England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		11 July 2002

Mr Justice Jacob:

1. Brian Hurst sues the executors of the late Ada Crampton (“Ada”) and a company called Crampton Bros. (Coopers) Ltd. The executors are the registered shareholders of 1,500 shares in the company. The company itself plays no part in the litigation but will obviously be bound by the result.
2. The facts relating to this appeal are not in dispute. Ada died on 19^th November 1998. Shortly before then, 30^th September 1998, she met a Mr Pennington, an accountant in the company's auditors. She told him she wanted to give 400 shares in the company to her nephew, one Harold Crampton Junior, known in these proceedings as “Harry". At the time she held 1,500 shares in the Company. Mr Harold Crampton Snr held the remaining 500. Mr Pennington instructed a member of his staff to prepare a share transfer form for the 400 shares. Ada signed the transfer form on 12^th October and returned it to Mr Pennington. He gave it to a member of his staff who placed the form on the file where it remained until after Ada's death.
3. Ada also told Harry that she wanted to give him some of her shares and that she wanted him to be a director of the company. Pursuant to that Mr Pennington wrote to Harry on 15^th October 1998 enclosing the appropriate form of consent to act as a director. The letter told Harry that Ada had instructed Mr Pennington to transfer 400 shares to him. The letter added that this required no action on Harry's part. Harry signed this form and Ada countersigned it.
4. These events have already lead to litigation which has been considered by the Court of Appeal (Schiemann, Clarke and Arden LJJ) on 4^th March 2002. Ada's executors instigated that litigation. Following the death all 1500 of her shares were registered in their name. They wanted to know whether 400 of the shares were within the estate or were held for Harry. The Court of Appeal held that 400 shares were held for Harry - that the transfer form was fully effective and not an incomplete gift.
5. Mr Hurst, a barrister who is appearing in this case in person, has, it is accepted, one share validly registered in his name. This he acquired from Harold Crampton Snr. by virtue of an assignment of 31^st January 2001. Mr Hurst also claims to have acquired from Harold and others the benefit of the pre-emption right asserted in these proceedings. The executors, who, following the decision of the Court of Appeal that they hold on trust for Harry, act pursuant to instructions from him, dispute the effectiveness of the assignment. They accept, however, that Mr Hurst has standing to appear by virtue of his single share.
6. Mr Hurst submits that the "transfer" of shares to Harry was in breach of the so-called "pre-emption" clause in the company's articles of association. This clause (clause 8) reads as follows:

"(A) Subject as in these Articles provided, any share may be transferred to any member of the Company, and any share may be transferred by a member to his or her father or mother, or to any lineal descendant of his or her father or mother, or to his or her wife or husband, and any share of a deceased member may be transferred to the widow or widower or any other such relative as aforesaid of such deceased member or may be transferred to or placed in the names of his or her executors or trustees; and in any such circumstances (but subject as aforesaid) regulation 3 of Table A, Part II, shall not apply save to ensure that the number of members shall not exceed the prescribed limit or to prevent a transfer of shares on which the Company has a lien.

(B) A share shall not be transferred otherwise than as provided in paragraph (A) of this Article unless it first be offered to the members at a fair value to be fixed by the Company's Auditors. Any member desiring to sell a share (hereinafter referred to as a "retiring member") shall give notice thereof in writing to the Company (hereinafter referred to as a "sale notice") constituting the Company his agent for the purpose of such sale. No sale notice shall be withdrawn without the Directors' sanction. The Directors shall offer any share comprised in a sale notice to the existing members, and if within twenty-eight days after the sale notice has been given a purchasing member is found such purchasing member shall be bound to complete the purchase within seven days. Notice of the finding of the purchasing member shall be given to the retiring member, who shall be bound on payment of the fair value to transfer the share to the purchasing member. If the retiring member fails to complete the transfer, the Directors may authorise some person to transfer the share to the purchasing member and may receive the purchase money and register the purchasing member as holder of the share, issuing him a certificate therefor. The retiring member shall deliver up his certificate and shall thereupon be paid the purchase money. If within twenty-eight days after the sale notice has been given the Directors shall not find a purchasing member for the share and shall give notice accordingly, or if through no default of the retiring member the purchase is not duly completed, the retiring member may at any time within six months after the sale notice was given, but subject to regulation 3 of Table A, Part II, sell such share to any person and at any price."

7. Harry was not a member of the class referred to in paragraph 8A (the "privileged class"). The transfer form signed by Ada reads (so far as relevant) as follows:

"I hereby transfer the above security [identified as 400 shares] out of the name aforesaid [i.e. Ada] to the person named below [i.e. Harry]

I request that such entries be made in the register as are necessary to give effect to this transfer"

8. The articles of association incorporate Table A articles save insofar as provided otherwise. Arts. 22 and 23 of Table A provide:

"22. The instrument of transfer of any share shall be executed by or on behalf of the transferor and transferee, and, except as provided by sub-paragraph (4) of paragraph 2 of the Seventh Schedule to the Act, the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof.

23. Subject to such of the restrictions of these regulations as may be applicable, any member may transfer all or any of his shares by instrument in writing in any usual or common form or any other form which the directors may approve."

9. It is common ground that the requirement that the instrument of transfer be executed by the transferee was abrogated by the Stock Transfer Act 1963. All that was needed for the instrument to be effective in form is execution by the transferor, namely Ada.
10. For present purposes an important part of the decision of the Court of Appeal lies in paragraph 67 of Arden LJ's decision (with which Schiemann LJ) agreed. She said:

"It is not necessary to decide the case simply on that [i.e. that delivery of the share transfer form was not necessary before the gift could be effective] basis. After the share transfers were executed Mr Pennington wrote to Harold on Ada's instructions informing him of the gift and stating that there was no action that he needed to take. I would also decide this appeal in favour of the respondent on this further basis. If I am wrong in the view that delivery of the share transfers to the company or the donee is required and is not dispensed with by reason of the fact that it would be unconscionable for Ada's personal representatives to refuse to hand the transfers over to Harold, the words used by Mr Pennington should be construed as meaning that Ada and, through her, Mr Pennington became agents for Harold for the purpose of submitting the share transfer to the Company. This is an application of the principle of benevolent construction to give effect to Ada's clear wishes. Only in that way could the result "This requires no action on your part" and an effective gift be achieved. Harold did not question this assurance and must be taken to have proceeded to act on the basis that it would be honoured."

11. So Mr Pennington was holding the form for Harry. Thus Ada was not in the position of an ordinary bare trustee who can be compelled by an order to transfer legal title to the beneficiary. If Harry had applied for such order against Ada, he would be met by the answer "none is necessary". This is not a case of equity looking upon that which ought to be done as done. It had been done. There was nothing left for Ada to do. The executors stand in her shoes. The fact that Harry has not been registered as the shareholder arises purely from the fact that he has not asked for that to be done. He has no intention of so doing because it stands accepted that would trigger the pre-emption clause. Mr Hurst contends that it was triggered earlier - at least by the time Mr Pennington was holding the share transfer certificate for Harry.
12. So that is the question on the appeal. What event pulls the trigger? Deputy Master Weir held (before the decision of the Court of Appeal), in effect, that no triggering event had happened. I do not fully follow his reasoning - in particular he seemed to think that "nothing could be done to force her to proceed with the transfer in its original form". But as I have said, there was nothing for Ada to do. Non-registration of Harry as a shareholder is a result of his unilateral action. In the event the Deputy Master gave judgment against Mr Hurst and struck out the relevant parts of the claim. Both sides accept that the Deputy Master was right to give judgment. The point can be, and should be, decided now.
13. The question turns on the true construction of the pre-emption clause. Before I consider that, however, it is helpful to consider some of the cases cited to me, though, save for one, they were concerned with differently worded clauses. The reason the cases are of some assistance is to show the approach to be adopted to this sort of clause. They cannot, of course, determine how this particular clause is to be understood.
14. First then, there are two principles which are somewhat in contradiction of one another. The first principle is based on the fact that a share is property. People are entitled to do what they like with their profits, subject to any restraints. Restraints must be accordingly construed restrictively. This is the Greenhalgh v Mallard principle [1943] 2 All ER 237. Lord Greene MR said, at p.237:

"Questions of construction of this kind are always difficult, but in the case of the restriction of transfer of shares I think it is right for the Court to remember that a share, being personal property, is prima facie transferable, although the conditions of the transfer are to be found in the terms laid down in the articles. If the right of transfer, which is inherent in property of this kind, is to be taken away or cut down, it seems to me that it should be done by language of sufficient clarity to make it apparent that that was the intention."

15. The counter-principle runs thus: clauses restricting who may be members of a company such as a small private company have the clear purpose of keeping the membership to the privileged class defined in the article - an outsider can only come in if no member is willing to buy. This principle was best expressed by Lord Reid in Lyle & Scott v Scott's Trustees [1959] AC 763 at p.777:

"The purpose of the article is plain: to prevent sales of shares to strangers so long as other members of the company are willing to buy them"

16. Next there is the principle that this sort of clause should be construed as a business document:

"I think that the articles of association of the company should be regarded as a business document and should be construed so as to give them reasonable business efficacy, where a construction tending to that result is admissible on the language of the article, in preference to a result which would or might prove unworkable" (per Jenkins LJ in Holmes v Keyes [1958] 1Ch. 199 at p.215).

17. Then there is the question of whether it is legitimate to imply terms to make a pre-emption-type clause work. Here the leading authority is Tett v Phoenix Property [1986] BCLC 149. The relevant part of the relevant article read:

"… no share shall be transferred by a member or by any person entitled to transfer the same to any person not already a member of the company if any member [of a privileged class] shall be willing to purchase the same."

18. Stripped of complications what happened was that a shareholder executed a transfer form in favour of a stranger. The company refused to register the transfer on the grounds that the shares had not been offered to members of the privileged class. The Court of Appeal held the company had acted correctly. The article contained a sufficiently clear express restriction to cut down the right of a shareholder to transfer his share. The restriction was held to workable on the basis that a term should be implied to make it so. The implied term was (per Slade LJ at p.160):

"Before transferring any shares to any person not already a member of the company, the intending transferor shall first take reasonable steps to give all other members and their respective wives, husbands, parents and children (not being minors) a reasonable opportunity to make an offer to purchase the same at a fair value to be determined by the auditors in default of agreement."

19. Slade LJ explained why the term should be implied:

"The justification for implying such a term may be tested in this way. Let it be supposed that at the time when the articles of association of the company were being negotiated, some officious bystander had asked the interested parties: 'Is a member to be free to transfer his shares to a non-member without first taking reasonable steps to give all other members and the relevant class of relatives a reasonable opportunity to offer to purchase them at a fair value?' I feel no doubt that the answer would have been to the following effect: 'Of curse not; we did not trouble to say that; it is too clear'."

20. Next I must refer to the case most relied upon by Harry, Safeguard v National Westminster Bank [1982] 1 WLR 589. The relevant article (7B) read:

"A member shall not be entitled to transfer an Ordinary Share except subject to clause 3 of Part II of Table A and in accordance with the following provisions: (a) An Ordinary Share may be transferred by a member or other person entitled to transfer to the other members in them proportions between them (if more than one) as nearly as may be to the number of Ordinary Shares held by them respectively, but no Ordinary Share shall be transferred to a person who is not a member as long as any member is willing to purchase the same at the fair value. (b) Except where the transfer made is pursuant to Article 8 hereof, in order to ascertain whether any member is willing to purchase an Ordinary Share, the proposing transferor shall give notice in writing (hereinafter called "the transfer notice") to the Company that he desires to transfer the same. Such notice shall constitute the Company his agent for the sale of such share to any member of the Company at the fair value".

There was provision as to what was to happen if a transfer notice was executed and presented to the company. The directors had to offer them to the members to purchase at fair value.

21. What happened was that a shareholder died. His will appointed the bank as the executors (following a deed of family arrangement) leaving shares to two strangers. The Bank became registered as a shareholder. That, it was common ground, was permissible under the Articles (see per Vinelott J at [1980] 3 AER 849 at p.854). The Bank said it held the shares on trust for the strangers. They said they did not want a transfer to them - they were content to remain as equitable owners. The question was whether there had been a breach of the Article. That said a member was "not entitled to transfer" to a stranger without first going through the transfer notice procedure. Was that what had happened? Vinelott J and the Court of Appeal held it had not. All that had passed was an equitable interest in the shares.
22. Oliver LJ put it this way at p.598:

"I find myself quite unable to construe the article in the instant case in a way which would make a person who involuntarily comes under an obligation to transfer, if called upon, a "proposing transferor"

23. Oliver LJ also approved Vinelott J's analysis of the difficulties which would arise if the article were "inapt to apply to transfers of beneficial interest." Vinelott J said this (p.858):

"Faced with these conflicting observations in the House of Lords I must decide which to follow. Although it may seem at first sight unduly restrictive to read the word 'transfer' as referring only to a transfer of the legal interest in a share leaving, as Lord Sorn put it, the 'obvious manoeuvre' of a sale of the beneficial interest unprohibited, art 7 seems to me wholly inapt to 'catch' transfers of beneficial interests. A 'transfer of a share' in the ordinary sense of that expression is a transfer of the legal title to the share with the rights and liabilities attaching to it; on registration of the transfer the transferor ceases to be, and the transferee becomes, a member of the company in right of that share. A member who desires to transfer a share will carry his intention into effect by executing a transfer and lodging it for registration. At that stage the restrictions in the pre-emption provisions come into operation. To treat the references to the transfer of a share as comprehending a transfer or disposition of a beneficial interest in a share is to give the expression 'transfer of a share' a meaning wider than it would ordinarily bear. No doubt there are contexts in which that extension would readily be made. But this context of art 7 and 8 points, if anything, in the opposite direction. Any number of equitable interests can be carved out of the equitable ownership of a share. But it is impossible to construe art 7 as applying to any disposition of a beneficial interest in a share however small. And if the article is construed as applying to a disposition of the entire beneficial interest in a share but not to a disposition of part of the beneficial interest it may operate in a way that is both capricious and which in practice would afford little protection against the 'obvious manoeuvre' of a shareholder determined to defeat the pre-emption provisions."

24. Vinelott J went to give examples of the difficulties and inconsistencies which would be involved if the clause referred to a beneficial interest, examples which impressed Oliver LJ.
25. Next I must mention Re Macro (Ipswich) [1994] 2 BCLC 354. This has the advantage of being a case with an identically worded pre-emption clause to that in this case. That rather suggests that at one time the clause was in use as a precedent, but I am told no-one can find the source. The point concerning the clause arose in the context of a s.459 petition. The shareholders (Ian and Neil) had entered into an agreement with strangers to sell their shares. And they had executed transfers. They had also entered into a trust declaration saying they would forthwith when called upon to do so, transfer their interest in the shares to the stranger and that for that purpose they had delivered to the stranger the share certificates and the transfer. Arden J said this (p.402):

"The second sentence of para (B) of the pre-emption articles imposes an obligation to serve a sale notice (as defined) on a 'member desiring to sell a share'. I accept that, in this context, the relevant desire must be to transfer a share. Even that point, however, does not prevent the article from applying in the circumstances of this case. Ian and Neil have executed transfers for their shares. Despite the wording of cl. 4 of the declarations of trust, there is nothing further for them to do when Julian decides to register the shares in his own name. They have done more than merely sell the beneficial interest in the shares. They have agreed also to sell the legal title to their shares and provided forms of transfer executed by them".

Arden J went on to hold that in those circumstance the pre-emption clause bit.

26. Finally, so far as the authorities are concerned, I return back to Lyle & Scott. It was Lord Reid who said (p.778):

"Transferring a share involves a series of steps, first an agreement to sell, then the execution of a deed of transfer and finally the registration of the transfer. The word 'transfer' can mean the whole of those steps. Moreover the ordinary meaning of 'transfer' is simply to hand over or part with something. The context must determine in what sense the word is used."

27. I do not go to more of the authorities cited. I have already gone to enough (probably more than enough) to assist me in the approach I must take in this case.
28. When the executors' application for determination of whether or not the transfer form was an effective document came before HHJ Howarth, he held, obiter, that the pre-emption clause was prima facie effective. He said:

"The result is this, it seems to me, that the gift is a valid and effective and completely constituted gift, but it may well be divested in this sense, that if Mr Harold Crampton Snr. [who was the only other shareholder at the time and from whom Mr Hurst's share has come] asserts his rights of pre-emption, if he has not already sought to assert them, and it is still not too late for him to do so, then he could prevent it from taking place at all. Of course, the purchase price which he paid in that way would go to Harold Crampton Jnr. [Harry]; it would not go to Ada's estate."

The Court of Appeal expressed no opinion on the point, which did not strictly arise.

29. I now turn to the clause concerned, bearing in mind the principles from the cases. Firstly it is abundantly clear that the intention behind the clause is that there shall be no "transfer" of shares to strangers without a pre-emption. The clause is designed to cut down members' freedom to "transfer" shares. If "transfer" means "part with" or "hand over" and has a business meaning then an act which amounts to a parting with the share will suffice to amount to a transfer.
30. The second sentence sets out the beginning of a procedure initiated when there is "any member desiring to sell a share." Mr Hurst contended that those words should be construed as meaning "any member desiring to transfer the legal interest in a share, whether by gift or sale." Mr McGhee submitted the words meant what they said, they only applied when the member wanted to sell. He said the first sentence stood on its own. It only took effect when the legal interest was fully conveyed by registration of the transferee as a shareholder.
31. Although I accept the first part of Mr McGhee's submission, I reject the remainder. The second sentence onwards applies to what happens when a member wants to sell. But on top of that the first sentence imposes an overriding requirement. It is expressed in the passive, but any fair business reading of it imposes positive obligations and duties on the members. It is fair to read it as "no member shall transfer." That does not mean a member cannot deal with his beneficial interest. But where a member goes further than that, and actually gives a transferee a signed transfer form, it seems to me rational and businesslike to say that the member has transferred the share to the transferee. It is what the form actually said - "I hereby transfer." Once a member has done that, he has lost all control over the share. Whether the transferee is actually registered in the company's books is no longer his business. The share is no longer the transferor's in any meaningful business sense.
32. I do not think Safeguard provides Mr McGhee with the support he needs. That was a case of what amounted to a bare trust. The shares not only were registered in the name of the Bank, but there was no attempt to transfer title in them. True the beneficiaries could compel the Bank to execute an instrument of transfer but they had not. In the present case more had happened. There has been a transfer. It is just that the transfer had not been registered by choice of the transferee.
33. I find confirmation for my view in the remainder of the clause dealing with what happens when a member wants to sell. The "retiring member" is "bound, on payment of the fair value to transfer the share to the purchasing member". That can only mean execute an effective instrument of transfer. It is not the retiring member's job to see that the purchaser is put on the register of shareholders. Again, the Article provides what is to happen if the retiring member "fails to complete the transfer". That must be a reference to the instrument of transfer itself, not the registration of it. Moreover, if there is failure to complete the transfer, the Directors may authorise some person to transfer the share "and register" the purchasing member as holder of the share. So in this very clause a distinction between registration and transfer is apparent.
34. Really Mr McGhee's argument amounts to reading "transferred" in the first sentence as "registered." There is no business reason so to do.
35. I find further confirmation from Arden J's decision in Macro (Ipswich). The argument before her was, as in this case, that the pre-emption clause applied only to transfers of the legal title in the shares. The argument, as here, was based on Safeguard - that the article applied only to transfers of the legal title in a share. The passage I have already quoted shows that an essential part of Arden J's reasoning was that despite the purported trust, there was nothing further to be done by the transferor. Just as here.
36. Mr McGhee seeks to evade Macro by submitting that was a case where the shares were being sold, so the second sentence onwards applied. The gift here, he submitted was different. I think that is a distinction without a difference. It does not touch on Arden J's reasoning, based as it was on the execution and delivery of the instrument of transfer. Adapting Arden J's words in that case to this, "Ada has done more than merely give the beneficial interest. She has agreed to give the legal title and provided a form of transfer executed by her."
37. I have accepted Mr McGhee's submission that the first sentence stands on its own. But that does not mean that a member who transfers a share without offering it to members for a fair value can succeed in his breach. On the contrary, just as in Trett, there has to be a term implied to make the thing work. Mr McGhee rather so accepted, as I think he had to given his basic submission that the first sentence stood alone.
38. Accordingly I hold that Ada was in breach of the articles when she, by executing the transfer form, transferred the shares to Harry. It follows (as was accepted) that the transfer is defeasable at the suit of a member. Mr Hurst is a member and, unless he or his predecessor in title (Harold Snr.) waived his rights of pre-emption, what Harry got was not an entitlement to the shares but only to the price paid if a right of pre-emption were exercised. That price would be, as the article provided, the "fair value" of the shares.
39. Accordingly I turn to whether there was a waiver or estoppel. No such defence is pleaded at present. I was told that this was because, until the decision of the Court of Appeal, the executors felt that they could not take sides. But the decision was in March and there is still no draft pleading.
40. Be that as it may, Mr McGhee contends that the materials before me justify such a defence. I say "waiver or estoppel" though the point really seems to be the former. An estoppel normally requires some act done in reliance upon a representation. None is suggested here. What is suggested is that Harold Snr., Mr Hurst's predecessor in title, waived his right of pre-emption. The suggestion is based purely on a letter of 23^rd written by Harold Snr.'s solicitors to Harry. Despite its length I must quote it in full:

“As you may be aware we have been instructed by your father, Mr Harold Crampton Senior, a director of the Company, to advise the Company with regard to the ownership and transfer of shares in the Company and the validity of the Register of Members of the Company.

The last accounts of the Company for the year ended 31 March 1998 disclose that there were 2000 issued shares, 500 of which were held by your father, Harold Crampton and 1500 which were held by your Aunt, Mrs Ada Crampton. We understand that Mrs Ada Crampton died on 19 November 1998. However, we believe that Mrs Crampton may well have transferred to you 400 of her 1500 shares in the Company some time before she died. We have been informed by your father that Mrs Crampton advised him that she had, in fact, executed a transfer of 400 of her shares in the Company to you. Certainly the will of Mrs Crampton, of which we have obtained a copy, discloses only specific bequests of a total of 1100 shares in the Company rather than 1500 shares. Furthermore we have seen a copy of a letter from a Mr John Gibson, who we believe to be a nephew of Mrs Crampton, in which Mr Gibson states that it was his understanding also that Mrs Crampton had made a life time gift of some of her shares to another member of the Crampton family before she died.

The Company has now been requested by Messrs Reason Breen who are solicitors acting on behalf of the executors of Mrs Crampton, to have the executors registered as the holders of 1500 ordinary shares in the Company. We have advised the Company that this cannot be done until the directors are satisfied that none of Mrs Crampton’s 1500 ordinary shares were transferred to you or indeed anybody else before Mrs Crampton died.

If Mrs Crampton did not transfer the 400 shares to you before she died then the remaining 400 shares in the Company will form part of the balance of her estate. Under the terms of her will those shares will be shared equally by the 16 members of her family who are named in the will including you and your brothers, Steve and Billy.

The first purpose of this letter therefore is to enquire whether you have any knowledge of the existence or whereabouts of any share transfer form or agreement executed by Mrs Crampton in your favour in respect of 400 shares in the Company.

We confirm that we have sent similar letters of enquiry to Messrs Reason Breen who acted as solicitors to Mrs Crampton and Messrs J & D Pennington, the auditors of the Company and enclose copies of those letters for your convenience.

If it transpires that either you or somebody else can produce a valid share transfer form in your favour in respect of the 400 shares then you will be entitled not only to those 400 shares but also to the 620 shares in the Company specifically left to you by Mrs Crampton under the terms of her will.

Whether you are entitled to 1020 shares in the Company or just 620 shares in the Company there is a practical difficulty to be overcome before you can be registered as the holder of those shares. Under the terms of the articles of the Company, your Aunt Ada could not transfer any shares to you unless they were first offered for sale to the other members of the Company and the other members had the chance either to buy those shares or decline the offer. As you know the only other member of the Company at the time your Aunt Ada was alive was your father. Your father has advised us that he would be willing to waive any rights that he may have to acquire the 400 shares so that you can be registered as a member of the Company in respect of those shares.

With regard to the 620 shares left to you and your Aunt Ada there would be no difficulty in having those shares transferred to you and registered in your name if you were already a member of the Company holding 400 shares. If you cannot, however, produce a valid share transfer in respect of those 400 shares you will still be able to have the 620 shares under the will transferred to you and you could then be registered as a member of the Company. A transfer of shares by one member of the Company to another member of the Company is valid under the articles. In order for you to become a member of the Company your father is willing to transfer one of his shares to you. This transfer would be valid under the articles of the Company because of your family relationship with your father. Once you are the holder of one share in the Company you are a member and you can then request the executors of your Aunt Ada to transfer the 620 shares referred to in her will directly to you. There is no need for the executors to be registered as members of the Company and in fact if they were registered as members of the Company they could not transfer the shares to you under the terms of the articles of the Company.

As soon as you are registered as the holder of the 620 shares you would then need to transfer the one share back to your father.

As a shareholder in the Company you would also then be able to become a director of the Company once again.

Both your father and your brothers very much wish for you have to have your just entitlements in the Company and the mechanism that we have suggested in this letter is, we believe, the quickest and best way for you to achieve this. We are enclosing with this letter a share transfer form in respect of the 620 shares left to you by your Aunt Ada in her will which should be signed by her executors to effect transfer of the shares to you. We are also enclosing a copy of a share transfer form which will be signed by your father transferring one share to you so that you can be registered as a member of the Company. In view of the fact that the transfer of the one share to you will only be a temporary arrangement we are also enclosing an agreement to be signed by you acknowledging that you will hold the one share on trust for your father and then transfer it back to him on his request and an agreement to vote in respect of that one share only as your father requests you to do. As soon as the one share is registered in your name in the books of the Company you can then have the other 620 shares transferred to you and at the same time you can become a director of the Company.

We appreciate that the contents of this letter are somewhat complicated but it is very much in your interests and indeed those of your family, to have these matters sorted out as soon as convenient. For this reason we strongly urge you to take this letter and the accompanying documents and also the letters that we have sent to Messrs Reason Breen and J & D Pennington to a solicitor so that you can get independent legal advice. You cannot obtain independent legal advice from Reason Breen because they already act for the executors of your Aunt Ada’s will and have threatened to sue the Company in that capacity. It is likely therefore that a conflict of interest will arise.

We look forward to hearing from either you or your nominated solicitors as soon as possible. Finally we are also enclosing a copy of the Articles of Association of the Company so that you can show these to your solicitor.”

Mr McGhee relies upon the isolated sentence "Your father has advised us that he would be willing to waive any rights …"

41. Remarkably, following the letter (and the similar letter to Mr Pennington), neither Harry nor Mr Pennington revealed the fact that Ada had indeed executed a transfer form for 400 shares, though "the first purpose of this letter" was to get an answer about that. I am told that on top of that Harry sat through a meeting where the question came up but that he sat tight, saying nothing. I do not fully understand why (and do not need to): the strategy formed part of a tussle for control of the company. It is not disputed that Harry misled his father over this matter.
42. I do not read the letter as waiving Harold Snr.'s pre-emption rights. For there to be a valid waiver, the person said to have waived his rights must have had all necessary information. Here, Harold Snr. was asking for just that: did Ada execute a transfer?
43. The letter does not say: "I do not know whether she did not or not, but if she did I hereby waive my right?" The sentence must be read in context. The context was seeking an overall resolution of the problem. I think that is fairly obvious. The use of the conditional "would" means that waiver is dependent on other matters. They are all the matters in the letter and its enclosures.
44. Mr McGhee also suggests that the letter evidences a waiver of rights during Ada’s lifetime. That cannot be right. The question could not have been asked if that had happened.
45. It is perhaps worth observing further that there is no evidence that Harry or his advisors read the letter at the time as constituting a waiver. For why, if they thought there had been, would Harry have continued to keep everyone in the dark? He could simply have replied to the letter by saying "now that the pre-emption rights have been waived I can be registered as a member. Then I will be a member of the privileged class and can take the inheritance accordingly. All this proposal about a share from my father on trust is completely unnecessary."
46. Although strictly nothing turns on it, I am not surprised, that Harold Snr., when it was suggested that had waived his rights, vehemently denied it in a letter dated 1^st August 2000 to Harry's solicitors. He said:

"You would have the reader believe that I, Harold Crampton Senior, have waived my rights unconditionally. THIS IS NOT TRUE AND THIS IS NOT THE CASE. The draft agreement, referred to in "the August letter", "HC9" (dated 23 August 1999), was a confidential matter between myself and my son, Harry Crampton Junior. As Mr Michael Prince was personally present at subsequent discussions, your firm knows, full well, that the proposed agreement was always conditional on son Harry agreeing to comply with my wishes. Furthermore, as my conditions provoked considerable objections from my son, you know, that there was never any agreement on the matter."

47. In the result I conclude that there is nothing in the waiver point. The appeal is allowed. I will hear counsel as to the appropriate order.