Stena Finance BV and Temple Holdings Ltd v Sea Containers Ltd
| Jurisdiction | Bermuda |
| Judgment Date | 01 January 1990 |
| Docket Number | Civil Jurisdiction 1989 No 20 |
| Date | 01 January 1990 |
| Court | Court of Appeal (Bermuda) |
In the Court of Appeal
Huggins, JA
Civil Jurisdiction 1989 No 20
-and-
Hadmor Productions Ltd v HamiltonELR [1983] AC 191
The Abidin DaverELR [1984] AC 398
American Cyanamid Co v Ethicon LtdELR [1975] AC 396
Cayne v Global Natural Resources PLCUNK [1984] 1 All ER 225
NWL Ltd v WoodsWLR [1979] 1 WLR 1294
Trevor v Whitworth (1887) 12 AC 409
Howard Smith Ltd v Ampol LtdELR [1974] AC 821
Garden Cottage Foods Ltd v Milk Marketing BoardELR [1984] 1 AC 130
Motion for interlocutory relief — Restraining order restraining subsidiary companies from delaying in any way with a company's shares — Hostile takeover bid — Rights plan — Restraining subsidiaries from acting as ‘agents’ for parent company
HUGGINS, J.A.: This application was made in an appeal in proceedings arising from a take-over bid originally made on 26th May, 1989 by the second Appellant (‘Temple’) for the 1st Respondent (‘S.C.L.’). Both S.C.L. and Temple were companies incorporated in Bermuda. Temple's bid was unwelcome to the Directors of S.C.L., who had taken steps to fend off all such hostile bids by adopting on 8th May, 1988 what I shall call ‘the Rights Plan’. This was a complicated device of a kind which was apparently common in the United States of America. Under it rights to a fraction of a share were annexed to the issued shares in the Company but initially having no existence separate from the shares. In specified circumstances which threatened a take-over of the company the rights would, subject to a possible postponement of the ‘distribution date’ by the Directors, become separate and disposable. However, the person threatening to take over the company would be severely prejudiced and would, unless the Directors did postpone the distribution date (which they would be unlikely to do indefinitely in the case of an unwelcome bid), find himself unable in a commercial sense to continue with his offer.
In the action brought by the Appellants numerous questions of law and fact, were raised. One was whether the Rights Plan was lawfully adopted. Another was whether the 2nd to 4th Respondents, which were wholly-owned subsidiaries of S.C.L., had lawfully purchased shares in their parent company and could exercise the voting rights attached to those shares. These two issues were ordered to be tried as preliminary issues, and in due course the Chief Justice ruled on both issues in favour of the Respondents.
Ultimately the matter came before me as an originating motion for interlocutory relief. In the course of the hearing Counsel for the Applicants (the Appellants in an appeal from the Chief Justice upon the trial of the preliminary issues) amended the precise form of the relief they sought, which then became:
‘1. An Order restraining Sea Containers Limited (‘S.C.L.’) and each of the subsidiaries of SCL joined or represented in these proceedings until the final disposal of the Appellants' appeal against the decision of the Supreme Court contained in the Judgment of the learned Chief Justice dated 27 November 1989 in respect of the Preliminary Issues numbered (i) and (ii) ordered to be tried herein on 1 June 1989 (‘the PI Appeal’) or until (if leave be granted for such an appeal) the final disposal of the Appellants' appeal against the decision of the Supreme Court dismissing the Appellants' Interlocutory Relief Summons dated 26th May 1989 (‘the Interlocutory Relief Appeal’) or until further order in the meantime from (whether directly or indirectly and whether by their respective officers, servants, agents, persons acting in concert with them or otherwise howsoever) acquiring any shares in the capital of SCL or agreeing or proouring or completing or taking steps to complete, (i) the aoquisition and/or (ii) the registration in the names of any of the above persons of any such shares or purporting to do any of the foregoing.
2. An Order restraining SCL and each of the subsidiaries of SCL joined or represented in these proceedings until the final disposal of the PI Appeal or until (if leave be granted for such an appeal) the final disposal of the Interlocutory Relief Appeal, or until further order in the meantime from (whether by themselves, their respective officers, servants, agents or otherwise howsoever):
(a) exercising or procuring the exercise of (or in the case of SCL giving effect to, recognising, registering or recording) any voting or other right attached to shares in the capital of SCL purportedly acquired in the name(s) of its subsidiaries (or of any agent or nominee of any of such subsidiaries or of SCL); or
(b) dealing or purportedly dealing or procuring dealings or purported dealings (by transfer, sale charge or otherwise) with any such shares, except accordance with (and subject to any conditions of) an order for divestment or other directions made by the Court or the directions of any Receiver or Judicial Trustee appointed by the Court pursuant to paragraph 3 below.
3. Further or alternatively to 2(b) above, an Order appointing a Receiver or Judicial Trustee in respect of any and all shares in SCL purportedly purchased by or through SCL's subsidiaries.
4. An Order restraining SCL, and each of the subsidiaries of SCL joined or represented in these proceedings (insofar as in them lies to do or purport to do any of the acts referred to below), until the final disposal of the PI Appeal or until (if leave be granted for such an appeal) the final disposal of the Interlocutory Relief Appeal, or until further order in the meantime from (whether directly or indirectly and whether by their respective officers, servants, agents or otherwise howsoever):—
(a) Exercising or (in the case of SCL) recognising or giving effect to, or taking steps to implement any of the rights (‘Rights’) purportedly granted pursuant to a ‘shareholders' rights plan’ purportedly adopted by the board of directors of SCL on 8th May, 1988 (the terms of which are set forth in a ‘Rights Agreement’ (‘The Rights Agreement’)) dated as of 9th May 1988 and made between SCL and the Bank of New York; and in particular but without prejudice to the generality of the foregoing,
(b) (i) allowing, or issuing any certificates or taking any other steps to enable, the Rights to be transferred separately from the common shares in SCL by reference to which they were purportedly distributed;
(ii) allotting or issuing or taking steps to allot or issue any shares pursuant to the purported exercise of any of the Rights,
(iii) amending or taking any steps to amend the Rights Agreement (except with respect to an amendment the sole effect of which would be to maintain the status quo by postponing the Distribution Date as defined by the Rights Agreement).
PROVIDED that nothing in the relief sought hereby shall prevent the said Respondents doing all or any of the acts restrained by an Order herein if they have obtained the prior written consent thereto of the Appellants or alternatively if they have, on application to the Court notified in writing to the Appellants at least two clear days in advance, obtained the leave of this Court to do the act otherwise restrained.
AND FURTHER PROVIDED (for the avoidance of doubt) that nothing in the relief sought hereby shall prevent either:
(a) The convening and holding of a general meeting of SCL to consider resolutions:
(i) approving the purchase of shares in SCL pursuant to its self-tender proposal announced in its press release dated 31st October 1989 (or lawful variation or amendment thereto);
(ii) effecting any alteration to its Memorandum of Association or Bye-laws considered by SCL to be necessary to effect the same; or
(b) if the said self-tender proposal (as now formulated or as so varied or amended, as the case may be) is approved and any such alterations are made by resolutions duly passed at the general meeting so convened and held, being resolutions on which no votes...
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