Hayim and Others v Couch
| Jurisdiction | England & Wales |
| Judgment Date | 15 May 2009 |
| Neutral Citation | [2009] EWHC 1040 (Ch) |
| Docket Number | Case No: HC06C04397 |
| Court | Chancery Division |
| Date | 15 May 2009 |
[2009] EWHC 1040 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before : MR STEPHEN SMITH QC
Case No: HC06C04397
Adam Smith (instructed by Muscatt Walker Hayim) for the First and Second Claimants
Daniel Margolin (instructed by Cowells) for the Third Claimant
Hugh Norbury (instructed by Gordon Dadds) for the Defendant
Hearing date: 8 th May 2009
APPROVED JUDGMENT
Stephen Smith QC sitting as a Deputy Judge of the Chancery Division:
In this matter I have decided to accede to applications that I should make declarations of right without there having been a trial, or indeed any hearing on the merits of the Claimants' claims. The grant of declaratory relief without a trial is relatively unusual, and I shall therefore briefly explain my reasons for taking this step.
The proceedings were commenced in 2006 by Delilah Gerda Pratt against Jeanne Regina Couch, the niece of Mrs. Pratt's late husband, Sydney Leonard Pratt. Mrs. Pratt claimed to set aside two transfers of shares in the company SL & DG Pratt (Properties) Ltd (“the Company”). The first transfer, dated 6 th December 2004, concerned a holding of 60 shares in the Company. The second transfer, dated 31 st March 2005, concerned the holding of the remaining 40 shares in the Company.
The holding of 60 shares was owned by Mr. Pratt at his death on 30 th October 200Mrs. Pratt was the administratrix of her late husband's estate. Although a shareholder in the company herself (viz. of the other 40 shares), Mrs. Pratt had never had a role in the running of the Company, which owned several properties in the vicinity of Leigh-on-Sea in Essex. At the date of the transfers Mrs. Pratt was 79 years old. Mrs. Pratt and Mrs Couch were not the only statutory beneficiaries of Mr. Pratt's estate: Rosamund Neal (Mr. Pratt's sister) and Jill Ross (Mrs. Couch's sister) were also beneficiaries.
Mrs. Pratt claimed that the two transfers should be set aside on the grounds of Mrs. Couch's undue influence. In the alternative, in the Particulars of Claim Mrs. Pratt claimed that the transfers should be set aside because she did not have the required mental capacity to execute the transfers when they were executed. The original Particulars of Claim contained a statement of truth signed by Mrs. Pratt. In paragraph 10 of the Particulars it was asserted that when she signed the two transfers Mrs. Pratt was suffering acutely from grief “and undergoing a lengthy period of severe bereavement following the loss of her husband”.
Prior to Mr. Pratt's death, Mrs. Couch had not been involved in running the Company; she was a hairdresser in two nursing homes in Kent, and a tourist board clerk for Sevenoaks Town Council. In her Defence, Mrs. Couch denied the allegations of undue influence and lack of capacity, though she made no admission of whether Mrs. Pratt retained the ability to manage her own affairs. She asserted that she had been very close to Mr. and Mrs. Pratt prior to Mr. Pratt's death; that Mr. Pratt had repeatedly made clear that he wanted the company to be owned and run by her; and that apart from Mrs. Pratt, Mr. Pratt considered Mrs. Couch to be his only family.
Mrs. Couch appended to her Defence a copy of a letter which she wrote to Mrs. Pratt dated 23 rd July 2005. The key parts of that document read as follows:
“Dear Auntie
As you never called me I am concerned that you are ok. I cannot believe that you have been goaded into believing this black picture that has been painted of me and I am sure that deep down in your heart you must know that I haven't betrayed your trust in me.
If I write this for you, you can slowly try to understand the white picture.
Since Uncle's passing I have taken control of running the property company when you made me a director. He had explained a lot about the company to me and about the way he operated so taking up the reins was although very sad, an honour and a privilege. There were also pressing matters awaiting attention… As time went on it became clear to me that you really wouldn't be able to deal with anything much to do with the running of the company. You and I both know that Uncle wanted me to take over the company one day as we discussed it many times (in his words “It'll [be] your property company one day, not yet!! But one day”).
After taking legal financial advice it became obvious that if all the shares of the company remained in your name if anything happened to you 40% of each property would go to the government in taxes. That is nearly half of each property. Half the property company would have to be sold to pay the taxman. This would have been ludicrous and I am certain that Uncle would agree with me. So, this was presented to you at a meeting with Derek last year to explain how a simple measure could protect the company a little with absolutely no detrimental effect to you. I would be a non-profit taking director all the income that I made for the company would remain in the account to pay you. This has of course remained the case.
This seemed to [be] working quite satisfactorily until January this year when I was advised that perhaps the remaining shares in the company should be made secure in my name for the complete control of running it. I would still be a non-profit making director, all proceeds going into the high interest account to pay your dividends and the taxes of which I have shown you the statement repeatedly. At the end of the day I would have [the] satisfaction of knowing that all my hard work for the company would be for the benefit of the family, now for you, and later for the girls. So that is what happened. An honest and sound business move that in no way affected you financially.
…”
Mrs Couch's reference in her letter to “the girls” is a reference to her daughters.
Mrs. Pratt died on 7 th November 200The (substituted) First and Second Claimants are her executors, and the Third Claimant the administratrix de bonis non of Mr. Pratt.
On 13 th November 2008 the Third Claimant made an additional claim in the proceedings. This was to the effect that the transfer of the 60 shares by Mrs Pratt to Mrs Couch was void or should be set aside because the prior appropriation of those shares by Mrs. Pratt to herself was made in breach of the self-dealing rule or in breach of trust.
The case was fixed for a mention before me on 8 th May 200Just before it was called on, I was handed a draft Order which I was to be asked by the Claimants to make. A schedule to the draft Order contained an agreement signed by the parties and on behalf of the Company. I was also provided with a bundle of authorities and two skeleton arguments prepared on behalf of the Claimants. After hearing argument I adjourned the case to enable me to digest all the last minute material and to consider my ruling. I have subsequently received a Note and a further bundle of authorities filed on behalf of the First and Second Claimants.
The material terms of the agreement scheduled to the draft Order (which runs to more than 20 pages) are as follows:
(a) it is recited that both share transfers were void and of no effect, alternatively they would have been voidable and avoided and therefore of no effect;
(b) a further recital records that Mrs. Couch has been wrongly registered as holder of both shareholdings;
(c)it is also recited that a resolution signed by Mrs Couch subdividing the shares in the Company was void and of no effect;
(d) the parties agreed to ask the Court to make an order in terms of the draft Order to which the agreement was appended;
(e)...
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