Attorney General of Belize v Belize Telecom Ltd
is a judicial decision of the Privy Council in relation to contract law, company law and constitutional law. It concerns the correct method for interpretation and implication of terms into a company's articles of association.
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 privatised its telecommunications network. Established the year after independence in 1974, the Belize Telecommunications Authority's business and assets were transferred to a corporation called Belize Telecommunications Ltd. The government was to gradually sell off its shares, but in the process retain a "special share". 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 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 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 until the debt was repaid, the government obtained a pledge on the shares it had just sold. 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, 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 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.