Attorney-General of Belize v Belize Telecom Ltd. [2009] UKPC 10, [2009] 2 All ER 1127
Privy
Council
This is an icon case regarding the proper interpretation and implication of the terms in a firms articles of association. The government of Belize privatized its telecommunication sector in 1989 after years of monopoly since 1974. This move triggered the transfer of assets and shares from Belize Telecommunications Authority’s to a private company called Belize Telecommunications. In the deal, the government was to retain a golden share of which the constitution allowed the appointment 2 out of the 8 directors. In addition the government as a golden shareholder referred to as class “C” with over 37.5% of the total share capital was also allowed to appoint 2 more directors. Therefore, the government was allowed to appoint 4 of the eight directors.
After the completion of the privatization process, competition was rife in the telecoms market and in 2004 the company acquired the golden shares from the government alongside the “C” shares it owned. Here, the government turned its share into debts and as collateral until the full repayment of the money, Belize Telecommunications pledged the same shares except the special share. Year later the company defaulted on the re-payments, which forced the government to enforced the pledge. This resulted to a stalemate as no party held the special share and the 37.5%. Therefore, it was not clear which director held the special share as the company’s constitution lacked provisions about the situation.
A new government was elected in 2008 and pledged to fight corruption and introduce honesty in government activities. It sought to change the board, a move that was opposed by that its two directors could not be changed. The governments through the Attorney General counter argued that the articles were clear that the director should leave office after the shareholding that got them there ceased to exist. The Supreme Court judge Conteh favored the government argument, but Court of Appeal judge, Carey was of the opinion that it was no “necessity” in the government’s terms. Morrison of the same court further quoted article 90(D)(ii) saying that the hiring and firing of directors, is articulated but not their tenure of office, and that Conteh CJ’s interpretation was not consistent with the articles.
Legal Issues Raised
As much as Conteh’s interpretation is welcome especially in regard to the new government’s efforts to fight corruption, Carey and Morrison’s perspective bring clarity to the whole issue pointing at the legal issues. However, it is a challenge resolving these issues using imputed intentions. Imputed intentions are subjective and many a times uncertain. This is because the prevailing judge or judges are forced to create an intention in the absence of one or where the parties fail to agree. One such decision was in Stack v Dowden [2007] UKHL 17 that triggerred strong dissenting opinions. Here there was a decision to impute the whole agreement since there was none. Unlike in Stack v Dowden [2007] UKHL 17, this case was guided by the constitution of the company of which the government relied on in order to claim the pledge and recupture its shares.
It is sometimes impossible point out the details in articles of association and imputed intentions. Examining the issues in this case, it is revealed that the government reason to change the directors is not significant to the court’s decision as the intention by the articles. It is also clear that the constitution does not stipulate how to remove and hire the directors but focuses on sharing out the directors’ positions. This was the gap in the case that could have brought the case to conclusion.
Reference
Stack v Dowden [2007] UKHL 17.
