Kinlan v Crimmin
| Jurisdiction | England & Wales |
| Judge | Mr Philip Sales |
| Judgment Date | 11 April 2006 |
| Neutral Citation | [2006] EWHC 779 (Ch) |
| Docket Number | Case No: 2621/2005 |
| Court | Chancery Division |
| Date | 11 April 2006 |
[2006] EWHC 779 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Mr Philip Sales (Sitting as a Deputy Judge of the High Court)
Case No: 2621/2005
John Bryant (instructed by Hamilton Davis) for the Respondents
Hugo Groves (instructed by Machins) for the Applicants
Hearing dates: 1 st-2 nd February 2006
Judgment Approved by the court For handing down
Mr Philip Sales:
This is an application under s. 212 of the Insolvency Act 1986 by the liquidators of a company called Styleprint Ltd ("Styleprint") for various declarations and orders against the Respondents, Mr and Mrs Crimmin. Mr Crimmin was previously a shareholder in and director of Styleprint. Mrs Crimmin was previously a director of Styleprint. In summary, it is claimed that Mr and Mrs Crimmin contravened provisions of the Companies Act 1985 ("the Companies Act") and were guilty of misfeasance and breach of trust in relation to a share sale agreement made in 2001 between Mr Crimmin and Styleprint (acting by his then fellow shareholder and director, Alan Smith) for the sale of Mr Crimmin's shares in Styleprint to the company itself, and the payment of sums totalling £122,500 by Styleprint to Mr Crimmins under that agreement.
The Facts
Styleprint was incorporated on 1 May 1986, to carry on a printing business. It had a fully paid up share capital of 10,000 shares at £1 each. Mr Crimmin and Mr Smith were the sole shareholders, owning 50% of the shares each. They, together with their wives, were the directors.
Mr Crimmin and Mr Smith were both closely involved in the business. They began as the only employees of Styleprint, with a single old press. Over time, Styleprint bought new presses and other employees were taken on. For some years at the outset Mrs Crimmin did the books and invoicing, but later the company employed a book-keeper.
In about 1999 Mr Smith proposed that Styleprint should invest in some expensive pre-press equipment, and persuaded Mr Crimmin to accept this. But the acquisition of this equipment precipitated dissension in terms of the distribution of physical work in the business between the two men. Contrary to Mr Crimmin's expectations, Mr Smith used the new equipment and as a result did not do so much of the physical work required with the printing presses. Mr Crimmin became disillusioned and lost his enthusiasm for the business. He also felt that Mr Smith was taking decisions in relation to the business without consulting him fully about them.
From the early 1990s, Styleprint's accountant and auditor was Mr Suckling. In September 2000, Mr Crimmin and Mr Smith were due to have their annual meeting with Mr Suckling. While they were waiting for Mr Suckling, Mr Smith observed to Mr Crimmin that he (Mr Crimmin) was not happy in the business and asked whether he would consider selling his shares to Mr Smith. Mr Crimmin asked him to make an offer, which he would consider. Mr Smith said that all he could raise was £140,000. Mr Crimmin indicated that was too little, but it was agreed that Mr Suckling should be asked to value the company so that they could consider the matter further. In fact, when Mr Suckling arrived for the meeting, it became clear that Mr Smith had already spoken to him about the possibility of buying out Mr Crimmin's shareholding. Mr Crimmin again indicated that he would be interested in selling, if the price was right. Mr Suckling agreed to provide a valuation of the company, to facilitate the negotiation of a sale between Mr Crimmin and Mr Smith.
A couple of weeks later there was another meeting between the three men, at which Mr Suckling said that he valued Styleprint at about £450,000. Mr Smith again said that all he could raise was £140,000, and Mr Crimmin again said that he would not accept that. Mr Suckling then proposed that there might be another way forward, by arranging for the company to buy back Mr Crimmin's shares. Mr Suckling said that this would be possible, provided that the company had sufficient distributable profits. Mr Crimmin indicated he wanted half the value of the company; Mr Smith was not happy with that; Mr Crimmin said he would not accept less than £200,000; and it was left for Mr Smith to think this over.
About a week after this, there was another meeting between the three men. At this meeting, Mr Smith said he could not pay £200,000. Mr Suckling suggested that Mr Crimmin might be paid a smaller lump sum of £140,000, with the balance of the price being spread over six years by means of payments of £10,000 pa under a consultancy agreement between Mr Crimmin and Styleprint. Mr Suckling said that the company had sufficient money to fund this. (It is common ground that Styleprint did have substantial distributable profits: Styleprint's balance sheet as at 31 March 2000 showed that the profit and loss account stood in credit in the sum of £437,564; and even as at 31 March 2001, after Styleprint had paid out sums to Mr Crimmin as set out below, the credit on that account was still £234,603). Mr Crimmin said that this proposal was acceptable to him. Mr Suckling suggested that solicitors be instructed to draw up the necessary agreement, but Mr Smith did not wish to involve lawyers. Mr Suckling said that he could draw up the necessary agreement.
Shortly before Christmas 2000, Mr Suckling, Mr Crimmin and Mr Smith met again. Mr Suckling produced a draft share sale agreement, including provision for payment of £140,000 by Styleprint to Mr Crimmin with a further £60,000 payable over 6 years by way of consultancy fees. But Mr Smith sought to bargain further on the price, to substitute a lump sum payment of £130,000 (to include repayment of £5,000 then owed to Mr Crimmin on his director's loan account), plus £9,500 pa payable over 8 years. Mr Crimmin indicated that he would agree to that, although he thought the price was low. Mr Suckling was left to draw up a new version of the agreement for the directors of Styleprint to consider.
Also in December 2000, Mr Smith and Mr Crimmin negotiated terms on which Mr Crimmin should buy a Jaguar car that Styleprint held under a hire purchase agreement, which was valued at £22,000. It was agreed that, in return for the car, Mr Crimmin should settle the hire-purchase debt (which then stood at £17,923.97) and forgive the £5,000 loan he had made to Styleprint.
There was then a final meeting with Mr Suckling on 26 January 2001. On that occasion, all the directors of Styleprint attended (ie Mr and Mrs Smith and Mr and Mrs Crimmin). Mr Suckling had drawn up a new draft of the share sale agreement, copies of which were made available to all the directors to read. Mr Suckling took some time taking them through it. They all indicated they were happy with it. He gave Mr Smith a draft resolution to sign on behalf of Styleprint, and Mr Smith signed it. Then all the directors signed the share sale agreement ("the Agreement").
The resolution signed by Mr Smith (as "Director") was in these terms:
"ORDINARY RESOLUTION OF STYLEPRINT LIMITED
Passed 26 th January 2001
AT an EXTRAORDINARY GENERAL MEETING of the above-mentioned Company, duly convened and held … on 26 th January 2001 the subjoined ORDINARY RESOLUTION was duly passed, viz:-
RESOLUTION
That the issued share capital of the Company be decreased to Five Thousand Ordinary Shares of £1 by the redemption of Five Thousand Ordinary Shares of £1."
The Agreement was expressed to be between Styleprint, Mr Smith and Mr Crimmin (the vendor). Clause A3 recorded that David Suckling & Co did not hold themselves out as experts in the area of share sale agreements, and had warned the company and the vendor that they should seek independent legal advice. The Agreement included the following terms:
Clause B1: Consideration.
The vendor agrees to sell his entire shareholding in the company to the company for a consideration of £130,000. The consideration is to be paid by the company to the vendor in the following manner at the following dates:
£100,000 by bankers draft on completion of this agreement.
£30,000 by a cheque from the company to be paid after 6 April 2001 but before 30 April 2001.
Clause B2: Other sums due to vendor.
The company will repay the entire balance of the directors loan account due to vendor as shown in the company's books and records by 30 April 2001.
Clause B3: Consultancy Agreement.
The company wishes to use the vendor as a self-employed consultant after completion of this agreement. The vendor agrees to be a self-employed consultant to the company after completion of this agreement. The company and vendor agree that the consultancy agreement will provide the company with access to a maximum of 95 hours per annum of the consultant's or his substitute's time. The company and the vendor will agree a separate self-employed consultancy agreement which will be signed on completion of this contract. The consultancy agreement will commence on 6 April 2001. The self-employed consultancy contract will run for eight years and the company will pay the vendor £9,500 per annum. The company must pay the vendor his entire annual consultancy fee by 31 March of each year.
Clause B4: Resignations.
The vendor will resign as a Director and Company Secretary on completion of this agreement. Mrs Angela Crimmin will resign as a Director on completion of this agreement. The vendor and Mrs Angela Crimmin agree that no claim for unfair dismissal or compensation for loss of office will be brought at any time against the company.
Clause B5: Voting Rights.
On completion of this agreement the vendor will have no further voting rights or have any influence in the business or activities of the company. On...
To continue reading
Request your trial
-
Henry George Dickinson v Nal Realisations (Staffordshire) Ltd
...whether the claim was purely personal or also proprietary; and vii) Mr Philip Sales, sitting as a Deputy High Court Judge, said in Kinlan v Crimmin [2006] EWHC 779 (Ch), [2007] BCC 106, albeit obiter, that, had he thought the claim otherwise well-founded, he would have considered it appro......
-
Baker
...capable of amounting to a distribution under ICTA 1988, Income and Corporation Taxes Act 1988 section 209s. 209 (Kinlan v CrimminUNK [2006] EWHC 779 (Ch) ("Kinlan"), Summary The taxpayer was one of two 50 per cent shareholders of a company. Following a falling out between the taxpayer and t......
-
Richard Toone & Kevin Murphy v Dean Robbins & Richard Robbins
...binding as a resolution in general meeting would be. He noted the observations in Re: Torvale Group Ltd [1999] 2 BCLC 605 at 617 and in Kinlan v Crimmin [2006] EWHC 779 (Ch) at paragraph [44] to the effect that (a) any such waiver of formality must not prejudice the interests of the group w......
-
North South Pig Company (NI) Limited and Michael McAuliffe, James McGraft, John Hanrahan, David Rowan, Truly Irish Country Foods Limited
...Practice and the common law in relation to mistaken payments -see Re Cleveland Trust PLC [1991] BCLC 242 and Kinlan v Crimmin [2006] EWHC 779. [104] As regards each of the Board’s decisions to (i) recapitalise, (ii) pay a dividend and (iii) pay directors’ fees – the defendants say that all ......