David Alfred Youlton v Harles Russell (A Firm)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 13 May 2010 |
| Neutral Citation | [2010] EWHC 1032 (Ch) |
| Date | 13 May 2010 |
| Court | Chancery Division |
| Docket Number | Case No: HC09C00566 & HC09C00751 |
[2010] EWHC 1032 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Warren
Case No: HC09C00566 & HC09C00751
Hugh Evans (instructed by Trethowans LLP) for the Claimant
Ben Hubble QC and Emilie Jones (instructed by Barlow Lyde & Gilbert LLP) for the Defendants
Hearing dates: 8th,9th,10th,11th,14th,15th, and 18th December 2009
Mr Justice Warren:
Introduction
This judgment concerns two related negligence claims against Charles Russell, a firm of solicitors (“ CR”). They concern allegedly defective advice given (or rather not given) by CR in relation to a pension scheme known as the Snell & Wilcox Pension Plan (“ the Scheme”). The Claimant (“ Professor Youlton”) in each action was at all material times, and remains, one of the trustees of the Scheme. He is also a member of the scheme prospectively entitled to benefits from it.
The background in brief
Snell & Wilcox Ltd (“ S& W”) is a company about which a little needs to be said. It was founded by Roderick Snell and Joseph Wilcox in 1973. Professor Youlton joined as Chairman and Chief Executive in 1988. S& W was and is a company which designs and develops digital signal processing products for the broadcast, post production and digital media markets. When Professor Youlton joined S& W, about 20 people worked for it. Over the next 13 years, it grew substantially so that by early 2000 it had over 600 people working for it and a turnover of £40 million. By 2007/8, although turnover remained much the same, the staff levels had halved.
The Scheme, a Small Self-Administered Scheme, was set up by S& W for a small handful of individuals. The members were Professor Youlton (with a 41% interest under the Scheme) Joseph Wilcox, Professor Snell (with a 35% interest under the Scheme) and David Lyons. Those four individuals, together with a professional corporate trustee, were and remain the trustees of the Scheme (“ the Trustees”).
In about February 1995, the Trustees acquired for the Scheme the property known as Southleigh Park, Havant, Hampshire (“ the Property”). This consisted of about 8 acres of parkland within which is found Southleigh Park House. The House is Grade II Listed. The Property also comprised a large two storey modern office building, a coach house, stable block, lodge and outbuildings.
S& W used the Property as its headquarters. It held the Property under a lease, dated 21 May 1996, from the Trustees for a term of 15 years from 25 March 1995 (“ the Lease”).
Between 1995 and 2001, significant works of improvement and refurbishment were carried out to the Property (both its buildings and grounds), the cost of which was, as a matter of fact, met largely, if not exclusively, by the Trustees. There was a dispute about the extent to which the Trustees were entitled to reimbursement of that cost from S& W.
Professor Youlton was an important figure in the development of S& W. He had been a controlling shareholder and chairman of the board of directors. Outside investors came into S& W. Professor Youlton ceased to be a director – he would say that he was ousted in a boardroom coup – in 2001.
Following his departure from the board, various agreements were made between him and S& W to deal with the terms of compensation for his removal as director and with other matters concerning his departure. One of these was an agreement referred to in these proceedings as “ the Apportionment Agreement”. It is dated 24 August 2001. It was executed as a deed, on behalf of S& W by John Spencer and Professor Snell. Mr Spencer was the Chief Executive Officer of S& W and Professor Snell was at that time a director. Professor Snell was also one of the Trustees. Each of the Trustees (including Professor Snell) executed the Apportionment Agreement for himself. I will deal later with its relevant terms but note at this stage that it was obviously intended to be a binding agreement. It provided for surveyors to determine how much of the costs of the improvement and refurbishment works at the Property was to be borne by S& W, a matter on which the parties were in dispute.
In connection with the Apportionment Agreement, a letter, also dated 24 August 2001 (“ the 2001 Side Letter”), was sent by Mr Spencer on S& W headed paper to Professor Youlton, a copy being countersigned by him. I set out the relevant passages later in this judgment.
As I have mentioned, outside investors became involved. In May 2002, a majority stake in S& W was sold to a group of private equity funds collectively known as Advent Venture Partners (“ Advent”). This transaction was effected by introducing a holding company (Snell & Wilcox (UK) Ltd) to hold 100% of the shares in S& W. Advent took a majority share in the holding company. Professor Youlton was bought out.
On 8 May 2002, an agreement letter (“ the 2002 Side Letter”) relating to the Lease was signed by Professor Youlton (on behalf of the Landlord, the Trustees) and Mr Spencer again purportedly on behalf of S& W. I say purportedly in each case, because it has been alleged by S& W that Mr Spencer had no authority to sign the 2002 Side Letter on behalf of S& W. I will come to the details of the 2002 Side Letter later.
The terms of the Apportionment Agreement were not fully implemented. The 2002 Side Letter was not implemented at all. Professor Youlton's position is that S& W was undergoing a restructuring at the time, 2002–3, and that the Trustees, who acted principally through Professor Youlton, did not press for implementation of these agreements. They did start to press, however, in 2004 when they wished to sort matters out. This was partly driven by the imminent retirement of some of their number and partly by the need to establish, essentially for tax reasons, the value of the pension fund at as high a level as possible which required uncertainties to be resolved.
S& W for its part appears to have wished to avoid or limit its apparent liabilities under the Apportionment Agreement and the 2002 Side Letter. On 16 September 2005, in a very short letter from its solicitors, Blake Lapthorn Linnell, S& W denied that the correspondence of 8 May 2002 (a reference to correspondence including the 2002 Side Letter) constituted a binding agreement and asserted that it did not comply with section 2 Law of Property (Miscellaneous Provisions) Act 1989.
The emerging defence included the following components identified by Mr Hugh Evans (who appears for Professor Youlton).
The most important component was that, under the 2002 Side Letter, S& W were to be permitted to sublet appropriate parts and the parties were to ask Mr Young, a surveyor, to advise. S& W alleged that this was too uncertain alternatively that it was an agreement to agree. The Trustees' response was, in effect, that “advise” should be interpreted as “determine”.
The next component was that the 2002 Side Letter failed to specify the terms on which S& W would be entitled to sublet. Then it was said that the provision that the rent for 2001 be settled was also an agreement to agree. The Trustees' answer to that was that the parties had agreed to instruct Mr Young to provide a valuation for the purposes of the review.
Then it was said that the terms of the new lease were not specified, it merely being stated that the Lease was to form the basis of those terms.
Lastly, by reason of those matters, the 2002 Side Letter failed to comply with the terms of the Law of Property (Miscellaneous Provisions) Act 1989.
I shall, following Mr Evans, refer to those challenges to the validity of the 2002 Side Letter as “ the Unenforceability Defence”.
There were attempts to settle the differences between the Trustees and S& W but they came to nothing. On 19 October 2006, Blake Lapthorn Linnell wrote to CR alleging the invalidity of the Apportionment Agreement and the 2002 Side Letter on additional grounds:
a) It was said that Mr Spencer and Professor Snell had no authority to enter into the Apportionment Agreement and Mr Spencer had no authority to enter into the 2002 Side Letter. It was alleged that it was not possible to rely on the usual ostensible authority of a CEO and a director. This was because they in fact had no authority and at the time of the Apportionment Agreement, three of the directors, Professor Youlton, Professor Snell and Mr Lyons, were directors of S& W. Although that position had changed by the time of the 2002 Side Letter, Professor Snell remained a director.
b) The three director Trustees were in breach of their fiduciary duty as there was an obvious conflict of interest. This had not been disclosed to the board of S& W in accordance with its Articles of Association (see Art 85 Table A) and section 317 Companies Act 1986.
c) Apparent acts of confirmation of the agreement ( eg participation in the appointment of surveyors under the Apportionment Agreement, provision of information, payment of fees) were ineffective because they were not ratified by the board or the shareholders.
I shall refer to the defences based on want of authority as “ the Want of Authority Defence”. Perhaps slightly misleadingly, I include in that definition the defence based on failure to comply with company law requirements and breach of duty (which have sometimes been referred to as “ the Company Law Points” and which is a reference which I will use from time to time).
Faced with S& W's refusal to implement the terms of the Apportionment Agreement and the 2002 Side Letter, and settlement negotiations having come to nothing, the Trustees, acting through CR, issued proceedings against S& W on 21 December 2006 in relation to each Agreement. The Trustees sought:
a) A declaration that S& W was...
To continue reading
Request your trial