Robert Hugh Thomas Davies v Ian Watkins
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lady Justice Black,Lord Justice Thorpe |
| Judgment Date | 04 December 2012 |
| Neutral Citation | [2012] EWCA Civ 1570 |
| Docket Number | Case No: A3/2011/3354 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 December 2012 |
[2012] EWCA Civ 1570
Lord Justice Thorpe
Lord Justice Lloyd
and
Lady Justice Black
Case No: A3/2011/3354
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
CARDIFF DISTRICT REGISTRY
HIS HONOUR JUDGE CHAMBERS Q.C.
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Russen Q.C. (instructed by Robert Davies Partnership LLP) for the Appellant
Richard Ascroft (instructed by Acuity Legal Ltd) for the Respondent
Hearing date: 3 October 2012
This appeal is brought against an order of His Honour Judge Chambers Q.C. sitting as a Judge of the High Court of Justice, Chancery Division, in Cardiff, made on 2 November 2011. The appellant is the Claimant, Mr Davies. The respondent is the First Defendant, Mr Ian Watkins. Mr Davies is, and brought the proceedings as, the executor of the late Mrs Doreen Watkins, mother of Mr Ian Watkins and of two other sons who were also Defendants but who took no part in the proceedings. She also had a daughter, Mrs Gaynor Colthart. The parts of the order which are challenged on the appeal are, first, an order that Mr Davies is not entitled to take his costs of the proceedings out of the estate of Mrs Watkins and, secondly, an order that Mr Davies pay to Mr Ian Watkins, out of his own assets, Mr Ian Watkins' costs of the hearing of the proceedings on 24 October 2008, and half of Mr Ian Watkins' costs of the hearing on 2 November 2011.
Mr Davies was represented on the appeal by Mr Jonathan Russen Q.C., replacing Mr Andrew Ayres who had appeared for Mr Davies at various stages in the court below (though not on 2 November 2011) and was to have conducted the appeal, but had been injured shortly before the appeal was due to come on. Mr Richard Ascroft appeared for Mr Ian Watkins, as he had done below. Permission for the appeal was given by Lord Justice Patten.
Before I explain the course of the proceedings and how the judge came to make the order as to costs which is challenged, I must describe the background briefly. Mrs Watkins was the widow of the late Ivor Watkins who died on 25 October 2000. His estate included one of the two issued shares in a company called Redijo Ltd (the "Company"); the other was held by Mr Ian Watkins. They had been the directors of the Company; Mr Ian Watkins became and remained the sole director. The Company had one asset, a long lease of some land in Cardiff which, at any rate from time to time, was seen as having development potential. Mr Ivor Watkins left his share in the Company to his widow. She died on 25 May 2005. Her estate included a house which she left to her daughter, and the single share in the Company which formed part of her residuary estate, which she left to her three sons in equal shares.
The articles of association of the Company contain no provision which would enable Mr Davies, as executor, to require Mr Ian Watkins to purchase the single share from the estate. Accordingly, the realisation of the share posed a problem for Mr Davies. In 2006 the Company's auditors valued the share at £181,213, applying a discount because of lack of control. In 2007 Mr Ian Watkins made a without prejudice offer of £125,000 to each of his two brothers for their interest in the share (thereby implying a value of £375,000 for the share) but this was rejected. In February 2008 HMRC valued the share at £133,853 for inheritance tax purposes as at the date of Mrs Watkins' death. From late 2005 until 2008 correspondence passed to and fro between Mr Davies and those acting for Mr Ian Watkins relating to the value of the share. It is not necessary to go into the details of that.
On 5 June 2008 Mr Davies wrote to Mr Ian Watkins stating his intention to apply to the court for directions. On 2 July 2008 Mr Davies issued a Part 8 Claim Form seeking such directions, joining as Defendants Mr Ian Watkins and his two brothers, supported by a witness statement. The proceedings so commenced are those in which this appeal arises. Because of the nature of the submissions made on the appeal, I need to describe the course of the proceedings in a little detail.
Mr Davies' letter dated 5 June 2008 started by informing Mr Ian Watkins that Mr Davies intended to apply to the court "for directions about taking legal proceedings against you and [the Company] in order to realise the full value of the estate's shares in [the Company] either by liquidation or by order requiring you to purchase the estate's shares at a valuation properly reflective of their true worth".
By the Claim Form Mr Davies sought "directions as to residuary estate of the deceased and in particular the interest of the estate in the share capital of" the Company. The claim was said to be brought under the principles in Re Beddoe [1893] 1 Ch 547. Mr Davies' witness statement explained that he sought the court's directions "as to how I should proceed in the light of the impasse which I have now reached in dealing with the only significant asset in the residuary estate of the deceased", namely the share in the Company. He described what he knew of the history of the Company, from before the death of Mr Ivor Watkins to date, and his attempts to engage with Mr Ian Watkins since the death of Mrs Watkins about the value of the share and its realisation for the benefit of the estate. At the end of the witness statement he said that the estate could only realise the true value of the share by approaching the situation in a normal commercial manner, with full and up-to-date information. He went on: "The only way in which I can do justice and fairness to the interests of the residuary beneficiaries as a whole is to take steps to realise true value for the shares in [the Company] whether by winding-up petition or by unfair prejudice petition". He exhibited to his witness statement, first, a bundle of correspondence, secondly instructions to Counsel and enclosures, and thirdly an opinion of Counsel. Because of the conflict in the position of Mr Ian Watkins, the latter two exhibits were not served on him. Mr Davies asked for the court's authorisation to commence appropriate proceedings against Mr Ian Watkins and the Company in order properly to realise the estate's interest in the share in the Company. That being the objective of the proceedings, it was appropriate to describe them as brought on the basis of the Court of Appeal's decision in Re Beddoe. They have been referred to, accordingly, as the Beddoe proceedings.
Mr Ian Watkins put in a witness statement in answer dated 31 July 2008. He put in issue a good deal of the history. More to the point, he asserted that there would be no proper basis for either form of proceeding indicated in Mr Davies' witness statement, whether a petition for a winding-up on the just and equitable ground, or an unfair prejudice petition under section 994 of the Companies Act 2006. He complained of the absence of any letter before action in relation to any such proceedings. Despite that, he made an offer to purchase his brothers' interests in the share, which can be summarised as follows. The value of the share would be a pro rata value of the entire share capital of the Company (so without any discount for lack of control); he would pay to each of his brothers one third of the value in return for a transfer to him of the share; the value of the share was to be determined by an independent expert to be identified by agreement if possible, acting as an expert; the costs of the valuation were to be borne equally by himself and the estate, unless the valuation came to less than the figure on which his previous offer to his brothers was based, in which case his brothers would pay the costs; Mr Davies would have a right of access to all information about the Company bearing on the value of the share, and both he and Mr Davies should have the right to make submissions to the valuer, in a form to be decided by the valuer.
Mr Davies made a witness statement in reply on 15 September 2008. He emphasised that his complaint was about being deprived of access to information about the Company. He took issue in terms with some of what Mr Ian Watkins had said, but said that the offer made in Mr Ian Watkins' witness statement was the approach that he had tried to encourage Mr Ian Watkins to adopt for some time past. In turn Mr Ian Watkins made a further witness statement on 6 October 2008.
In the meantime, Mr Davies had written seeking clarification of the offer on 9 September 2008. One obvious point was that, since the share was an asset of the estate, and there were liabilities which would need to be discharged, including by way of inheritance tax, the payment would have to be to Mr Davies, not directly to the brothers. Further correspondence ensued. The application came on for a first hearing before His Honour Judge Graham Jones on 24 October 2008, listed for a day. It was adjourned part heard. We were told, and can readily believe, that the judge urged the parties to reach agreement rather than incur further costs by way of contested proceedings. The correspondence continued, with that encouragement. Mr Ian Watkins' solicitors set out a more detailed offer on 11 November 2008, making it clear that it was not intended to deprive the estate of funds by making payment direct to the brothers. On 24 November Mr Davies replied, taking issue with some of the details of the offer, including that the valuation should be as at the date on which the valuer was instructed. His position was that the date should be 25 May...
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