The Attorney-General of Belize and others v. Belize Telecom Limited

The Attorney-General of Belize and others v. Belize Telecom Limited

[2009] UKPC 10

(S.9: Implied Promises)

FACTS:

The decision concerned the construction of the articles of association of a company incorporated to take over the undertaking of the Belize Telecommunications Authority, a public body which had been the monopoly provider of telecommunication services in Belize. The articles provided that any person who held both a “golden share” plus certain minimum amount of the issued ordinary shares in the company could appoint or remove two directors. The articles were silent as to what was to happen to the two directors if, as happened in this case, the golden shareholder no longer held the requisite percentage of ordinary shares.

CONTENTIONS: 

Belize Telecom Ltd (“BTL”), which had been the golden shareholder, argued that the two directors were irremovable unless they resigned, died or vacated office under article 112 of the articles of association, which provided for vacation in circumstances of conflict of interest, bankruptcy or other specified reasons. The Attorney General of Belize (the “AG”) argued that the articles should be construed as providing by implication that a director who had been appointed by a person holding the requisite percentage of ordinary shares vacated his office if his appointer ceased to hold such a shareholding.

RULE EVOLVED:

It is not the task of the Courts to make contracts for the parties or to improve them but only to interpret them. While interpreting the contracts Courts are only concerned with the meaning which the contracts would convey to a reasonable man having all the background knowledge that would reasonably be available to the public to whom such contract is addressed. This objective meaning is conventionally referred to as intention of the parties. Therefore in every case when Courts are to determine whether a provision is to be implied in a document, the question for the Court is:  “what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?” This question has been addressed by Courts in relatively different but overlapping ways: the implied term must be

1) reasonable and equitable;

2) necessary to give business efficacy to the contract such that no term will be implied if the contract is effective without it;

3) must go without saying;

4) must be capable of clear expression; and lastly,

5) must not contradict any express term in contract.

HELD (Application of Rule):

The Board of the company had been structured to reflect the level of interest of those participating in the company. Powers of appointment given to the Government (in the beginning) as special shareholder were carefully formulated to reflect the economic and political interest held at the time of the appointments. The Court held that, given the role of government appointed directors and the policy of the government to require redemption of the special share so that it could relinquish its influence over the conduct of the business, the Articles could not reasonably mean that government appointed directors could remain in office after the special share had ceased to exist. There was no difference if the special shareholder continued to exist but no longer had the requisite minimum shareholding that would have entitled it to appoint and remove special directors. Where a change in shareholding meant that the board of the company no longer reflected the appropriate shareholder interests, a term should be implied that, when the relevant shareholding ceased to exist, the directors appointed by reason of that shareholding should vacate their office. Accordingly, the special C directors could no longer remain in office.

 

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)