Irvine and Others v Irvine and another (No 1)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BLACKBURNE,Mr Justice Blackburne |
| Judgment Date | 10 March 2006 |
| Neutral Citation | [2006] EWHC 406 (Ch) |
| Docket Number | Case No: 001499 OF 2003 |
| Court | Chancery Division |
| Date | 10 March 2006 |
[2006] EWHC 406 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Blackburne
Case No: 001499 OF 2003
Miss Catherine Roberts (instructed by Stevens & Bolton LLP) for the petitioners
Michael Todd QC and Nigel Dougherty (instructed by Charles Russell LLP) for the respondents
Hearing dates: 6, 7, 10 to 14, 17, 19 to 21, 24 to 28 and 31 October 2005;
to 4, 7 to 11 November 2005 and, 13 and 14 December 2005
Approved Judgment
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.
THE HON MR JUSTICE BLACKBURNE
Mr Justice BlackburneIntroduction
This is a petition under section 459 of the Companies Act 1985 brought by shareholders in the second respondent, Campbell Irvine (Holdings) Ltd ("CIHL"). They seek an order pursuant to section 461 that their shares in CIHL be purchased by the first respondent, Ian Charles Irvine ("Ian").
CIHL, as its name implies, is a holding company. It was incorporated on 13 January 1978. It has always operated through wholly owned trading subsidiaries, principally Campbell Irvine Ltd ("CIL"). The business of the group has been that of insurance broking with the bulk of its income derived from travel insurance. The remainder of the business has been in general insurance broking. At all material times up to 31 December 2002 the business was conducted through CIL which had been incorporated on 12 June 1973. With effect from 1 January 2003, the general insurance part of CIL's business was transferred to and has since been conducted by Campbell Irvine (Insurance Brokers) Ltd ("CIIBL") which is another wholly owned subsidiary of CIHL.
There are 2,800 issued shares in CIHL. The petitioners, for whom Miss Catherine Roberts has appeared, hold 1, 399 (or 49.96%) of them. The remaining 1,401 shares (50.04% of the total) are held by Ian for whom Mr Michael Todd QC and Mr Nigel Dougherty have appeared. The petitioners' shares are comprised in two holdings: 699 are held by the first petitioner, Patricia Mary Irvine ("Patricia"), in her personal right; the other 700 are held by her and Michael Cleobury Thatcher (referred to collectively in the petition as the second petitioner) as trustees of a settlement ("the Trust") dated 6 August 199The Trust was created by Patricia's late husband, Malcolm, for the benefit of the three sons of their marriage, namely Alastair, Charles and Duncan.
At the time of his sudden and unexpected death at the age of 52 on 1 March 1996, Malcolm held 700 shares in CIHL. Prior to August 1994 Malcolm had been an equal shareholder with his elder brother Ian. In August 1994 Malcolm transferred 700 of his shares to the then trustees of the Trust (of whom he was one). By his will, he gave one share to Ian and the remainder of his holding (by then reduced to 700) to Patricia. This resulted in Ian holding a bare majority of the shares in CIHL.
Michael Thatcher, who is a solicitor and has now retired, was one of the original trustees of the Trust and an executor of Malcolm's will. He has been wanting since March 2000 or so to retire as a trustee but was persuaded to remain in office pending resolution of the disputes which have given rise to this petition. Although he remains a trustee he has delegated to Patricia his powers as a trustee in relation to this petition by a deed of delegation and indemnity. Apart from providing a witness statement (on which he was briefly cross-examined), he has taken no part in these proceedings and, apart from exchanging a few letters and attending a meeting or two, has had little to do with the events which have given rise to them. The effective contest has been between Patricia, in her own right and on behalf of the Trust, and Ian. Since Malcolm's death, Ian has been in control of the running of CIHL and its trading subsidiaries. He and Patricia are CIHL's sole directors.
By the petition, Patricia alleges that Ian has conducted, and continues to conduct, the affairs of CIHL in a manner which is unfairly prejudicial to her interest and the interest of the Trust in three respects. First (and principally), Ian has procured the payment to himself of what she describes as "excessive, unreasonable and unjustified levels of remuneration". Second, and as a consequence of the first, the shareholders (in particular she and the Trust) have either received no dividends at all or, in respect of CIHL's financial years ended 31 December 2000 and subsequently, have received what she refers to as inadequate dividends. Third, she says that Ian has failed to run CIHL in accordance with the requirements of the Companies Act 1985.
Ian denies that he has caused CIHL's affairs to be so conducted. He contends, in any event, that relief by way of a buy-out order of Patricia's and the Trust's shares should be refused as Patricia and the Trust were given, but declined to take up, the opportunity to dispose of them on fair and reasonable terms when an offer (negotiated by Ian) for all of the shares in CIHL was made by Towergate Underwriting Group Ltd ("Towergate") in February 2000. Until the twenty-second day of the trial he also relied on a further offer for the shares made by Towergate in July 2000.
The response of Patricia and the Trust to this allegation, as set out in their points of reply, is twofold. The first is to deny that the terms of the offers, now confined to the earlier of the two, were either fair or reasonable. The second is to aver that the terms were negotiated by Ian in breach of fiduciary duties which he owed her and the Trust (arising out of his action in taking upon himself the negotiation of the offer) and in a manner that was unfairly prejudicial to their interests.
Ian also contends, but Patricia denies, that given her (and Michael Thatcher's) acquiescence until March 2000 in the way he was conducting the Campbell Irvine business, including in particular the manner in which profits were distributed, it is not open to her (or the Trust) to complain about his actions prior to that date.
The origins of the business
The business was begun by Ian in early 1973. He had started in insurance broking three years earlier with a London based company called Ross Collins Ltd where he was employed as an account executive with responsibility for securing new insurance business. He acquired a shareholding in that company. From that position he succeeded in building up his own clientele, particularly in the travel industry which was a business area in which he concentrated.
One of his first clients was Trailfinders Ltd ("Trailfinders"). The founder, controlling shareholder and chairman of Trailfinders is Michael Gooley with whom from the inception of their business relationship Ian became and has since remained on very friendly terms. There were other travel companies who were his clients and for whom, among other things, he arranged travel insurance.
After three or so years, he decided to set up on his own. The arrangement which he came to with Ross Collins was that, in exchange for transferring his shares in that company back to it at par, he was permitted to take with him all those clients that he had introduced to the business from personal contacts. It meant that from starting on his own in March 1973 he had a portfolio of existing clients and a guaranteed brokerage income. Among those clients was Trailfinders.
In June 1973 he established CIL as the medium for his new business. Because of his close friendship with Mr Gooley of Trailfinders, Ian was provided by that company with offices together with secretarial support and office facilities initially at no cost to CIL. He also acquired a 15% shareholding in Trailfinders. In return Trailfinders acquired 25% of CIL's shares. For some months, Ian also assisted Trailfinders' with its book-keeping which he undertook without payment
CIL's business flourished. Initially, Ian employed his father, a qualified accountant, and his mother on the accounting and book-keeping side. Later, in 1973, Ian's youngest brother, Alastair (not to be confused with Patricia's eldest son, also called Alastair), joined him in the business to assist on the administrative side.
At the time, Malcolm was working for a business called Aldington Caravans (Redhill) Ltd as its general manager. He was also one of its directors. He had been with that company for five years. Its business was in retailing caravans. It was at Aldington Caravans that Malcolm met Patricia where she was employed as his personal assistant. They were not then married. That did not occur until 1 May 1976. Malcolm left Aldington Caravans in June 1973. For a while he was out of work.
After some months Alastair decided that he wanted to travel, gave in his notice and left the business. Finding that, with the business continuing to flourish, he needed more administrative support, Ian invited Malcolm to join him in an administrative role. Malcolm was willing to do so with the result that at around the end of 1973, or early 1974, Malcolm began his involvement with the business. He did so at a modest salary. He was appointed company secretary. The move proved successful and on 1 September 1974 Malcolm became a director of CIL.
Already in early January 1974 Ian had arranged with Michael Gooley that 150 of Trailfinders' shares in CIL should be sold to Malcolm. In due course Trailfinders disposed of the remainder of its shareholding and Ian disposed of his...
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