JUNE 28, just under a calendar month from today, will be six years since the Privy Council handed down its judgment in the Kingsland case, more formally Appeal No. 9 of 2004, Marjorie Knox vs John Deane and others.
Besides being a historical footnote as the last Barbados case to be ruled on by that court, the Kingsland ruling was important on its own merits.
It upheld the rulings of the Barbados courts in what had become a highly controversial case in which all kinds of peripheral allegations had surfaced, mainly through the grapevine, almost all of which reached their nadir in the “sequel” which took place a few years later in Canada.
Kingsland Privy Council was drama; Kingsland, Canada, was farce. Just read the latter judgment for yourself. It is easy to find on the Internet.
But I would point out that although the Canadian case was thrown out for lack of jurisdiction, in his 26-page ruling dated May 4, 2009, Justice J. Bryan Shaughnessy wrote: “The Plaintiff’s comments on the Barbados justice system are scandalous and unfounded.” (Para.96)
He was even more pointed in his view of the lawyer for the plaintiff, Nelson Barbados, in saying that “While Mr (William) McKenzie, inter alia, has formulated the intention to put the justice system on trial, nevertheless, he has failed on all accounts.”
Anyway, I have torn myself away once more from trying to digest all the incredible (take that description any way you like) details of that excellent ruling to go back to the Privy Council’s findings.
I do so because the issue of pre-emptive rights has been on my mind lately. Yes, I know there are other things to think about in life, but the concept has resurfaced in recent local company events.
First, we have Bermudez suing Sagicor over (this is not the legal wording but my own layman’s understanding) not being allowed to purchase additional shares in Sagicor after it took the decision to sell some $34 million in new shares to the National Insurance Board.
Presumably the case, if it hasn’t been heard yet, will examine whether existing shareholders of Sagicor had some sort of pre-emptive right to either be offered shares first or be offered to top up their shares so as to retain their pre-existing percentage stake in the company.
More recently, Banks Holdings Ltd issued millions of dollars’ worth of shares to a new investor without offering its existing shareholders the chance to top up theirs.
The Banks shareholders were invited late last year to a special meeting to vote on disallowing what had just been done to occur ever again – a measure demanded by, of course, the new investors. Can you blame them?
Sir Allan Fields, Banks’ chairman, told me the company had done nothing wrong, in fact had followed tradition, and cited several previous instances where similar new shares had been issued to new investors in BHL.
Oh, I can never get over the irony of that. Sweet and sour at the same time, like Chinese food.
Anyway, it should be noted that Sagicor has announced it will be getting new investment from the International Finance Corporation, the World Bank’s investment firm, and at the same time will be offering its shareholders the chance to buy new shares, on the old pro-rata basis, I believe. Good for Sagicor.
However, it does not seem that this automatically exists as a sort of pre-emptive right for shareholders.
In the Kingsland case, the one shareholder who resisted selling to a non-shareholder lost all the way up to and including the Privy Council.
The London court interpreted the clauses in the Kingsland article to mean that once the company’s directors had selected another entity to which it would offer shares, the pre-emptive right of existing shareholders was actually extinguished.
So it was left up to the directors to decide whether to allow existing shareholders some time to exercise their pre-emptive right or instead take a parallel track and bypass them altogether, thus not triggering the right.
It stated (Para. 21, Page 8) that “the rights of the selected person are not subordinate but alternative to the rights of the shareholders. And the choice is left to the discretion of the directors under sub-clause (b)”.
“In this case the directors decided to offer the shares to Classic [Investments] and the pre-emption rights were thereby exhausted.”
Moral: be careful whom you elect as directors.
Pat Hoyos is a long-standing journalist and publisher of the Broad Street Journal.
