CATTO v AMPOL LIMITED [1989] NSWCA 34

CATTO v AMPOL LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL

KIRBY P, PRIESTLEY JA and ROGERS AJA 17, 22 March, 28 April 1989

[1989] NSWCA 34

COMPANIES — reduction of capital — preferential shares — resolutions to reduce capital passed at general meeting — company seeks confirmation by Court pursuant to s 123 Companies (New South Wales) Code 1981 — company holds most ordinary shares — seeks to acquire preferential shares — scheme of arrangement proposed — scheme not approved by preferential shareholders — company acquires 61.4% of preferential shares at $4 each — offer by some remaining preferential shareholders to sell shares at $4 each — offer rejected as order filled — company acquires preferential shareholders' director on board — company thereafter proposes reduction of capital — scheme offers remaining preferential shareholders $2.78 per share — application to Court for confirmation of reduction of capital — held: (allowing appeal from Cohen J) (1) The Court will only confirm the reduction of capital of a company if its terms are fair and equitable. Bannatyre v Spanish Telegraph Co [1886] 34 ChD 247; Poole and others v National Bank of China, Limited [1907] AC 229 applied; (2) The market may not always provide a fair indication of the value of shares, particularly in circumstances of limited trading. Kingston vy Keprose Pty Limited (No 2) (1988) 10 ACLC 111 approved; (3) In determining fairness to the preferential shareholders in respect of a reduction of capital the Court is entitled to take into account, amongst other things, the principle reflected in the Companies (Acquisition of Shares) (NSW) Code that buyers of shares, seeking to secure control of a company should, as a matter of fairness, give all members of the class the opportunity of sharing equally whatever premium the rights attached to that particular class of shares bring into existence; (4) As that had not occurred here, the proposed reduction of capital was not fair and should not be confirmed.