferred on him in his capacity of being a member. The second principle is a negative one, one which puts a restriction on the completeness of freedom under the first, without excluding such freedom wholly.
The distinction, which may prove a fine one, is well illustrated in the carefully worded judgment of Parker J. in Goodfellow v Nelson Line. It was there held that while the power conferred by a trust deed on a majority of debenture holders to bind a minority must be exercised bona fide, and while the Court has power to prevent some sorts at least of unfairness or oppression, a debenture holder may, subject to this vote in accordance with his individual interests, though these may be peculiar to himself and not shared by the other members of the class. It was true that a secret bargain to secure his vote by special treatment might be treated as bribery, but where the scheme to be voted upon itself provides, as it did in that case, openly for special treatment of a debenture holder with a special interest, he may vote, inasmuch as the other members of the class had themselves known from the first of the scheme. Their Lordships think that Parker J. accurately applied in his judgment the law on this point."
"The court will scrutinize any scheme where the majority of a class will also benefit from the scheme in another capacity, which benefit is not available to the dissenting minority."
"The operation of majority clauses has been discussed in a number of cases. In sum, the powers of the meeting depend entirely on the true construction of the provisions in question. Each class of persons may vote in accordance with its own interests, provided that the whole scheme is fair, but not where there is a secret bargain to secure the vote of persons controlling the majority."
The claim against Imcopa U
The appeal against the judge's costs order
Lord Justice Aikens
Lord Justice Beatson