Brady v Brady

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Keith of Kinkel,Lord Havers,Lord Templeman,Lord Griffiths,Lord Oliver of Aylmerton
Judgment Date19 May 1988
Judgment citation (vLex)[1988] UKHL J0519-3

[1988] UKHL J0519-3

House of Lords

Lord Keith of Kinkel

Lord Havers

Lord Templeman

Lord Griffiths

Lord Oliver of Aylmerton

Brady and Another
(Appellants)
and
Brady and Another
(Respondents)
Lord Keith of Kinkel

My Lords,

1

I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Oliver of Aylmerton. I agree with it, and for the reasons he gives would allow the appeal upon the terms which he indicates and make the order proposed by him.

Lord Havers

My Lords,

2

I have had the advantage of reading in draft the speech to delivered by my noble and learned friend, Lord Oliver Aylmerton, with which I agree.

3

I would allow the appeal for the reasons which he has given, and, in particular, on the point on whether the appellants should be permitted, in your Lordships' House, to raise points of law not previously argued. In particular at p. 22:

"… It has to be borne in mind that this is a final appeal and that it would be entirely unsatisfactory if it resulted in what is, in effect, a declaration of the illegality of an agreement when in fact there is a conclusive answer in law to that contention. Your Lordships would then be dealing with the rights of the parties on an entirely false and artificial basis created and compelled simply by the way in which the parties had pleaded their cases in the courts below … but when the true position can be seen and when it leads to a quite different conclusion that is an unattractive proposition."

4

I would not like it to be too readily assumed that your Lordships would be given in the future to decide a case in favour of an appellant on a ground which has not been argued in the courts below.

5

In my view, this was a quite exceptional case and should be regarded as such.

Lord Templeman

My Lords,

6

I have had the opportunity of considering in draft the speech prepared by my noble and learned friend Lord Oliver of Aylmerton. I agree with it, and for the reasons he gives would allow the appeal upon the terms which he indicates.

Lord Griffiths

My Lords,

7

I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Oliver of Aylmerton. I agree with it, and for the reasons he gives would allow the appeal upon the terms which he indicates.

Lord Oliver of Aylmerton

My Lords,

8

On the 17 March 1986 Judge Blackett-Ord, the Vice-Chancellor of the County Palatine of Lancaster made an order for the specific performance of a contract between the appellants and the respondents for the reorganisation of a group of companies in which they were interested in accordance with a scheme evidenced by an exhibit P12 in the action. From that order the respondents appealed to the Court of Appeal [1988] B.C.L.C. 20 which, on 29 July 1987, by a majority (Croom-Johnson L.J. dissenting) allowed the appeal and declared that the agreement sued upon was void for illegality. From that order the appellants, the plaintiffs in the action, now appeal to your Lordships' House.

9

The scheme of reconstruction to which the agreement sought to be enforced was intended to give effect was a complicated one the refinements of which are not altogether easy to grasp on a first reading. I therefore set out the background in a little detail. The two appellants (to whom it will be convenient to refer as "Jack" and "Robert" respectively) are uncle and nephew, Robert being the son of Jack's brother, the first respondent (to whom it will be convenient to refer as "Bob"). The second respondent is Bob's other son, (to whom it will be convenient to refer as "John"). The dispute between them relates to a family business of haulage contractors carried on at Barrow-in-Furness and established a good many years ago. Since 1959 it had been carried on by a private Limited company, T. Brady & Sons Ltd., (to which I will refer simply as "Brady"). Brady operated the business both by itself and through a number of subsidiary companies. In the course of time the business expanded to include the manufacture and sale of soft drinks and the distribution of alcoholic drinks. It is unnecessary to list all the subsidiary companies but there are two which play an important part in the history and which require specific mention. One was Thomsons Soft Drinks Ltd. (to which I will refer as "Thomsons") and it was through this company that the drinks side of the business was conducted. It had an issued and paid up capital of £5000 divided into 5000 shares of £1 each all of which were beneficially owned by Brady. The other company in the group which requires specific mention is Athersmith Bros. Ltd. ("Athersmith") which owned a haulage depot, an asset which figures significantly in the reconstruction subsequently propounded. Jack and Bob were the only directors of Brady (Bob being Chairman) and they were also the only two directors of Athersmith. Brady had an issued and paid up capital of £5000 divided into 5000 shares of £1 each of which 2334 were held by Bob and 2333 by Jack. The balance of 333 shares was held by another private company, Tanda Transport Ltd. ("Tanda") the shares in which were held as to 50 per cent. by Robert and 50 per cent. by John. That, for present purposes, describes the main corporate structure of the Brady group. Just to complete the corporate background, however, and because they figure in the arrangements made between Bob and Jack, there are three other companies which require specific mention and which stand outside the group. Bob and Jack were the majority shareholders in another transport undertaking, Furness Transport Ltd. ("Furness") a company with an issued capital of £1650 divided into 1650 shares of £1 each of which 770 were held by Jack and 770 by Bob, the balance of 110 shares being held by Tanda. Bob and Jack also owned, in precisely equal shares, the whole issued capital of another company concerned in the drinks business, Marsh's Sass Ltd. ("Marsh's Sass"). Brady also held, by way of investment, a one third interest (33 shares) in the capital of a company called M6 Papers Ltd. ("M6"). This was, in fact, a valuable investment, being worth some £180,000, but it was entered in Brady's books at the historical cost of £33.

10

The business of the Brady group had, at one time, been a flourishing one, but it had, by 1982, begun to encounter difficulties, although it still remained very valuable. It had, however, made a loss in the year 1982, the management was deadlocked and the bank, to whom the group was substantially indebted, was pressing for a reduction in the overdraft facilities which it had provided. The basic reason behind this was not due to any inherent defect in the business but lay in the total inability of Jack and Bob to work together. As will have been observed, if the votes attached to the shares held by Tanda were neutralised, Bob had the controlling interest in Brady. By 1982 the situation between the two brothers was such that they were no longer on speaking terms and their dislike of one another communicated itself to Bob's two sons. Robert sided with his uncle, Jack, and John sided with his father. The result was that the votes attached to the Tanda shareholding were effectively neutralised and Bob had voting control of the group. Jack therefore declined to attend meetings of directors or of shareholders at which he was, inevitably, going to be outvoted and, not surprisingly, the business suffered as a result of the ensuing deadlock in management. Clearly that was not a situation which could endure permanently and in March 1983, efforts to settle the differences between the two branches of the family without recourse to litigation having failed, Jack presented a petition under section 75 of the Companies Act 1980 seeking an order that he should buy out Bob or alternatively that Brady should be put into liquidation. That petition was, of course, resisted by Bob, who was prepared to consider buying out Jack but not to sell his own shares. The position thus was that there were two potential buyers but no one willing to sell and, short of some compromise, the only likely outcome of the petition was an order for the compulsory winding-up of Brady which would have benefited nobody and would have destroyed a potentially thriving business. That would obviously have been disastrous and, after considerable negotiation between the parties, a meeting took place at Lancaster on 8 July 1983 at which an agreement was reached that the petition should be dismissed on terms that the business should be divided between the two brothers, Jack taking the haulage side of the business and Bob the drinks side together with an equality payment reflecting the difference in values. This accord was enshrined originally in written heads of agreement dated 8 July 1983 which set out the proposed arrangement in broad outline. The terms were, no doubt, intended to bind the parties but they did not purport to deal with the details and since they were, to a large extent, modified in material respects as the advisers on both sides proceeded to negotiate the details, it is unnecessary for present purposes to set them out in full. Broadly they provided for bringing both Furness and Marsh's Sass under the Brady umbrella and then for a scheme of reconstruction under section 287 of the Companies Act 1948 in the course of which the group assets would be divided equally between two new subsidiary companies the shares in which would be distributed in specie to Bob and Jack respectively in the ensuing liquidation of Brady. The end result contemplated was that Jack's company should end up with the haulage and transport business and Bob's with the drinks business so that they could then go their separate ways without reference to one another. For present purposes it will be sufficient to adopt the summary of the terms of the agreement contained in the judgment of the...

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