is a judicial decision of the

Privy Council A privy council is a body that advises the head of state of a state, typically, but not always, in the context of a monarchic government. The word "privy" means "private" or "secret"; thus, a privy council was originally a committee of the mo ...

in relation to

contract law A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to t ...

, company law and

constitutional law Constitutional law is a body of law which defines the role, powers, and structure of different entities within a state, namely, the executive, the parliament or legislature, and the judiciary; as well as the basic rights of citizens and, in fe ...

. It concerns the correct method for interpretation and implication of terms into a company's

articles of association In corporate governance, a company's articles of association (AoA, called articles of incorporation in some jurisdictions) is a document which, along with the memorandum of association (in cases where it exists) form the company's constituti ...

. It was approved by the UK Supreme Court in '' Société Générale, London Branch v Geys'' and '' Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd''.

Facts

In 1989

Belize Belize (; bzj, Bileez) is a Caribbean and Central American country on the northeastern coast of Central America. It is bordered by Mexico to the north, the Caribbean Sea to the east, and Guatemala to the west and south. It also shares a wa ...

privatise Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...

d its

telecommunications network A telecommunications network is a group of nodes interconnected by telecommunications links that are used to exchange messages between the nodes. The links may use a variety of technologies based on the methodologies of circuit switching, mes ...

. Established the year after independence in 1974, the Belize Telecommunications Authority's business and assets were transferred to a corporation called Belize Telecommunications Ltd (renamed

Belize Telemedia Belize Telemedia Limited (BTL), formerly Belize Telecommunications Limited, is a telecommunications company in Belize. Established in 1972 as the Telecommunications Authority, it rapidly became Belize's leading telecommunication provider in th ...

in 2007). The

government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government i ...

was to gradually sell off its shares, but in the process retain a "special share" (often called a

golden share In business and finance, a golden share is a nominal share which is able to outvote all other shares in certain specified circumstances, often held by a government organization, in a government company undergoing the process of privatization and tr ...

). According to the company's constitution, among various rights over important transactions, the special shareholder could appoint two of the eight directors. Class "B" shareholders (which were all private investors, such as

British Telecom BT Group plc (trading as BT and formerly British Telecom) is a British multinational telecommunications holding company headquartered in London, England. It has operations in around 180 countries and is the largest provider of fixed-line, b ...

) could appoint two directors and class "C" shareholders could together appoint four directors. The government owned class "C" shares, and there was a further provision that if the special shareholder still had over 37.5% of the total share capital, it would be entitled to appoint two of those four "C" directors. In 2003 the government decided to complete the privatisation process. Legislation was passed to try to let

competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, ind ...

into the telecoms market. In 2004 Belize Telecom bought the special share from the government. It also bought the "C" shares the government still owned. But to finance this, it took out a loan from the government. In other words, the government converted its shares in Belize Telecommunications Ltd to debt. For

security" \n\n\nsecurity.txt is a proposed standard for websites' security information that is meant to allow security researchers to easily report security vulnerabilities. The standard prescribes a text file called \"security.txt\" in the well known locat ...

until the debt was repaid, the government obtained a

pledge Pledge may refer to: Promises * a solemn promise * Abstinence pledge, a commitment to practice abstinence, usually teetotalism or chastity * The Pledge (New Hampshire), a promise about taxes by New Hampshire politicians * Pledge of Allegianc ...

on the shares it had just sold (but not the special share). Immediately Belize Telecom appointed new directors, replacing the government appointees. But unfortunately on 9 February 2005, Belize Telecom defaulted on its loan repayments. The government enforced its pledge, and now once again had over 37.5% of the "C" shares, but without the special share. The question was whether the two directors that were subject to appointment by the person who held the special share and over 37.5% of the "C" shares could be removed. As it stood, nobody held both the special share and 37.5% of the "C" shares. The company's constitution did not have any provisions about this situation. In 2008, after the United Democratic Party was elected on a platform of anti-corruption and honesty, this action was brought to change the board. Belize Telecom argued that those two directors were not removable. The

Attorney General In most common law jurisdictions, the attorney general or attorney-general (sometimes abbreviated AG or Atty.-Gen) is the main legal advisor to the government. The plural is attorneys general. In some jurisdictions, attorneys general also have exec ...

, for the government, argued this would be absurd and the articles should be construed as providing that a director should leave office if the specified shareholding which brought him there ceased to exist. Conteh CJ in the Belize Supreme Court agreed with the government and said that a term allowing the government with its 37.5% stake should be allowed to remove those two directors and appoint new ones. But Carey JA in the Court of Appeal held that there was no "necessity" in reading in such words. Morrison JA emphasised that art 90(D)(ii) provided for appointment and removal of directors, but nothing for tenure of office, and that therefore Conteh CJ's interpretation could not be "derived from the language of the articles". The Attorney General appealed.

Advice

Giving the advice of the Privy Council,

Lord Hoffmann Leonard Hubert "Lennie" Hoffmann, Baron Hoffmann (born 8 May 1934) is a retired senior South African–British judge. He served as a Lord of Appeal in Ordinary from 1995 to 2009. Well known for his lively decisions and willingness to break w ...

set out the principles for interpretation of a company's articles such as this. He stated that the same principles of interpretation apply whether it is a company's constitution, a

contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ...

or an

Act of Parliament Acts of Parliament, sometimes referred to as primary legislation, are texts of law passed by the legislative body of a jurisdiction (often a parliament or council). In most countries with a parliamentary system of government, acts of parliame ...

. A court should search for the meaning of any such document with all relevant contextual facts in mind, and consider the meaning it would convey to a reasonable person. He emphasised it was not relevant, in cases where a gap was left, what the parties hypothetically "would have" concluded, a hypothetical inquiry which he referred to as "barren". The important point was to ask what interpretation, and implication would be consistent with the scheme of the company constitution (or contract or Act of Parliament). For this reason, Lord Hoffmann agreed with Conteh CJ that the directors could be removed. The scheme of the privatisation programme was to balance the interests of the government and private investors according to their economic interest. As such, it would have been absurd that just because the special share and the possession of 37.5% of ordinary shares had become disjointed that the incumbent directors would be irremovable. So given the gap in the articles, it was consistent with the scheme of the company's articles that the two directors in question would be appointable by the government. Lord Hoffmann's advice on the law read as follows.

Significance

The case of ''AG of Belize v Belize Telecom Ltd'' has been widely cited as the new and all encompassing statement on implied terms. In '' Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc'', 009EWCA Civ 531, 0091 C.L.C. 909, 913-914 Lord Clarke MR said the following:

Notes

References

*HLA Hart, 'Positivism and The Separation of Law and Morals' (1958) 71 Harvard Law Review 593 *L Fuller, 'Positivism and Fidelity to Law - A Reply to Professor Hart' (1958) 71 Harvard Law Review 630, arguing that a purposive interpretation to legislation was consistent with Hart's positivist thesis. *''Holmes v Lord Keyes'' 959Ch 199

External links