The Court of Appeal has upheld a High Court order confirming Permanent TSB Group Holdings plc’s cancellation of 3,562,883,512 deferred shares, while removing a €20,000-plus-VAT costs order against the shareholder who challenged the process.
In a judgment delivered on 21 January 2020, the court dismissed Piotr Skoczylas’s appeals against the refusal of High Court judge Haughton J to recuse himself and against the order confirming the capital reduction. It also declined to refer questions to the Court of Justice of the European Union.
The company had sought confirmation under section 85 of the Companies Act 2014 of a special resolution passed by shareholders in May 2017. Because it is a public limited company, the court said it could not use the Summary Approval Procedure and was required to apply to the High Court. The resolution cancelled deferred shares created as part of the company’s 2011 recapitalisation.
Skoczylas argued that cancelling the shares without paying former shareholders compensation based on their original nominal value was inequitable and involved an appropriation of value. The Court of Appeal said the relevant rights were those set out in the company’s articles of association. Following an amendment in 2015, deferred shareholders were entitled to share pro rata in a total payment of €1.5 million. The court said that was the value attached to the shares under the articles, and that the 2011 Direction Order creating them could not be reopened in the confirmation proceedings.
The court found the reduction had a discernible purpose connected with the company’s ongoing regulatory capital requirements and was supported by evidence. It concluded that the deferred shareholders were treated equally under the articles and found no basis to reject the High Court’s confirmation order.
On recusal, the court held that the judge’s comments about Skoczylas’s objections were preliminary. It considered that the judge had made clear Skoczylas would be heard, adjourned the hearing to allow him to attend and permitted a further affidavit. The appeal against the refusal to recuse was dismissed.
However, the Court of Appeal set aside the costs order for the recusal application and substituted an order that neither side pay those costs. It said the application was not frivolous or unwarranted in the circumstances. The High Court’s decision to make no order for costs in the substantive confirmation application was affirmed. The appeal concerning correction of the costs order was treated as moot, with no order made.