Percival v Wright
| Jurisdiction | England & Wales |
| Date | 1902 |
| Year | 1902 |
| Court | Chancery Division |
Company - Directors - Fiduciary Position - Purchase of Shares - Negotiations for Sale of Undertaking - Obligation to Disclose.
The directors of a company are not trustees for individual shareholders, and may purchase their shares without disclosing pending negotiations for the sale of the company's undertaking.
WITNESS ACTION.
This was an action to set aside a sale of shares in a limited company, on the ground that the purchasers, being directors, ought to have informed their vendor shareholders of certain pending negotiations for the sale of the company's undertaking.
In and prior to October, 1900, the plaintiffs were the joint registered owners of 253 shares of 10l. each (with 9l. 8s. paid up) in a colliery company called Nixon's Navigation Company, Limited.
The objects of the company, as defined by the memorandum of association, included the disposal by sale of all or any of the property of the company. The board of directors were empowered to exercise all powers not declared to be exercisable by general meetings; but no sale of the company's collieries could be made without the sanction of a special resolution.
The shares of the company, which were in few hands and were transferable only with the approval of the board of directors, had no market price and were not quoted on the Stock Exchange.
On October 8, 1900, the plaintiffs' solicitors wrote to the secretary of the company asking if he knew of any one disposed to purchase shares.
On October 15, 1900, in answer to the secretary's inquiry as to what price they were prepared to accept, the plaintiffs' solicitors wrote stating that the plaintiffs would be disposed to entertain offers of 12l. 5s. per share. This price was based on a valuation which the plaintiffs had obtained from independent valuers some months previously.
On October 17, 1900, the chairman of the company wrote to the plaintiffs' solicitors stating that their letter of October 15 had been handed to him, and that he would take the shares at 12l. 5s.
On October 20, 1900, the plaintiffs' solicitors having taken a fresh valuation, replied that the plaintiffs were prepared to accept 12l. 10s. per share.
On October 22, 1900, the chairman wrote accepting that offer, and stating that the shares would be divided into three lots.
On October 24, 1900, the chairman wrote stating that eighty-five shares were to be transferred to himself and eighty-four shares apiece to two other named directors.
The transfers having been approved by the board, the transaction was completed.
The plaintiffs subsequently discovered that, prior to and during their own negotiations for sale, the chairman and the board were being approached by one Holden with a view to the purchase of the entire undertaking of the company, which Holden wished to resell at a profit to a new company. Various prices were successively suggested by Holden, all of which represented considerably over 12l. 10s. per share; but no firm offer was ever made which the board could lay before the shareholders, and the negotiations ultimately proved abortive. The Court was not in fact satisfied on the evidence that the board ever intended to sell.
The plaintiffs brought this action against the chairman and the two other purchasing directors, asking to have the sale set aside on the ground that the defendants as directors ought to have disclosed the negotiations with Holden when treating for the purchase of the plaintiffs' shares.
Eve, K.C., and Vaughan Hawkins, for the plaintiffs. There is no suggestion of unfair dealing or purchase...
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