High Court refuses to stop Grafton Group holding ‘closed’ agm

A High Court judge has refused to grant an order restraining the holding of a "closed" annual general meeting of the builders merchants and Woodie's DIY owner Grafton Group plc on Wednesday.

Mr Justice David Keane, in a ruling on Tuesday night, refused the injunction sought by Michael Chadwick, a former chairman of the group and its largest shareholder, for reasons including other shareholders had not signalled any support for his bid to stop the meeting.

Mr Chadwick wanted the injunction pending the full hearing of his action in which he wants declarations the "closed" agm unlawfully breached shareholders' rights under the Companies Act, including to participate in that meeting, plus orders quashing any resolutions passed.

The format of the meeting, to be conducted by four “company insiders”, was “a bit Stalinesque” and a “parody” of the rights of members of companies, his counsel Declan McGrath SC argued on Tuesday.

There was “no reason” to hold the agm in the middle of a pandemic when the company can lawfully hold it on any date up to August 7th.

Resolutions

The agenda contained important resolutions, including for directors to resign and put themselves forward for re-election, Mr McGrath said.

The company had made “no real effort” to convene a meeting that would comply with the Companies Act, but some other public companies had deferred agms as a result of the pandemic or put in place measures allowing shareholders to participate remotely, he said.

There was no “rancour” in the background and Mr Chadwick did not wish to disrupt the company’s business but rather to ensure shareholders’ rights are protected.

Opposing the injunction, Paul Sreenan SC, for Grafton, argued the agm must be held on Wednesday in accordance with a March notice issued by the company.

Mr Chadwick’s inability to attend was not caused by the company but by the extension to May 5th of the Covid-19 restrictions, he said.

The agm format is in line with those restrictions and Grafton’s 6,286 shareholders had been told not to attend and to instead forward proxy votes to the chairman, he said. This format was similar, and in some cases, less restrictive, to recent and proposed agms of a number of other public companies.

Difficulty

Mr Chadwick has not appointed a proxy and nor had he identified any resolution with which he has any difficulty or any issue with the board of directors, Mr Sreenan added.

On the basis of proxies to date, the vast majority of shareholders supported the proposed resolutions, which were not controversial but were important for management of the company.

Mr Chadwick had not accepted an offer from the company to table a resolution to have the agm adjourned on it convening on Wednesday, counsel added.

The injunction application opened at 2pm on Tuesday.

In his ruling at 7.30pm, Mr Justice Keane said the background to all this was the Covid-19 crisis and the lockdown regulations to remain in place, as of now, until May 5th.

Having outlined the evidence and relevant law, he said Mr Chadwick had plainly made out a serious question to be tried in his main action concerning the lawfulness of the agm procedure and the nature and extent of his entitlement to participate.

Damages

The judge did not think issues concerning adequacy of damages should the injunction be granted or refused was a significant factor in this “unusual” application involving a claim of procedural rights.

The balance of convenience, he believed, was against granting the injunction for reasons including other shareholders did not appear to have expressed support for the move to restrain the agm.

A majority of shareholders have already voted via proxies for the resolutions; they must be taken to be aware of Mr Chadwick’s complaints about the meeting procedure and there was no evidence any other shareholders supported the meeting being stopped, he said.

The uncertainty in the marketplace if an injunction was granted outweighed the uncertainty created by the bringing of these proceedings, he also held.

Weighing all the factors, the balance of convenience was against granting the injunction, he ruled.