Phipps v Boardman
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE PEARSON |
| Judgment Date | 26 January 1965 |
| Judgment citation (vLex) | [1965] EWCA Civ J0126-3 |
| Date | 26 January 1965 |
| Court | Court of Appeal |
[1965] EWCA Civ J0126-3
The Master of the Rolls (Lord Denning)
Lord Justice Pearson and
Lord Justice Bussell
In The Supreme Court of Judicature
Court of Appeal
From Mr. Justice Wilberforce
MR. W. ARTHUR BAGNALL, Q. C. and MR. ERIC GRIFFITH (instructed by Messrs Joyns on-Hicks & Co.) appeared as Counsel for the Appellants.
MR. RAYMOND WALTON, Q. C. and MR. N. C. H. BROWNE-WILKINSON (instructed by Messrs J. D. Langton & Passmore, Agents for Messrs Mellows & Sons, Bedford) appeared as Counsel for the Respondent.
Mr. C. W. Phipps was a prominent manufacturer in Northampton. He died in 1944. I will call him "old Mr. Phipps" so as to distinguish him from his sons. He left a considerable estate. Under his will his trustees had to provide an annuity of £3,000 for his widow: but, subject to that annuity, the trustees had to divide the estate between his four children. Bach of his three sons was to have five-eighteenths of his estate and his daughter three-eighteenths. One son has since died.
In telling the story I must first describe the persons who come into it. In the year 1956 the trustees of the estate consisted of these three: (1) The widow, old Mrs. Phipps. She was 83 years of age and suffering from senile dementia. She was not really fit to be a trustee but no one had taken any steps to remove her. She was not consulted about the management of the estate. She did not die until 19th November? 1958. (2) The daughter, Mrs. Noble. She lived in Dorset and was not easily available. The old mother lived with her for much of the time, Mrs. Noble did not take any active part in the business affairs of the estate. She was ccntent to rely implicitly on the advice of the solicitor, Mr. Boardman. (3) A chartered accountant, Mr. Wilfred Fox, who practised in Northampton. He looked after the trust accounts.
The solicitor to the estate was Mr. Thomas Gray Board-man. He was described by the Judge as "a man of conspicuous ability, of great energy, clarity of mind and persistence, with a flair in negotiations". The beneficiaries of the estate consisted of old Mrs. Phipps, the widow, the three surviving children and the representatives of the deceased son. The two sons figure largely in this case. The elder son was Mr. John Anthony Phipps. He was a farmer in Bedfordshire who was concerned to get his share of the estate, but was not consulted much about the management of it. The younger son wag Mr. Thomas Edward Phipps. He succeeded his father as chairman of the family business. Hehad good business common sense. but on matters of complexity, in particular those which arose in this action, he relied on the advice of Mr. Boardman. the solicitor.
Such were the persons concerned. I turn now to the property. Old Mr. Phipps had a controlling interest in the family business of Phipps & Son, Ltd. of Northampton. He was also the largest shareholder in a private company called Lester & Harris Ltd. It had factories in Coventry and Nuneaton and in Australia. This case concerns the shares of that Company. The total issued capital was 30,000 £1 shares. Old Mr. Phipps owned 8,000 of these shares: and these formed part of his estate. 15.000 shares were owned by a group of directors headed by Mr. Smith, a solicitor of Coventy. The remaining 7.000 were in other hands. There was in the Articles of Association a pre-emptive provision in these words: "No share shall be transferred to any person who is not a member, so long as any member is willing to purchase the same at a fair value".
In December 1956 the Company's accounts showed that the assets were considerable, but the earnings were low and the profits were down. The annual general meeting was due to be held on 28th December, 1956. Mr. Fox (the accountant-trustee) and Mr. Boardman (the solicitor) talked the matter over with Mr. Thomas Phipps (a principal beneficiary). They all felt that the accounts were very unsatisfactory and that "something should be done to try to improve the position". Mr. Thomas Phipps suggested that he himself and Mr. Boardman should go over to the annual general meeting at Coventry on 28th December, 1956. Their purpose was "to representing the holding" of 8,000 shares held by the estate. But neither of them were trustees. So proxies had to be obtained so as to enable them to attend and vote. Forms were signed by two of the trustees, Mr. Fox and Mrs. Noble. But old Mrs. Phipps did not sign as she was in a nursing home.
On 28th December, 1956, Mr. Boardman and Mr. Thomas Phipps attended the annual general meeting "as representing the estate"Mr. Boardman stated that the Phipps family were very dissatisfied. He proposed that the final dividend should not be paid. He was out-voted. He asked that Mr. Thomas Phipps be elected to the Board, but as he had given no prior notice, it was left in abeyance. After the meeting Mr. Boardman reported to Mr. Fox that they had had a very hostile reception and could not get anywhere.
During the next fortnight Mr. Boardman and Mr. Thomas phipps made an important decision. They decided that they personally would make a "take-over" bid for all the outstanding 22,000 shares in Lester & Harris Ltd. They thought that, if they got control, they could liquidate some of the assets and make a repayment of capital to the shareholders. This would be beneficial all round: in that (1) the estate would stand to benefit because its 8,000 shares would benefit: and, of course, (2) Mr. Boardman and Mr. Thomas Phipps would stand to benefit too from the shares they acquired personally. Mr. Boardman thought that the two of them must do it personally because the trustees could not properly make a bid themselves for the outstanding 22,000 shares. The trustees by the will had only power to invest in trustee securities, not in Lester & Harris Ltd. In any case Mr. Fox considered the matter and rejected any idea of the trustees buying the shares. So Mr. Boardman and Mr. Thomas Phipps decided to make the bid personally on their own account.
Mr. Boardman and Mr. Phipps reported this decision to the accountant-trustee, Mr. Fox, in a letter of 11th January, 1957: and afterwards saw him. In the witness box when asked if they asked his consent, Mr. Fox replied: "I do not know that they asked my consent. I was only too glad". He asked Mr. Board-man to write to Mrs. Noble. Mr. Boardman did so in a letter of 17th January, 1957. He told her that "the making of an offer in this form is not a matter which the trustees should properly do and Tom and I have, therefore, agreed to make an offer personally. Our offer price is £2. 5s.0d. per share". He concluded by saying that he hoped the proposal would be to theadvantage of the trustees. "We both feel", he said, "that you, should know what is happening".
On the 27th January, 1957, Mrs. Noble replied in a letter which showed that she did not understand that it was personal. She said to Mr. Boardman: "I think the line you and Tom are taking is the only possible one. But if they do accept your offer, where is the money coming from to pay for the shares? The trust fund, I presume". On the next day, 28th January, 1957, Mr. Board-man replied to her: "I do not think the trustees can properly make of this nature, and for that reason Tom and I have made it personally, with the object of taking such shares as we can and the balance being taken by Phipps & Son, Ltd". Mrs. Noble did not reply. As the Judge said, she relied on Mr. Boardman implicitly.
Such were their communications to two of the trustees. They did not communicate with the third trustee at all. Old Mrs. Phipps was left out of account altogether. True it is that she was not capable of understanding it, but nevertheless the fact was that she was still a trustee. She was not consulted and she did not consent. The beneficiaries were not told anything. Mr. Boardman and Mr. Tom Phipps did not tell Mr. Anthony Phipps: nor did they tell the representatives of the deceased son.
Thus the important decision was made. Mr. Boardman took steps immediately to implement it. He conducted a long series of negotiations with consummate skill. The Judge paid him this tribute: "It is interesting and at times fascinating to watch, through the long correspondence that has been put in, the mannerin which he drives Mr. Smith, his fellow solicitor, Chairman of Lester & Harris, from one prepared position to another until the fruit was ready to drop into his hand". The negotiations fell into three phases:-
The first phase took place from January, 1957, to April, The first phase phase took place from January, 1957 Mr. Boardman and Mr. Thomas Phipps personally made an offer to all the shareholders of Lester & Harris to buy their shares at £2. 5s.0d. cash per share. (It wasafterwards increased to £3). For this purpose Mr. Boardman, had, of course, to get a list of the names and addresses of the members. Neither he nor Mr. Thomas Phipps had any right to the list as they were not members. So he used bis position as solicitor to the trustees to get the list. Then they aent a circular to the shareholders in which they criticised the management of the company: I and they used for this purpose the information which they had received at the annual general meeting as representatives of the trustees. Indeed the circular itself shows that, whilst making a personal offer for the shares, they regarded themselves also as representing the estate. The very last sentence said: "It is, therefore, with the object of acquiring a controlling holding, so that the company can be reorganised and the capital investment that we represent be saf e guar ded, that we are now making an offer for all the ordinary shares in the capital of the company". Thereupon Mr. Smith, on behalf of the directors, issued a counter circular and offered to buy the...
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