Austin Michael Waldron v Patrick James Waldron
| Jurisdiction | England & Wales |
| Judge | Eyre |
| Judgment Date | 15 February 2019 |
| Neutral Citation | [2019] EWHC 115 (Ch) |
| Docket Number | Case No: 2737 of 2017 |
| Court | Chancery Division |
| Date | 15 February 2019 |
[2019] EWHC 115 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
INSOLVENCY AND COMPANIES LIST (Ch D)
IN THE MATTER OF WESTSHIELD LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
HIS HONOUR JUDGE Eyre QC
Case No: 2737 of 2017
Mr. Mark Cawson QC (instructed by Gunnercooke llp) for the Petitioners
Mr. David Casement QC (instructed by McHale & Company) for the First Respondent
Hearing dates: 4 th, 5 th, 6 th, 7 th, 10 th, and 11 th September 2018
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HH Judge Eyre QC:
Introduction .
The Petitioners and the First Respondent are siblings. They are all shareholders in the Second Respondent (“the Company”), a company incorporated by their father. To avoid duplication and for clarity in this judgment I will normally refer to each of the family members by his or her first name. The First Respondent, Patrick, is the managing director of the Company; the First Petitioner, Austin, is the other director; and the Second Petitioner, Gerard, is the company secretary. Until their dismissal in August 2016 Austin and Gerard worked in the Company. The Third Petitioner, Marian, formerly worked in the Company but has not done so since 2005 at the latest. The Petitioners assert that Patrick's actions were unfairly prejudicial to their interests in a number of respects culminating in the dismissal of Austin and Gerard and that they are entitled to relief under section 994 of the Companies Act 2006. Patrick denied this disputing the factual basis of some of the matters of complaint and saying in relation to others that his actions were justified and/or done with the agreement of his brothers and/or were not unfairly prejudicial to the Petitioners
The relief sought was an order for the purchase of the Petitioners' shares by Patrick and for that purchase to be without any discount reflective of the minority status of those shares. On 2 nd February 2018 District Judge Bever ordered that there be a split trial as to liability and quantum. It was accepted on behalf of Patrick that for the purposes of establishing whether his actions were unfairly prejudicial no distinction was to be drawn between Marian's position and that of her brothers with Patrick accepting that behaviour which was found to be unfairly prejudicial to Austin and Gerard was also to be regarded as unfairly prejudicial to Marian. Patrick also conceded that if I were to find that he had acted in breach of his fiduciary duties as a director of the Company in any of the respects alleged by the Petitioners then it was appropriate for me to regard such a breach as amounting to unfair prejudice and as such potentially giving rise to an order for a buying out of the Petitioners' interests. In other words he was not taking any point that any of the breaches alleged were, if established, not capable of amounting to unfair prejudice. This concession did not extend, however, to the basis on which such purchase was to be made. Patrick did not accept that such purchase should be without discount and also said that there was scope for different bases of valuation being applicable as between Marian and Austin and Gerard. Moreover, the concession did not extend to the Petitioners' entitlement to relief nor was it an abandonment of the contention, at paragraphs 21 and 22 of the Defence, that in respect of certain of the alleged breaches there had been acquiescence disentitling the Petitioners to relief as a matter of the court's discretion. Accordingly, I am to determine whether there was unfairly prejudicial conduct on the part of Patrick entitling the Petitioners to relief (and to do so in the light of the concession as to the potential effect of the breaches alleged) and the basis on which any consequent purchase of the Petitioners' shares is to be conducted but not the value of the shares in such circumstances.
At the conclusion of the hearing on 11 th September 2018 I urged the parties to make a final attempt to see if they could resolve matters by agreement in the period before I gave judgment. On 3 rd October 2018 the solicitors acting for both sides asked that I defer further work on my judgment because the parties were seeking to achieve a resolution through mediation. I agreed to do so. On 26 th November 2018 I received a further joint communication explaining that the date for mediation had been delayed and that the mediation would not take place until the end of December 2018 and asking that completion of the judgment be deferred until the beginning of 2019. I again agreed to defer further work on this judgment pending the outcome of the mediation. Unfortunately the parties were unable to resolve their differences and I was informed of this on 7 th January 2019. At that stage I allowed time for short further written submissions in respect of two authorities one having come to light after the hearing and the other being a judgment which was handed down after the hearing. I commend the parties for their attempts to reach an amicable resolution but their failure to do so and the time which has been occupied in that exercise and in preparation of the further submissions mean that this judgment is being finalised and will be handed down considerably longer after the hearing than it would otherwise have been.
The Factual Background in Outline .
Austin Waldron senior (“Austin senior”) and Catherine Waldron are the parents of the Petitioners and the First Respondent. The Company was incorporated in 1977 and Austin senior and Catherine were the directors. The Company was and is engaged in construction and civil engineering works.
Originally Austin senior and Catherine each held 50% of the shares in the Company. By the mid-1980's Catherine had transferred part of her holding so that she held 20% of the shares; Patrick, Marian, and Austin each had 10%; and Austin senior retained 50%. In 1997 Catherine made a further transfer of shares this time to Gerard who became the holder of 10% of the shares.
Patrick began working for the Company in 1994. Marian came to work for the Company in 1997; Austin in 1998; and Gerard in 2002. There was conflicting evidence as to the circumstances in which the various siblings came to be working in the Company. In essence Patrick said that the Petitioners were given jobs because they had not been able to find work elsewhere whereas the Petitioners said that they were encouraged to engage in the work of the Company because of the needs of the Company and because of their father's desire that his children should be employed in what he regarded as the family company. I accept in general terms the Petitioners' account of this aspect of the history. As I will explain below I found Patrick's evidence and his recollection of matters to have been markedly affected by his feelings of grievance towards his siblings and by the belief that he had made contributions to the Company far exceeding theirs. I find that this was particularly so in respect of his evidence as to the circumstances in which his siblings came to work for the Company. Although, as will be seen, there were a number of important respects in which I was unable to accept the evidence of Austin and Gerard and in which I had to regard Marian's evidence of limited weight I do accept what they said about how they came to join the Company. I found their recollection of their father's desire to have his children in the family business convincing. In particular I found persuasive Marian's evidence of her father's desire for her to work in the business despite her wish to have a different career and her evidence that she was offered a directorship in an attempt to dissuade her from leaving. I find that evidence was based on a genuine recollection and was unaffected by the animosity towards Patrick which undermined the reliability of other aspects of her evidence. In the light of that I also accept that Austin was persuaded to switch from studying civil engineering to studying quantity surveying because his father and Patrick said that this would be good for the Company's business and would mean that the two brothers had complementary skills.
In 2000 Patrick was appointed as a director of the Company. He says that then and subsequently his father assured him that he, Patrick, would end up with more than 50% of the shares in the Company.
Marian left the employment of the Company in 2005. There is a dispute between her and Patrick as to the amount of work she had actually done in the preceding years when she was combining work in the Company with a university course but that is immaterial for present purposes.
In 2007 the four siblings and their parents met at Players restaurant in Hale. In the course of the meal Austin senior and Catherine explained changes which were being made in the ownership and governance of the Company. Austin senior had transferred part of his shareholding to Patrick so that Patrick and Austin senior each held 30% of the shares while Catherine, Marian, Austin, and Gerard each had 10%. At the same time the appointment of Austin as a director and of Gerard as company secretary was announced. Patrick became managing director of the Company although it was not clear in the evidence whether this appointment coincided with this meeting. In my judgement this meeting is significant as indicating the approach which Austin senior and Catherine took towards the Company and to the involvement of their children in it. The nature and significance of the meeting are to be...
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