Re Horsley & Weight Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date30 July 1980
Judgment citation (vLex)[1980] EWCA Civ J0730-5
Docket NumberNo. 004006 of 1976
Date30 July 1980

[1980] EWCA Civ J0730-5

In The Supreme Court of Judicature

Court of Appeal

(Civil Division)

On Appeal from the High Court of Justice

Chancery Division

Companies Court

(Mr. Justice Oliver)


Lord Justice Buckley

Lord Justice Cumming-Bruce (not present when judgment delivered)


Lord Justice Templeman

No. 004006 of 1976
In the Matter of Horsley & Weight Limited
In the Matter of the Companies Act 1948

MR. E. C. EVANS-LOMBE Q. C. and MR. JOHN HIGHAM (instructed by Messrs. Titmuss, Sainer & Webb, Solicitors, London EC4Y 1LT) appeared on behalf of the Liquidator (Appellant).

MR. PHILIP GOODENDAY and MR. N. CLIFFORD (instructed by Messrs. Harry I. Alkin & Co., Solicitors, London WC1R 4QP) appeared on behalf of the Respondent, Stephen Albert Horsley.


The appellant liquidator of Horsley & Weight Ltd. ("the company") claims in proceedings under the Companies Act 1948, Section 333, against the respondent, Mr. Stephen Albert Horsley ("the respondent"), a declaration that the respondent was guilty of misfeasance and breach of trust in relation to the company in respect of the acquisition by the company of a pension policy for the respondent's benefit. The policy in question was taken in the name of the company and is held by the company, and consequently the question is whether that policy is held by the company for the benefit of the respondent, or is an asset applicable in the liquidation of the company for the benefit of the company's creditors. Mr. Justice Oliver rejected the liquidator's claim in a judgment delivered on 4th December last, and the liquidator appeals from that decision.


The company was incorporated in 1950 to take over a business of shopfitters then being carried on by the respondent and a Mr. Weight in partnership. The issued and paid-up share capital has at all material times been £1,200, divided into 1,200 shares of £1 each. Originally the respondent held 450 shares and his wife held 150; Mr. Weight held 450 and his wife 150. In 1972 Mr. Weight and his wife retired and their 600 shares were acquired by a Mr. Campbell-Dick, who then became a director. At the end of 1973 the respondent and his wife transferred their 600 shares to their son, Mr. Frank Stephen Horsley ("Mr. Frank Horsley"). Thenceforth Mr. Campbell-Dick and Mr. Frank Horsley were the only shareholders, each holding 600 shares. The respondent remained a director and continued to work in the business until his retirement in 1976. The other directors from the end of 1973 were Mr. Campbell-Dick, Mr. Prank Horsley and their twowives. The two ladies took no active part in the business or the company's affairs.


Among the objects for which the company was established, set forth in Clause 3 of its Memorandum of Association, is the following: "(0) To grant pensions to employees and ex-employees and directors and ex-directors or other officers or ex-officers of the company, their widows, children and dependants, and to subscribe to benevolent and other funds for the benefit of any such persons and to subscribe to or assist in the promotion of any charitable benevolent or public purpose or object".


Clause 3 contains the following paragraph, which has of recent years become regrettably common notwithstanding that it is often in some respects inappropriate, if not actually misleading: "All the foregoing objects shall be read and construed as separate and distinct objects and the generality of any such objects shall not be abridged or cut down by reference to any other object of the company". I shall use the expression "separate objects clause" to describe any clause to this effect.


During 1973, 1974 and 1975 the business of, the company expanded in consequence of Mr. Campbell -Dick and Mr. Frank Horsley acquiring control of, or interests in, certain other companies in a similar line of business to the company's business, for which the company acted as sub-contractor and supplier.


The affairs of the company seem to have been conducted with the utmost informality. The learned judge found that no board meetings were held. The respondent acted as assistant production manager, and although he remained a director in name his position was really that of an employee of the company. His trade was that of a carpenter and his responsibility was to estimate forcontracts to be carried out by the company. The financial policy was directed by Mr. Campbell-Dick. The respondent had no control over the financial affairs of the company and knew very little about them. At the relevant time Mr. Campbell-Dick and Mr. Prank Horsley were the only authorised signatories on the company's bank account. The respondent had no contract of service with the company. He, like the other directors, including the two ladies who took no part in the company's affairs, was remunerated at rates which varied from year to year, fluctuating, as it would seem, with the amount which was thought suitable to be drawn out of the company having regard to the fluctuating fortunes of the business. No dividends seem to have been declared.


The events which give rise to the liquidator's claim are described as follows in the respondent's affidavit: (9)Ever since I had parted with my shares as aforesaid I had made it clear that it was my intention to retire on my 65th birthday on 2nd May 1976 and my said indention was well known, but the idea that I should receive from the Company a retirement policy or other retirement benefit had never occurred to me. The events disclosed in the next paragraph hereof came as a complete surprise to me".


Paragraph 10: "On a date which I verily believe must have been 30th September 1975 (judging from the date on the application form hereinafter mentioned) I was working in my office on the ground floor of the Company' said premises. I remember that I was working at the time on the preparation of estimates to be submitted to intending customers. Whilst I was thus engaged, Mr. Campbell-Dick came into the room and asked me toaccompany him to his room on the 1st floor which I accordingly did. Waiting in his room was a gentleman whom I had not previously net and who was then introduced to me as Mr. Pope, a representative of Hambro Life Assurance Limited. I remember saying 'What's this all about?'. Mr. Campbell-Dick then told me that having regard to my intending retirement and because of my service to the Company over a period of 23 years the Directors had decided that the Company would spend £10,000 in providing me with a retirement pension policy. I have in fact now been advised that the policy provides for payment of a single premium of £9,000 and annual premiums of £1,000 and that the said single premium plus the first annual premium of £1,000 has been paid to Hambro, but I do not remember that being explained to me at the time. I was simply told that the Company would pay the sum of £10,000. I saw no reason to refuse this gesture by the Company and I was very glad to accept the same. Mr. Pope had with him a form which he produced and which had already been partly filled in by him and which he then completed in my presence and I then at his request and in his presence and in the presence of Mr. Campbell-Dick at the said interview signed the same. Looking now at exhibit 'GAAl' which is a photostat of the said application form, I notice that the document is also initialled by my son and Mr. Campbell-Dick on behalf of the Employer (i. e. the Company). I regret that I do not know at what stage those initials were put on the form and my son was not present at the said interview. Presumably the said initials must have already been on the said form because the form having been thus completed as aforesaid the same was then handed by Mr. Campbell-Dick to Mr. Pope together with a cheque for £10,000and Mr. Pope took the same away with him. I did not examine the cheque but it must have been signed by Mr. Campbell-Dick and my son as directors on behalf of the Company. That interim view was the beginning and end of the transaction so far as I was concerned; before then I did not have the slightest inkling of any intention that the Company should thus provide for me. I did not receive the policy as the same was presumably in due course received and held by the Company as trustee".


Mr. Justice Oliver accepted that evidence. The amount of the pension secured by the policy was £1,176 per annum, payable from 1st October 1975.


In his summons the liquidator described the respondent's alleged misfeasance and breach of trust as being "by procuring that the company take out for his benefit an executive pension plan policy with Hambro Life Assurance Ltd, and pay therefore a single premium of £9,000 and one yearly premium of £1,000 on or about the 1st October 1975". In the light of the respondent's evidence which I have read, that charge obviously cannot prevail. However, before the summons came on, the liquidator widened his grounds in two respects. In paragraph 3 of an affidavit sworn on 27th November 1978 the liquidator gave notice that he would contend that, if the respondent did not procure the company to take out the policy, "nonetheless that policy was procured to be taken out by the company in circumstances of misfeasance and breach of trust by the responsible directors of the company". The affidavit goes on to assert that "the respondent has had or alternatively now has knowledge of such misfeasance and breach of trust by the responsible directors and accordingly now holds the policy in trust for the company".


By a further affidavit sworn on 16th November 1979 the liquidator further deposed as follows: "With further reference to paragraph 3 of my affidavit of 27th November 1978, I should make clear that it will be contended on my behalf that the circumstances of misfeasance and breach of trust referred to include the disposition of the company's...

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