Thomas Jones and Others v Firkin-flood and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BRIGGS,Mr Justice Briggs |
| Judgment Date | 17 October 2008 |
| Neutral Citation | [2008] EWHC 2417 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC08C01566 |
| Date | 17 October 2008 |
[2008] EWHC 2417 (Ch)
Mr Justice Briggs
Case No: HC08C01566
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand,
London, WC2A 2LL
Mr Jeremy Cousins QC & Mr Andrew Charman (instructed by Shammah Nicholls LLP, 340 Deansgate, Manchester M3 4LY) for the Claimants
Mr Gilead Cooper QC & Mr Andrew Child (instructed by Reynolds Porter Chamberlain, Tower Bridge House, St Katherine's Way, London E1W 1AA) for the Defendants
Mr Ian Clarke (instructed by Shammah Nicholls LLP, 340 Deansgate, Manchester M3 4LY) for the Minors and Unborn Beneficiaries
Hearing dates: 23 rd September —7 th October 2008
Approved Judgment
I direct that pursuant to CPR PD 39A paragraph 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.
Douglas F irkin-Flood (“Mr Flood”) died on 16 th February 2001, leaving behind him his eldest son Daniel, born on 30 th March 1963, his second son Ian born on 20 th July 1964 and his only daughter Louise born on 26 th January 1969. His wife Freda predeceased him on 28 th April 1998.
By his last will made on 12 th February 2001 (“the Will”), four days before he died, and admitted to probate on 4 th May 2001, Mr Flood appointed as his executors and trustees (“the Trustees”) his solicitor Thomas Jones, his son Ian, Mrs Norma Levy and Mr Graham Bramley, the last two being longstanding friends of his and employees in the family business.
He separated his estate into two parts. The first part was constituted as the Bredbury Hall Trust Fund (“the Trust Fund”), and consisted of all his shares in two companies, First House Leisure Group Ltd (“FHLG”) and First House Group Ltd (“FHG”). Apart from a specific but defeasible trust of income, which was to be paid as to 60% to Ian, 30% to Daniel and 10% to Louise, he left the Trust Fund to his Trustees upon broad discretionary trusts both as to capital and income in favour of a class of beneficiaries consisting of his three children and the children of Ian and his remoter issue, with a gift over to such of his three children as should be living at his death in the same percentage proportions as I have already set out in relation to income.
Mr Flood left the residue of his estate to his three children in the proportions 50% to Ian, 30% to Daniel and 20% to Louise with gifts over to their issue should any of his children predecease him.
The principal assets of FHLG and FHG were a hotel known as the Bredbury Hall and Country Club (“the Hotel”) and a night club called Quaffers. The night club together with substantial other assets were held through Quaffers Limited (“Quaffers”), a wholly owned subsidiary of FHLG. I shall refer to FHG, FHLG and its subsidiaries as “the Trust Companies”. Mr Flood had by the time of his death become a successful hotelier and night club proprietor.
By clause 12 of his will he expressed his wish that his son Ian should operate and direct the affairs both of the Hotel and of Quaffers after his death.
The net value of the estate was stated in the grant of probate to be £3.42 million odd, based upon a purported valuation of the assets of the trust fund at slightly over £3 million and an aggregate gross value of the residue of slightly over £600,000, of which the main item was Mr Flood's home in Lytham.
On 31 st January 2008 the Trustees and the other shareholders in FHLG (“the Sellers”) contracted to sell the entirety of its share capital to Bredbury Hall Ltd (“the Buyer”) for an aggregate consideration in cash and assets of £17,458,763. At that date, the 801 issued share in FHLG were owned as to 456 by the Trustees, as to 71 by Ian (who received them as the result of a variation of his mother's will, in substance by way of gift from his father) and as to 274 by FHG, the whole of the shares in which were part of the Trust Fund. The result was that, subject to adjustment pursuant to the terms of the Sale Agreement, the Trustees will receive the whole of the contracted consideration save for £1,547,531 payable directly to Ian in his own right. The bulk of the consideration has already been paid.
Pursuant to the Sale Agreement the Sellers including the Trustees gave wide-ranging warranties, and to protect the Buyer's potential claims under those warranties the Trustees covenanted not to deal with or distribute the Trust Fund, subject to certain exceptions, for a primary period of 7 years (capable of extension), and subject to a cap in an amount slightly less than the part of the cash consideration receivable by them under the Sale Agreement. One of the exceptions to that restraint enabled the Trustees to distribute to any adult beneficiary of the Trust Fund who first entered into a warranty covenant with the Buyer in substantially the same terms as that undertaken by the Trustees.
At a meeting on 6 th February 2008 the Trustees unanimously resolved that the capital of the Trust Fund should, subject to retention of tax, be distributed as soon as possible, as to £2.5 million net of tax to Daniel, £1.5 million net of tax to Louise, and as to the balance to Ian subject to any election on his part, after taking tax advice, to have part of his share distributed to his children. I shall refer to the Trustees' decision as “the provisional resolution”. The Trustees signed a written resolution to that effect and it was copied to Daniel and Louise's solicitors under cover of a letter of 1 st April 2008.
That letter formed part of the Trustees' considered response to a claim first notified on their behalf by Daniel and Louise's solicitors by letter of 29 th February 2008, that shortly after Mr Flood's death, they and Ian had agreed that their father's estate should be divided between them in three equal shares, the alleged quid pro quo for Ian's promise to that effect being that Daniel and Louise would not pursue a proposed challenge to the validity of the Will on the grounds of want of testamentary capacity and undue influence. By the same letter Daniel and Louise made wide-ranging complaints, both at the inadequacy of the distributions so far made to them, and as to the failure by the Trustees to provide proper accounts and information in connection with the administration both of the estate and the Trust Fund. I shall adopt the label applied by the parties to the alleged agreement for the equal distribution of Mr Flood's estate between his three children as “the Equal Shares Agreement”.
On 13 th June 2008 the Trustees issued a Part 8 Claim under CPR 64.2 seeking the court's determination:
i) whether their powers under the Will are restricted, limited or compromised by virtue of the alleged Equal Shares Agreement; and
ii) whether the Trustees may properly exercise their powers of appointment and distribution under the Will trust so as to give effect or substantial effect to the provisional resolution.
Apprehending the loss of a permanent tax advantage if the proposed appointments were not made before 5 th October 2008, the Trustees applied for, and obtained, an expedited trial of the claim, designed to lead to a determination of the above issues by the October 2008 deadline, and on 29 th July 2008 Daniel and Louise served a Defence and wide-ranging Counterclaim seeking some 22 heads of relief which may be summarised as:
i) a declaration whether and if so when the Trust Fund had ever been constituted;
ii) the removal of the claimants as executors and trustees both of the estate and of the Trust Fund (if constituted);
iii) the appointment of independent professional executors and/or trustees;
iv) a declaration as to the validity of the Sale Agreement, and its effect, if any, on them;
v) damages for losses sustained by them by virtue of the Sale Agreement and any other breaches of trust proved;
vi) declarations that the Trustees had surrendered their discretion by virtue of the Equal Shares Agreement or the Sale Agreement;
vii) declarations that the assets of the estate are held on trust in equal shares for each of them and Ian, or alternatively that any excess above a one third share distributed to Ian is held on trust for them;
viii) payment of arrears of income alleged to be due;
ix) a wide-range of accounts and inquiries in relation to the estate and the Trust Fund;
x) declarations as to the respective entitlements of them and Ian in relation to the share capital of Cheshire Sporting Club Ltd (“CSCL”).
A review of the Statements of Case, which were completed by the service by the claimants of a Reply and Defence to Counterclaim on 26 th August 2008, revealed a wide range of disputed issues between the parties, most but by no means all being disputes of fact. So complete has been the breakdown of what appears to have been a formerly substantial level of trust and confidence between Mr Flood's children, following his death, that the parties have not shrunk from alleging, as against each other, deliberate lies and deception, the fabrication of deeds and attendance notes, and the perversion of justice by the offering of financial inducements to witnesses.
In substance, the defendants say that Ian, with the connivance of the other Trustees, and despite all of them having notice of the Equal Shares Agreement, thereafter embarked on a deliberate and initially clandestine course of obtaining for himself the lion's share of his father's estate while pretending initially to provide equal benefits for his siblings. The claimants' case, in a nutshell, is that the...
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