Leonard Goodrich v AB
| Jurisdiction | England & Wales |
| Judge | Chief Master Shuman |
| Judgment Date | 21 January 2022 |
| Neutral Citation | [2022] EWHC 81 (Ch) |
| Docket Number | Case No: PT-2019-000654 |
| Court | Chancery Division |
[2022] EWHC 81 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Rolls Building,
7 Rolls Building, Fetter Lane,
London. EC4A 1NL
Chief Master Shuman
Case No: PT-2019-000654
Simon Atkinson (instructed by Macfarlanes LLP) for the Claimants
Elizabeth Weaver (instructed by Charles Russell Speechlys LLP) for the 1 st to 6 th Defendants
Adam Cloherty (instructed by Charles Russell Speechlys LLP) for the 7 th Defendant
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.
On 14 February 2020 the court approved and sanctioned the claimants to do all things necessary to complete a conditional share purchase agreement of their shares in Walker Books Limited (WBL) to a buyer. The sale completed on 7 May 2020. The application for approval had been brought under the jurisdiction in Public Trustee v Cooper. The claimants, who no longer hold any shares in WBL, wish to distribute the proceeds of sale but before doing so need to determine the scope of the beneficiaries (the construction application) and the extent to which the claimants may share information with each other in respect of the intended distributions and take that into account in their own decision as to distributions (the information application). It is anticipated that there will then be an application for the court to approve the final distribution policy, again under the jurisdiction in Public Trustee v Cooper.
The construction application concerns the construction of the trust deed dated 11 April 1990, which established the Walker Books Employee Trust (WBET), and comprises four issues:
Issue 1: What does the term “retired officers or employees” mean?
Sub-issue 1(1): does the term “retired” mean
(a) only those who reach usual retirement age while working for Walker Books and on that date or after cease to be part of the workforce (narrow meaning);
(b) those who, whether before at or after usual retirement age, cease working for Walker Books and cease to be part of the workforce (wider meaning); or
(c) those who, whether before or at or after usual retirement age cease working for Walker Books irrespective of whether they continue in the workforce thereafter or not (widest meaning)?
Sub-issue 1(2): if sub issue 1(1) is resolved in favour of the widest meaning, does the term
(a) exclude a person who subsequently joins a competitor of Walker Books (narrow meaning); or
(b) include a person who subsequently joins a competitor of Walker Books (wider meaning)?
Sub-issue 1(3): does the term
(a) exclude officers or employees who die in service (narrow meaning); or
(b) include officers or employees who die in service (wider meaning)?
Sub-issue 1(4): does the term
(a) exclude ‘bad leavers’ (narrow meaning); or
(b) include ‘bad leavers’ (wider meaning)?
Sub-issue 1(5): if sub issue 1(4) is resolved in favour of the narrow meaning, does the term
(a) exclude a person who leaves one role as a ‘good leaver’ but subsequently leaves another as a ‘bad leaver’ (narrow meaning); or
(b) include a person who leaves one role as a ‘good leaver’ but subsequently leaves another role as a ‘bad leaver’ (wider meaning)?
Issue 2: what does “spouse” mean?
Sub-issue 2(1) does the term
(a) exclude civil partners (narrow meaning); or
(b) include civil partners (wider meaning)?
Sub-issue 2(2): does the term
(a) exclude same-sex spouses (narrow meaning); or
(b) include same-sex spouses (wider meaning)?
Issue 3: Does the term “children”:
(a) exclude stepchildren (narrow meaning); or
(b) include stepchildren (wider meaning)?
Issue 4: Whether the terms “spouse”, “children” and “remote issue”
(a) exclude surviving spouses, children and remoter issue of officers/employees who die in service (narrow meaning); or
(b) include surviving spouses, children and remoter issue of officers/employees who die in service (wider meaning)?
For the purposes of these issues the following definitions apply:
“Walker Books” means Walker Books Limited and its subsidiaries;
“employee” means an employee of Walker Books Limited or any of its subsidiaries;
“officer” means an officer of Walker Books Limited or any of its subsidiaries.
Mr Goodrich, the 1st claimant, has filed a witness statement dated 26 January 2021, his seventh, in support of the claimants' construction application. In addition, Mr Andrew Stone, one of the two living original trustees of WBET, has filed a witness statement dated 14 December 2020. Mr Harold Gould, the other living original trustee of WBET, has filed a witness statement dated 14 December 2020.
The information application, as I have indicated, concerns whether the 1st and 2nd claimants and the 3rd and 4th claimants can share information with each other in respect of the distribution of the proceeds of sale and how each set of trustees can take the others' distribution into account in respect of their own distribution. Ms Cohen, the 3rd claimant, has filed a witness statement dated 26 January 2021, her 4th, in support of the claimants' information application.
THE PARTIES
The claimants comprise the two trustees of the Walker Books Employee Trust (WBET) and the two trustees of the Walker Books Limited Employee Share Ownership Plan 2001 (ESOP).
For the purposes of the first Public Trustee v Cooper application the defendants represented various categories of people potentially affected by the proposed sale. However, the categorisation is problematic for the construction application. I was referred to NBPF Pension Trustees Limited v Warnock-Smith [2008] EWHC 455 and Walker Morris Trustees Ltd v Masterson [2009] EWHC 1955, cases concerning applications for directions by pension fund trustees, albeit the general tenor was that the court needed to form a view on whether to approve the distribution as sought and for that purpose it was necessary for the parties to present a critical analysis of the proposals. In both cases it was impractical to divide up the potential beneficiaries into classes with separate representation who could each argue in a consistent manner free from conflict. Both cases show the flexibility with which the court can approach this conundrum. In PTNZ v AS [2020] EWHC 3114 the court was faced with the defendants, bar one, contending for a particular construction, the trustee being neutral and the defendant opposing the construction not attending court. The trustee was directed to assist the court by setting out the alternative argument so that the court had a fully argued construction case.
In relation to the current issues before me, the claimants were neutral on all issues and the first defendant had a conflict with potential distribution and neither the 1st nor 2nd defendants were willing to argue a narrow construction on issues 2 to 4. The parties' lawyers are to be commended for navigating a route in this case whereby in respect of each issue opposing views could be put before the court. The 1st to 6th defendants argued a narrow or wider but not widest construction on sub-issue 1(1) and a narrow construction on sub-issues 1(2) to 1(5). The 7th defendant was added to represent those who would benefit from the widest meaning on sub-issue 1(1) and the wider meaning on sub-issues 1(2) to (5), sub-issues 2(1) and 2(2), and issues 3 to 4. The 1st to 6th defendants were permitted not to advance any arguments in support of the narrow meaning for sub-issues 2(1) and 2(2) and for issues 3 to 4, notwithstanding the class of persons that they had been appointed to represent. Therefore, the claimants, notwithstanding their neutrality, were directed to advance arguments in support of the narrow meaning on those issues, as otherwise there would not be full argument before the court.
I am grateful to all counsel in this case who have each set out a comprehensive analysis both in writing and orally of the construction which they were tasked with supporting.
THE FACTUAL BACKGROUND
In 1978 Richard Sebastian Maynard Walker (Mr Walker) founded Walker Books, a United Kingdom based but internationally renowned publisher of high-quality children's books. Sebastian Walker Associates Limited was incorporated on 14 July 1978, the name was later changed to “Walker Books Limited”. WBL is the parent company of a group of UK and overseas subsidiaries located in Australia, New Zealand and the United States of America.
In 1989 Mr Walker was diagnosed with a serious illness. It is likely that this caused Mr Walker to create the Walker Books Employee Trust (WBET). He instructed Lewis Silkin to prepare the necessary documents. The deed of settlement is dated 11 April 1990 and made between Mr Walker as settlor and Harold Gould, Andrew Howard Stone and Mr Walker as trustees (the WBET trust deed). 51% of WBL shares were transferred into the WBET. The remaining 49% shares in WBL were held across five family trusts, established by Mr Walker.
On 16 June 1991 Mr Walker died at the age of 48, only 12 years after he had founded WBL.
The shares held in the family trusts were acquired by Walker Books Limited Employee Share Ownership Trust 1997, as a qualifying employee share ownership trust (QUEST). Until 2003, QUEST transferred shares directly to qualifying current and former employees and officers.
On 31 March 2003 the Walker Books Limited Approved Share Incentive Plan 2003 (the SIP) was...
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