England and Wales High Court (Chancery Division) Decisions

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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/2063.html
Cite as: [2009] BPIR 1438, [2009] EWHC 2063 (Ch)

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		Neutral Citation Number: [2009] EWHC 2063 (Ch)
		Case No: 11549 of 2007

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

05/08/2009

B e f o r e :

ALISON FOSTER Q.C.
(Sitting as a Deputy Judge of the Chancery Division)
____________________

Between:

	NICHOLAS MILLER	Applicant
	(AS TRUSTEE IN BANKRUPTCY OF KEITH BAYLISS) - and –
	DONNA JANE BAYLISS	Respondent

____________________

Mr Michael Booth QC and Mr James Couser (instructed by Messrs J P Fletcher & Co) for the Applicant
Mr Stephen Nathan QC and Mr Mark Vinall (instructed by Messrs Mackrell, Turner & Garrett) for the Respondent
Hearing dates: 10th, 11th, 12th, 13th, 14th March, 12th June 2009
____________________

HTML VERSION OF JUDGMENT
____________________

Alison Foster QC:

This Judgment has the following structure:

A Introduction, paragraphs 2 to 13

B The Issues, paragraphs 14 to 17

C Events down to the date of the alleged contract, paragraphs 18 to 32

D The Contentions, paragraphs 33 to 45

E Later Events, paragraphs 47 to 67

F Analysis.

(a) The Contract Issue, paragraphs 68 to 88

(b) The Conduct Issue, paragraphs 89 to 127

i. Locus 128 to 132

G Summary of conclusions paragraphs 133 to 137

A Introduction

This case comes before the Court as two applications under the Insolvency Act 1986 ("the Act"). It concerns various dealings with the shares in a small company known as UK Business Watch Limited ("UKBW") which appears at the relevant times to have carried on the business of providing security services. The company had been renamed on more than one occasion and on 26 October 2005, it was changed to UKBW from Surrey Business Watch Limited.

For the time relevant to the issues before me UKBW was run by certain of the members of two families, the Bayliss family, and the Peckham family. The relevant history begins in 2005. At that time Mr Bayliss and Mr Peckham were directors of UKBW. The 1000 issued shares of £1 each in UKBW were held at that time in the following names: Mr Bayliss 487, Mrs Bayliss 138, Mrs Peckham 375, (Mr Peckham had none). In other words, between them the Baylisses had 625 shares and between them, the Peckhams had 375.

Mr Bayliss had at one stage been disqualified from being a director but was, by 2005, a director of UKBW. In the summer of 2006 a Petition in Bankruptcy was issued against him based on a debt due to American Express and he was made bankrupt on 26 September 2006. He resigned as a director of UKBW. In May of 2006, however, he had transferred to Mrs Bayliss, the Respondent, 187 shares in UKBW for no consideration, leaving Mr Bayliss with 300 to his name at the date of the Petition. On 30 November 2006 Nicholas Miller, the Applicant, was appointed as Trustee in Bankruptcy and the remaining 300 shares in UKBW vested in him. He also treated the 187 shares transferred to Mrs Bayliss as a transfer at an undervalue and therefore also part of the bankrupt's estate. On several occasions, by correspondence, he required the return of the 187 shares from the Respondent.

Although at various times Mrs Bayliss has acknowledged that the 187 shares ought to be transferred, she never did so. The Trustee's application under Section 339 of the Insolvency Act 1986 ("the Act") requests an order transferring the shares to himself for the benefit of the bankrupt's estate, and a declaration that the transaction was at an undervalue. The application, begun in the Kingston County Court, was transferred into the High Court on 31 October 2007.

It is clear from the large volume of documentation before the Court that the relationship between the Bayliss and Peckham families deteriorated significantly before and during the events which are the subject matter of the applications. It is clear also, there was continuing direct contact, negotiation and manoeuvring between the members of the two families in addition to contact through professional representatives at this time.

On 22 March 2007, Mrs Bayliss issued a Petition under section 459 of the Companies Act 1985 as minority shareholder of 138 shares in UKBW alleging a series of defalcations against, principally, Mr Peckham, Director of the company.

In the early months of 2007, in exercise of his functions as Trustee, Mr. Miller entered into negotiations to sell the 487 shares in UKBW, that is, the 300 which he held from Mr Bayliss by virtue of his appointment and the 187 to which he had the right, held by Mrs Bayliss. It is the outcome of these negotiations that forms the subject matter of Mrs Bayliss' application, and gives rise to the issues which I have to decide.

In short, Mrs Bayliss asserts that the Trustee entered into a binding contract to transfer absolute title to all of those shares to her for the sum of £30,500.00. The Trustee does not agree, he argues there was never a binding agreement to sell to Mrs Bayliss, and that he was free to and did sell the shares to Mrs Peckham for the sum of £20,000.00.

Mrs Bayliss criticises the conduct of the Trustee in a number of respects, arguing he acted in an improper and unfair way so as to justify the intervention of the Court under Section 303 of the Act. In that application the Court is invited either to give effect to the contract which she says was entered into in February, or alternatively, to give directions for the setting aside of the transfer to Mrs Peckham.

There is no issue between the parties that if the Trustee is correct in arguing he was entitled to sell the shares in question to Mrs Peckham, and Mrs Bayliss has no grounds for complaint under section 303, she must return the 187 shares to the Trustee.

Mrs Bayliss responded to the Trustee's Application begun on 7 August 2007 in the County Court, by asserting, in a witness statement dated 30 July 2007, that the Trustee was in breach of a "closed bid auction" contract with her for the sale of the Trustee's interest in all 487 shares once owned by her husband. She alleges breach of his obligations under section 303 in the conduct leading up to the purported sale of the shares to Susan Peckham on 28 March, at a time when she says he was contractually bound to deal with her. She described the conduct of the Trustee as "at best sharp practice" and at worst wrongful and a breach of contract", and listed a number of matters as evidence of his conduct by which she asserted she was "aggrieved" under Section 303.

On 22 January 2009 Blackburne J ordered that the parties' contentions on the contract issue be reduced to pleadings. This was done by Respondent's Statement of Case dated 30 January 2009. The Trustee responded on 5 March 2009. In the course of the hearing on 11 March 2009 I gave leave for the Respondent to amend her Case. I refused a further request by her for re-amendment after the evidence had closed.

B The issues

The two main issues I have to decide are:

(a) the existence of any binding agreement between the Trustee and Mrs Bayliss to sell the shares, which would predate an agreement which the Trustee believes he in fact made with Mrs Peckham on 28 March 2007.

I refer to this as the "the Contract Issue". Secondly,

(b) whether the Trustee has acted in such a way as to invoke the Court's supervisory jurisdiction under section 303 at the behest of Mrs Bayliss and, if so, to grant her relief.

I refer to this as "the Conduct issue".

The arguments set out in the pleadings and statements have been developed in skeleton arguments and subsequently by further amendment and elaboration. The parties also provided written and oral submissions in closing. Aside from the two major issues for decision in this case there are 2 subsidiary issues that arise under (b) the Conduct Issue, namely:

i. The scope of the jurisdiction under section 303 and the test I should apply,

ii. Whether, absent a contract with the Trustee for the sale of the shares in issue, Mrs Bayliss has locus to invoke the Court's section 303 jurisdiction in any event.

In addition to the correspondence and other documentary evidence before the Court, I had the benefit of live witness evidence and a considerable number of written statements both from the witnesses who gave live evidence and others who did not attend. This included the documents supporting a petition issued under section 457 of the Companies Act 1985 by Mrs Bayliss as minority shareholder and a body of materials from disclosure and other previous interlocutory applications.

The factual background to these two issues is lengthy and in order to understand both the contractual matrix and the materials on which Mrs Bayliss founds her case under section 303, it is necessary to set out the dealings between the parties compendiously.

C Events down to the date of the alleged contract

The emphases within the correspondence are mine.

On 27 January 2007 the Trustee wrote to Mrs Bayliss as a shareholder in the following terms:

"Keith Bayliss – In Bankruptcy

Kingston County Court No. 592 of 2006

As you should be aware, I was appointed Trustee in Bankruptcy for Mr Keith Bayliss on 30 November 2006. I enclose a copy of my Certificate of Appointment for your information.

Companies House' records show that Mr Bayliss is a shareholder of UK Businesswatch Limited, with a holding of 300, £1 ordinary shares. I understand that in May 2006, he transferred 187 ordinary shares to you for no consideration. This appears to be a transaction at undervalue pursuant to Section 339 of The Insolvency Act 1986. As the transaction was made within the relevant period before the Bankruptcy Order the Trustee has powers to void the transaction and recover the shares from you.

Therefore the 187 shares due to Mr Bayliss together with 300 shares still registered to him, constitute an asset in the bankruptcy. It is therefore appropriate for the Trustee to seek a sale of these shares.

Under the terms of the shareholders' agreement of UK Businesswatch Limited, any shares for sale must first be offered to the current shareholders before being marketed to third parties.

This letter should therefore be considered notice that the Trustee intends to offer for sale 487 ordinary shares in the company and any shareholders wishing to purchase these shares should submit their offer in writing to this office within 7 days. After this period has expired, if there are no suitable offers received for the purchase of these shares, I will seek to market these shares to other interested parties.

If you have any queries regarding the contents of this letter, please contact Matt Kesek of this office.

Yours sincerely"

Save for the reference to return of 187 shares, he wrote to Mrs Peckham in materially identical terms, indicating his understanding of the effect of the shareholders' agreement and his obligation to offer the shares for sale first to the company's shareholders.

On 2 February Julie Vahey of Benedict Mackenzie, accountants, wrote in reply on behalf of Mrs Bayliss as follows:

"I have been instructed to act on behalf of Mrs D Bayliss in connection with your invitation to shareholders of UK Businesswatch Limited to put forward an offer to acquire 487 ordinary shares in that company.

I have been provided with a copy of your letter dated 29 January 2007 in which it is stated that the transfer by Mr K Bayliss of 187 ordinary shares to Mrs D Bayliss in May 2006 appears to be a transaction at an undervalue. Mrs Bayliss does not accept that this is the case because under the shareholders' agreement she was entitled to first refusal to purchase the shares and does not consider that an external party would have paid any consideration for them.

However, in order to bring this matter to a speedy conclusion Mrs Bayliss is prepared to offer the sum of £6000.00 in consideration for the 187 shares she has already acquired and the additional 300 shares held in her husband's name. If the offer is accepted, I have been informed that Mrs Bayliss will be able to make the payment within 7 days.

This offer is made on the basis that UK Businesswatch Limited is a private limited company, run as a family concern. All customers have dealt with Mr & Mrs Bayliss personally over a number of years. In view of this it is anticipated that the business would not be attractive to an external investor, because of the loyalty both the staff and customers have to the Bayliss family.

I look forward to hearing from you.

Yours sincerely,"

Mr Peckham called, saying that they would be on holiday until 21 February. Mr Kesek therefore agreed to extend the deadline until 23 February 2007.

On 14 February 2007 the Trustee wrote to Mrs Vahey rejecting the offer of £6000.00.

"This offer is substantially less than the £30,000.00 valuation I have received for the shares. I must therefore reject your client's offer."

The Trustee also indicated in the letter that he had agreed with Mrs Peckham that any offer for the shares should be received by close of business on 23 February 2007. He invited a further offer from Mrs Bayliss by the same date.

Mrs Bayliss made an increased offer of £10,000.00 on Friday 23 February. A holding response was sent by the Trustee. Bids for a slightly larger amount were made later that day by Mrs Peckham.

On Monday, 26 February 2007, at about 2.30 Julie Vahey sent a further email to Matt Kesek:

"I refer to our telephone conversation this morning. I have been in contact with Donna Bayliss and she has confirmed she would like to put in an increased offer for the 487 ordinary shares in UK Businesswatch Limited. Having spoken to Stephen Edwards [in Julie Vahey's office at Benedict Mackenzie] who consulted you regarding this matter last Friday, he informs me that you had agreed to contact him if a higher offer was received from Mr/Ms S Peckham. At no time was it indicated that the £10,000.00 offer was Mrs Bayliss' final bid.

In her oral evidence, Ms Vahey explained that in the telephone conversations she indicated she was dissatisfied with the way in which they had so far conducted the sale between her client and the Peckhams. They then agreed to ask again for offers. Thus, at about 15.40 p.m. on the same day Mr Kesek wrote materially:

"Further to our recent telephone conversation, please accept this fax as confirmation that closed bids of full and final offers for the purchase of Mr Bayliss' shares in UK Businesswatch Limited should be received by close of business on Wednesday 28 February 2007…"

At about 4.50 p.m. on Wednesday 28 February Ms Vahey wrote:

"I refer to your fax of 26 February, along with our previous correspondence and telephone conversations concerning the above matter.

Mrs D Bayliss has instructed me to put in an offer on her behalf in the sum of £1,100.00 over any other bid received by the Trustee for Mr Bayliss' shares in UK Businesswatch Limited.

I look forward to hearing from you."

However, the Trustee's office responded:

"Dear Julie

You know as well as I do that such a proposal does not constitute an offer and is not acceptable. Accordingly, unless I receive a quantified offer by 6 p.m. tonight 28 February 2007, I shall proceed with other parties.

…"

A telephone conversation again took place in which Ms Vahey explained that she obtained the Trustees assurance that, in spite of the 6:00 pm deadline, he would in fact consider any offer received by the end of the day. Ms Vahey wrote to him thereafter in the following terms:

"Following our telephone conversation just before 6 p.m. this evening, I have since been in contact with Donna Bayliss again and having taken further legal advice she has instructed me to put in a quantifiable offer on her behalf of £30,500.00.

I am informed that these funds will be made available by a third party within the next 14 days.

I look forward to hearing from you.

…"

On the following day, Thursday 1 March 2007, at 10.15 Mr Kesek in an important reply said:

"Further to your email of 28 February 2007, the Trustee is prepared to progress with your client's offer of £30,500.00 for the purchase of Mr Bayliss' shares in UK Businesswatch Limited. Formal acceptance of the offer will only occur when cleared funds are received into my firm's account, the details of which are as follows:"

[Address & sort code & account number followed].

On the same morning at about 11.13 Ms Vahey responded:

"Thank you for your email agreeing to progress Mrs Bayliss' offer of £30,500.00 for Mr Bayliss' shares in UK Businesswatch Limited.

For the sake of clarity, the offer is for the shares currently registered in Mr Bayliss' names and those formerly in his name which were transferred to Mrs Bayliss which have been the subject of previous correspondence."

On the following Tuesday, 6 March, at about 10 o'clock she emailed again as follows:

"I have heard nothing from you since my email below [by which she meant that cited immediately above] and shall be grateful if you will confirm that Mrs Bayliss' offer is accepted as set out in that email."

Matt Kesek replied about a day later:

"Further to your recent email, I confirm that the offer as accepted on the terms detailed in my previous email, is for all the 300 shares currently registered to Mr Bayliss and the 187 previously registered to Mr Bayliss…"

There is no dispute that "my previous email" refers to that sent by Mr Kesek on 1 March 2007 at 10.15 a.m.

D The Contentions

Before passing on to further events I refer to what the parties say about this correspondence and its legal effect.

(a) The Contract Issue

In her amended Statement of Case, the Respondent argued two alternative cases. The first case being:

(a) A contract was formed on 28 February 2008 at approximately 18.12 p.m. when Mrs Bayliss's bid of £30,500.00 was received by the Trustee, alternatively

(b) At some later time when the Trustee's business closed for the evening, alternatively

(c) A contract was formed by the acceptance of Mrs Bayliss's offer (the email of 18.12 on 28 February) by Mr Keswick's emails of 1 March and / or 7 March

Mrs Bayliss primarily characterised the transaction as a contract constituting an offer by the Trustee to accept the highest bid made by either Mrs Bayliss or Mrs Peckham in an auction held by the Trustee. Mr Nathan submitted on her behalf that the Trustee made an offer to sell to the highest bidder on whatever terms he, the seller, had set out. Mrs Bayliss accepted that offer on 28 February at 18.11 pm and the Trustee was bound. He said further, even if (which he denied) by promising to pay in 14 days time payment was made of the essence of the contract, that term was waived by the Trustee by phone on 14 March. Accordingly the Trustee was at no time free to sell to anyone else from that point.

As part of this argument Mr Nathan pointed to the letter of 29 January. He referred to the terms of a Shareholders' Agreement which was in evidence before me, and submitted that the Trustee had acted as if he were bound by this agreement and argued that the Agreement (whether in law binding on the Trustee or not), informed the nature of the contract that was created between the Trustee and his client.

He drew attention to Clauses 7 and 8 of the agreement which provided:

"Transfer of shares

7.1 The parties shall procure that before any person not already a member of the Company is registered as a holder of any share in the company, such person shall enter into a Deed of Adherence in a form reasonably required by [UKBW] undertaking to be bound by the provisions of this Agreement. The parties shall procure that the Company shall not register any such person as the holder of any shares until such a deed has been executed. Upon being so registered that person shall be deemed to be a party to this Agreement.

7.2 Each party to this Agreement hereby agrees to offer first refusal to the other parties to purchase their shares. They shall issue notice in writing detailing the terms to the other parties who shall have 7 days to respond. If the other parties do not accept in writing the opportunity under the terms specified, then the original party will be able to sell their shares to the outside party at those specified terms.

8. Compulsory purchases

8.1 If an offeror for shares in the company makes offers to all members of the Company which are acceptable to Mrs S Y Peckham and Mr A M Peckham and approved by the Board of Directors of [UKBW] then, provided such offer includes an offer to purchase the shares held by all of the other Shareholders for a consideration per share equal to (or on the same terms or as to the price or to value as) the consideration offered for each share held by any of the shareholders.

8.2 Such offeror [UKBW] may give notice to any non-accepting holder of shares held by any of the other shareholders requiring him to accept the offer within 14 days and stating that, failing such acceptance, he shall be deemed to have accepted such offer in respect of all shares held by him and irrevocably to have waived any pre-emption rights he may have in relation to any shares the subject of such offer;"

Mr Nathan submitted that the Trustee believed he was acting under this agreement in initiating his correspondence in January 2007 and that he had no discretion: if he received a bid which was acceptance of his offer he was obliged to accept it. In fact, he says the Trustee had been bound to accept the bid initially made at £6,000 by Mrs Bayliss but it was wrongly rejected by the Trustee. What he says then happened was that, later, there was a "row" because Mrs Bayliss was dissatisfied by the conduct of the sale, and the shares were put back into the "auction" once again. He cites the email asking for closed full and final offers to Ms Vahey as evidence of that.

Mr Nathan says in the context of the Shareholders' Agreement and the previous dealings, this also was an offer made by the Trustee, accepted on the 28^th by Mrs Bayliss's email giving a bid of £30,500.00. Mr Nathan stated the correspondence showed the Trustee undertook to Ms Vahey to accept the highest bid, which would constitute binding acceptance.

An alternative way in which Mr Nathan put the case was encapsulated in paragraph 32 of his written Submission of Case. Under this construction, the email from Ms Vahey of the 28^th (cited above) was to be regarded as an offer which was accepted by the Trustee by his email of 1 March, or alternatively or additionally by his email of 7 March. It was not open to the Trustee to add any new term in his purported acceptance.

The Trustee disagrees fundamentally with these analyses. He says that the word "offer" in the correspondence means what it says. Accordingly, if Mrs Bayliss or Mrs Peckham were to make an offer, the Trustee could, but was not bound to accept it, and on such terms as he chose. He accepted Mrs Bayliss' offer conditionally – on her payment of £30,500.00.

(b) The Conduct Issue

In her initial application Mrs Bayliss, in the statement of 30 July 2007 (effectively her pleading on the section 303 issue), made the following complaints about the manner in which the Trustee in Bankruptcy had conducted himself.

(i) The Trustee, having sold the 487 shares to Mrs Bayliss had not completed the sale but purported to effect a sale of them to Mrs Peckham the afternoon before Mrs Bayliss's Section 489 Petition. The timing is criticised as "indicative of the Trustee's behaviour in this case" and as in breach of the contract for sale Mrs Bayliss believed she had.

(ii) In spite of her telling the Trustee that she had issued a Petition and that there would be an injunction hearing on 29^th he sold the shares without further notice on 28^th to Mrs Peckham.

(iii) He sold the shares for only £20,000.00 and not £30,500.00.

(iv) The Trustee's general conduct in requiring return of the 187 shares at an undervalue notwithstanding Mrs Bayliss's offer to buy them was wrong.

(v) He rapidly arranged for the shares to be sold in order to "steal a march on" the injunction the Bayliss's planned against Mr & Mrs Peckham.

(vi) He gave extra time to Mrs Peckham, without giving notice of it to Mrs Bayliss or unfairly favoured the Peckhams because Mr Peckham and the Trustee knew each other (in fairness to Mr Nathan, this was not pursued before me).

(vii) He acted improperly, in that no reasonable professional person in his position would have sold to Mrs Peckham for two-thirds of the price that the shares could have been sold for.

(viii) He acted unreasonably in conducting a sale to Mrs Peckham without giving some notice that he was no longer content to allow time to go by and without giving final notice as to time limits.

Mr Nathan in his submissions laid emphasis upon certain other matters, namely what he said was the Trustee's deliberate, false misrepresentation to Mrs Bayliss that he had a valuation of the shares at £30,000.00; and further, upon the actions of Mr Kesek on behalf of the Trustee regarding his file note of a conversation with Mr Dudley, solicitor to Mrs Bayliss.

I pressed Mr Nathan as to whether he was in fact alleging dishonesty against the Trustee concerning the valuation. Mr Nathan told me he did not assert dishonesty but that what was done was improper. He alleged the Trustee also improperly took sides in the dispute between the Peckhams and the Baylisses, favouring the Peckhams.

The Trustee, for his part, emphasised his overriding obligation to the creditors, and vigorously denied that any of the steps taken by him could be characterised as improper or otherwise such as to invoke the jurisdiction of this Court under Section 303 of the Act. He also argued that unless she had a binding contract with the Trustee, Mrs Bayliss had no locus to bring proceedings under Section 303.

I now return to the later events.

E Later events

Mrs Bayliss wrote to Mr Peckham on 2 March:

"As you are well aware yesterday I was informed by the Trustee dealing with my husband's bankruptcy that they accepted my offer to buy back the shares Keith owned."

In response to this communication, on 6 March 2007 Charles Russell, acting for Mr Peckham, wrote to the Trustee and raised a series of points, protesting about the Trustee's handling of the bidding for shares.

Meanwhile, however, the Trustee's solicitor, Fletcher & Co, wrote to Mrs Bayliss on 13 March 2007

"We also understand that you have been communicating with our client in respect of your proposed purchase of all the shares held by Mr Keith Bayliss in the capital of the company, including the undervalue shares; a total of 487 shares. If it is your intention to progress the purchase of these shares, you should contact our client's offices without delay. Even if this transaction is progressed, the undervalue shares must still be transferred back to Mr Bayliss regardless of your proposed purchase of all of Mr Bayliss' shares. All the shares held by Mr Bayliss in the capital of the company can then be properly transferred to you."

It is clear that each of the parties had a different understanding of the effect of the exchange of correspondence, and a telephone conversation took place the following day between Mrs Bayliss' solicitors and Mr Kesek of the Trustee's office. A file note dated 14 March 2007 but apparently compiled by Matt Kesek about two weeks later from notes made on 14^th (as to which circumstances I will return later in this judgment), stated as follows:

"Telephone conversation between Matt Kesek and John Dudley at Mackrell Turner Garrett.

Mr Dudley re-confirms that Mrs Bayliss would be purchasing all shares of UK Businesswatch Limited that Keith Bayliss' Trustee in bankruptcy has right and title to.

Matt Kesek stated that for completeness for our files, the 187 shares transferred at an undervalue should still be transferred back to the name of Keith Bayliss. He confirmed that this was not going to be an issue.

It was also noted that the offer email of 28 February 2007 received from Julie Vahey had stated that cleared funds would be received into the Kingston Smith client account within 14 days and that we had not yet received this. Mr Dudley did not give a definitive date for transfer of the funds, but stated that they would be received at the latest by Friday 23 March 2007 ("the end of next week"). Matt Kesek confirmed that this would be OK, but that they should be transferred ASAP.

It was also reiterated that the offer from Donna Bayliss was not formally accepted by the Trustee until funds were received.

Matt Kesek."

There is also a letter dated 14 March 2007 sent from Mackrell Turner Garrett, solicitor to the Baylisses, reflecting the recollection of Mr Dudley:

"… we understand that our client's offer of £30,500.00 has been accepted for the purchase of 487 shares in UK Businesswatch Limited.

We spoke today about the timing of the purchase, and that is the reason for this letter, to confirm that there is no specific date for the timing of the purchase but that the Trustee would be content if we are able make payment sometime around the end of next week. We have agreed that time is not of the essence but that the Trustee is keen to get this matter settled sooner rather than later and we will do what we can in that respect."

I heard oral evidence from both Mr Kesek and Mr Dudley as to their recollection of this conversation to which I will return.

On 16 March 2007 a further important reply was sent to the solicitors' letter by the Trustee himself:

"Dear Sirs,

… I refer to your fax dated 14 March 2007.

As was previously advised, I have not accepted your client's offer. However, I am prepared to look favourably upon your client's offer of £30,500.00 for the purchase of Mr Bayliss' shares in UK Businesswatch Limited subject to funding being available to satisfy the purchase consideration. Formal acceptance of your client offer will only occur when cleared funds are received into my firm's client account. Until that date I reserve the right to consider any other offers that may be made with regards to the shares. The details for my firm's client account are as follows: [The details plus the sort code plus the account number are given].

…

Yours faithfully

N J Miller, Trustee."

On 16 March Mr Dudley wrote directly to Matt Kesek:

"We write further to our letter of 14 March concerning the above [Donna Bayliss and Keith Bayliss].

… The purpose of this letter is only to ask for your confirmation, please, that the 487 shares are to be sold to her at the price of £30,500.00. We have spoken to your Matt Kesek on the telephone and this was confirmed, but we feel it would be wise to have this confirmed in writing now."

Mr Dudley also wrote to Matt Kesek's firm expressing his surprise and complaining of the Trustee's conduct of the sale process:

"You now write as if you previously advised that the offer has not been accepted. This appears to be in direct conflict with that which Mr Kesek said on the telephone. It is good that you are "prepared to look favourably" at our client's offer. This is somewhat different to your pressing our client to purchase the shares sooner rather than later. It is noted, however, that payment of cleared funds into your firm's client account will secure this purchase and in this respect, based upon Mr Kesek's confirmation, we would have until about the end of next week within which to do that.

…

We write this letter to you promptly, in response to your fax received at 4.30 today, since we are very surprised indeed at the change in position of your company to that expressed two days ago."

On 19 March 2007 the Trustee explained:

"Reference to "previously advised" in my letter of 16 March 2007 assumed that your client would have informed you of the content of my email of 1 March 2007 to Julie Vahey of Benedict Mackenzie, who at that time was acting for your client. In that email I advised that acceptance of your client's offer would only occur when cleared funds are received into my firm's client account. A copy of that email is attached.

I have previously been advised by Julie Vahey that Donna Bayliss would be in a position to transfer the sum of £30,500.00 within 14 days of her making the offer. The 14 day time period expired on 14 March 2007.

For the avoidance of doubt, unless and until cleared funds are received, I reserve the right to consider any further offers submitted for the purchase of the shares. However, should your client have the funds transferred, and in the absence of any material change, I am intending to accept her offer.

You should be aware that these terms were made clear to your client in previous correspondence and have not changed since my initial discussions with Benedict Mackenzie. Thus your reference to my having "changed my position" is not accurate.

If upon the receipt of £30,500.00, I accept your client's offer, I shall sell such rights, title and interest in the shares of UK Businesswatch Limited that rest in me as Trustee …

I trust the above has clarified my position and I shall be grateful if you will confirm that your client's offer remains outstanding and indicate the likely timescale for my receiving funds from her."

On 20 March an injunction was threatened against the Trustee, but not pursued.

Notes and emails indicate that JP Fletcher were trying to contact Mackrell Turner Garrett urgently on 21 and on 22 March without success.

However, rather than producing payment, or a promise of immediate payment, at 9.30 a.m. on the 23^rd Mackrell Turner Garrett emailed Fletchers apologising for "missing each other on the telephone" and sent a copy of a minority shareholder's Petition, saying:

"In connection with all of the shares that your client holds, may we respectfully suggest that no actions are taken with regard to the shares in UK Businesswatch Limited until the resolution of the proceedings which we have issued. In respect of those, we enclose, with this email, the Petition, Application and draft Order, Witness Statement and exhibit.

We should be grateful if you would confirm that your client will not seek to dispose of the company shares without at least awaiting the result of next Thursday's hearing. If you do not agree then we shall have to consider bringing your client into the proceedings.

…"

A later letter asked the Trustee to wait until after the court appearance on Thursday 29 March.

In the meantime further activity took place concerning the share sales in which the Peckhams were still expressing interest. A telephone note dated 26 March 2007, signed by Mr Kesek, records:

"Matt Kesek spoke to Adrian Peckham. Mr Peckham made an offer on behalf of his wife of £20,000. Nick Miller is not in the office, and his offer will have to be discussed when he returns."

The papers show that several messages were left at this time for Mr Dudley to be in touch with the Trustee's solicitors. He was asked urgently to confirm:

"(i) The status of your client's proposed purchase of all the shares held by Mr Keith Bayliss...

(ii) The status of the retransfer of the 187 ordinary shares transferred by Mr Bayliss to your client at an undervalue …

..."

In the course of Tuesday afternoon, 27 March 2007, the Trustee responded to Mr Peckham. He said materially:

"I refer to your recent telephone conversation with Matt Kesek of this firm regarding your wife's offer of £20,000 to purchase the shares of UK Businesswatch Limited.

Subject to funds being received into my firm's client account by 5:00 p.m on Thursday the 29th of March 2007, I will sell such right, title and interest as I, as Trustee of the Bankruptcy Estate of Mr Keith Bayliss, have to the 300 shares that currently vest with me. I will also transfer such right, title and interest as I have in the 187 shares previously registered to Keith Bayliss …

[He enclosed details of the client account].

The following morning at 10:21, Adrian Peckham sent to Matthew Kesek at the Trustee's office an email entitled "Transfer of £20,000". It said:

"Herewith the receipt from Barclays. Barclays obviously guarantee funds will be with you today. Sorry, but as it's early in the day – have said it could well be with you before lunch.

As per our telephone call, it would be most helpful if you / your solicitors can get me a fax / scan of the completed share transfer form for 300 shares today. I appreciate this is dependent upon when the funds are received by yourself.

However, you are also aware that with the court action tomorrow, evidence of this transaction would be helpful to me.

Please also copy to my solicitors, Charles Russell..."

At 3.46 p.m. on the 28 March, Matthew Kesek emailed Adrian Peckham saying:

"The funds have now been received into the client account. I therefore attach the completed Stock Transfer Form as requested. If you have any further queries, please contact me.

…"

At 16.02 on the 28 March 2007, Matthew Kesek emailed John Dudley:

"

I refer to previous correspondence regarding the above.

Please be aware that in the absence of funds being received into our client account from Mrs Bayliss, an offer for the purchase of the shares of UK Businesswatch Limited was received from Mrs Susan Peckham. As cleared funds were received today, the offer was accepted and the relevant Share Transfer Forms completed.

I therefore confirm that Mrs Bayliss should not now forward funds to the client account as previously requested.

For the avoidance of doubt, the 187 shares transferred at an undervalue to Mrs Bayliss should still be re-registered to the name of Mr Keith Bayliss without delay. Failing that, I would have no option other than to instigate legal proceedings to recover them.

..."

Thereafter, the parties protested their differing understandings of the legal position in correspondence, and Mrs Bayliss made allegations of the improper handling of affairs by the Trustee.

F Analysis

I turn first to the Contract Issue.

(a) The contract Issue

Principles to be Applied

The resolution of the first issue requires analysing whether offer and acceptance, the fundamentals of the contractual relationship, exist. I have been furnished by the parties with various extracts from Chitty on Contract 30^th Edition 2008; there was no dispute that the principles there set out were applicable in this case, that is to say:

(a) in deciding whether the parties have reached agreement an objective test is generally applied

(b) an offer is an expression of willingness to contract on specified terms made with the actual or apparent intention that it is to become binding as soon as it is accepted by the person to whom it is addressed.

(c) an acceptance is a final and unqualified expression of assent to the terms of an offer

(d) the objective test also applies to ascertaining whether an acceptance exists.

(e) the labels put by the parties upon their pre-contractual exchanges are not determinative of the legal effect of such exchanges

Mr Nathan's primary case, as set out above, is that Mrs Bayliss had an enforceable contract as soon as she enunciated her willingness to pay £30,500.00 for the shares.

Mr Nathan referred me to those passages in Chitty in which invitations for tenders might exceptionally amount to offers (2-040) and my attention was drawn to Halsburys Laws Volume 9(1) at paragraph 636ff on the law of auctions. In such circumstances, he submitted, a bid may constitute an offer which is accepted on behalf of the seller by the auctioneer when he signifies his acceptance. Mr Nathan argued, drawing a parallel with the law of auction, that in the present case there was an offer by the Trustee, by his letters beginning on 29 January 2007, to sell to whichever of the two other shareholders (Mrs Bayliss and Mrs Peckham) put in the highest bid in the form of a full and final offer. Mrs Bayliss accepted it by her bid of £30,500.00. Mr Nathan says that in auction law a collateral warranty is sometimes expressed to arise that the seller, through the auctioneer, will sell to the highest bidder, and that, by analogy, was what happened here. Mr Nathan seeks to fortify the argument by reference to the Shareholders' Agreement which he says was plainly in the mind of the Trustee when writing his letter of 27 January and under which he purported to act. He states that Clause 7.2 reflects the analysis he propounds: initially the Trustee (wrongly) refused to accept the only offer he received within 10 days when in fact, he was bound to accept such an offer. However, after protest, the process of bidding, continued on the same basis. He says that the wording of the email to Ms Vahey stating "confirmation that closed bids of full and final offers for the purchase of Mrs Bayliss's share in UK Businesswatch Limited should be received by close of business …" was an undertaking to accept the highest bid.

An alternative suggested by Mr Nathan is that the email on behalf of Mrs Bayliss did indeed constitute an offer, and that offer was accepted by the Trustee by his emails of 1^st and/or 7 March. Mr Nathan describes it as implicit that if the Trustee received offers from both, he was bound to accept the higher of the two. It was not open to him to add a new term in his "purported acceptance". A term as to payment within a reasonable time would be implied.

Mr Nathan further argues that if, which he does not accept, there was a term that time for payment was 14 days and was of the essence, such term was waived by the Trustee in the course of the conversation between Mr Kesek and Mr Dudley on 14 March.

Analysis

In spite of Mr Nathan's ingenious characterisation of the nature of the Trustee's communications I am in no doubt that the Trustee was, at all times, inviting offers from potential purchasers of the shares in UKBW which he might, but was not obliged to, accept and which he could accept subject to whatever conditions he chose to impose.

The presence and terms of the Shareholders' Agreement does not alter that view. Whether or not the Trustee was obliged or believed he was obliged to couch his opening letter of 27 January in such terms as he did, it is nonetheless, objectively judged, an invitation to both Mrs Bayliss and Mrs Peckham to make offers to him.

Mr Nathan may well be right that, given the dissatisfaction of Mrs Bayliss' representatives at the end of February, particularly with regard to the fact that they thought the Peckhams knew the size of the offers made by their client, the email sent by Matt Kesek on 28 February inviting further offers was a second, or third, round in the sale negotiations. Whether judged in the context of the earlier correspondence (beginning in January) and its surrounding documents, or whether judged on its own as a fresh start in negotiations, objectively judged in context, the correspondence between the parties amounts in my judgement to an offer by Mrs Bayliss on 28 February 2007 to the Trustee to purchase the 487 shares at a price of £30,500.00. I do not accept that the actions of the Trustee were such as to induce a reasonable person to believe that the Trustee intended to be bound by the first offer, or the first offer over £30,000 that he received.

I cannot construe out of the Trustee's response dated 1 March 2007 any unconditional agreement to be bound to sell those shares to Mrs Bayliss. The language of response is clear: he is "prepared to progress with your client's offer". This is not a statement that the offer is accepted, indeed there follows an express statement that the offer is not accepted: "formal acceptance of the offer will only occur when cleared funds are received into my firm's account, the details of which are as follows …". This is not merely a label applied by the Trustee to a step taken: this is a statement of an intention not to be legally bound until the fulfilment of a particular condition; namely until receipt of payment.

This communication plainly indicates to the prospective purchaser that she has offered a sum that is acceptable, as a sum, to the seller. However, it is only on receipt of payment that he will consider the sale complete.

I am quite unconvinced by the suggestion that the circumstances were equivalent to an auction and that one ought therefore to imply into the Trustee's communications a term that he was prepared to accept and would consider himself immediately bound by the highest offer. In the circumstances of the Trustee's obligations to the creditors, the bankruptcy, and the previous correspondence between the parties I can see no basis for the implication of any such term. All the communications surrounding the negotiations and the file notes indicate the parties referred to and regarded the Trustee's actions as invitations to make, in law, offers which he might, but was not obliged to accept.

It could not, in my estimation, be plainer to those reading the Trustee's communication that no interest at all in the shares would pass to Mrs Bayliss until her money was in the Trustee's account.

Although not relevant to the contractual construction of those emails, it is interesting to note that Ms Vahey, responding on behalf of Mrs Bayliss, thanked Mr Kesek in terms for "agreeing to progress" Mrs Bayliss' "offer". Her only query was to ascertain the exact subject matter of her offer, namely the sum of the number of shares in issue. Similarly, her subjective understanding of the nature of the negotiations was of her client's offer which might, or might not, be accepted.

There is nothing in Mr Kesek's response on 7 March 2007 that changes the characterisation of the exchanges set out above. I reach this conclusion because the language used by the parties does not sensibly admit of a different interpretation.

The email which Mr Nathan seeks to characterise as an offer to be bound by the first bid over £30,000.00 requests the submission of "closed bids in full and final offer for the purchase". He described this email in opening as "a letter of offer if ever there was"; and prayed in aid the Shareholders' Agreement for that characterisation. I disagree. The reference to closed bids appears to me to derive from the fact that there was dissatisfaction that others may have known the sums offered previously. The phrase "full and final offer" was used in order to convey the Trustee's inclination to bring the matter to a conclusion by this correspondence. This context supports my interpretation of the effect of these documents as an invitation to treat on the part of the Trustee, an offer by Mrs Bayliss, followed by a conditional acceptance by the Trustee.

I do not accept that the Shareholders' Agreement had the effect contended for on the communications in the earlier part of the year nor do I accept that by 26 February the Trustee was intending to be bound, influenced or otherwise to refer to the earlier materials including the Shareholders' Agreement, nor does the correspondence looked at objectively convey that impression. I accept the Trustee's submission that the Agreement is irrelevant to the characterisation of the exchanges.

Mr Booth QC for the Trustee points to the email from Mr Miller at 5.30 p.m. in which (as well as rejecting the referable offer made by Ms Vahey) he indicates he will proceed with other parties unless a quantified offer is received by 6 o'clock that evening. He notes that in any event the offer was received at 12 minutes past 6 and therefore outside the time for acceptance. I am satisfied that the Trustee indicated to Ms Vahey that offers received that day (i.e. while he was still in the office) would be considered – and it was indeed considered although received after 6 p.m. - as an offer, to which he gave conditional acceptance.

I turn now to the conversation on 14 March 2007 on which evidence was called. It is Mr Nathan's secondary case, that in the course of that conversation, any term as to payment of monies by Mrs Bayliss in 14 days was waived or the term was varied.

In view of my findings as to the absence of a binding agreement between the parties, this conversation is not relevant to the contract issue. However, it is plain from the letters and from hearing the oral evidence of the two men that Mr Dudley was at cross purposes with Mr Kesek in this conversation. At the time of this telephone call he had not read the previous correspondence, and did not know, except in part and at second-hand, what had transpired between the parties and did not therefore bring his professional mind to bear on the true status of the negotiations when he spoke with the Trustee's office.

It was the case for the Trustee that no binding agreement has ever been reached with Mrs Bayliss and the Trustee was entitled to sell the shares to Mrs Peckham on 28 March 2007. I agree with him.

(b) The Conduct Issue

Section 303 of the Insolvency Act 1986 provides as follows

"303 General Control of Trustee by the Court

(1) If a bankrupt or any of his creditors or any other person is dissatisfied by any act, omission or decision of a Trustee of the bankrupt's estate, he may apply to the court; and on such an application the court may confirm, reverse or modify any act or decision of the Trustee, may give him directions or may make such other order as it thinks fit."

I am content to take from Schaw Miller & Bailey, Personal Insolvency Law & Practice 4th Edition 2008, a short encapsulation of a trustee's duties:

"General.

18.147 … the function of the Trustee is to get in, realise and distribute the bankrupt's estate in accordance with the IA 1986 Sections 303 to 335. Overarching all his activity in his capacity as trustee is an obligation that he should conduct the administration and fulfil his function in the interests of the general body of unsecured creditors in whose interests he is appointed."

Mr Nathan for Mrs Bayliss did not seek to persuade me that this was inaccurate.

A logically prior question was also raised by the Trustee in these proceedings as to the locus standi of Mrs Bayliss to bring an application under Section 303 of the Act if she does not have a contract with the Trustee. The Trustee in Bankruptcy draws my attention to the words "any person dissatisfied" and submits that Mrs Bayliss does not come within them. He reminds me that the assertion made by her upon the Section 303 application (contained primarily in her statement dated 30 July 2007) asserted her rights under contract against the Trustee. I propose to deal with this point last.

It is a long established principle that the Court will be slow to intervene to upset a decision taken by a trustee. In Re a Debtor (No. 400 of 1940) ex parte the Debtor v Dodwell (the Trustee) [1949] 1Ch 236 at page 241 Charles Harman J, expressing the rationale for this principle said:

"It seems to me clear that there must be circumstances in which the Court can interfere at the instance of a bankrupt to control the actions of the Trustee. I need not, I think, attempt to define what these circumstances are. They cannot, I think (in the absence of fraud) justify interference in the day-to-day administration of the estate, nor entitle a bankrupt to question the exercise by the Trustee in good faith of his discretion, nor to hold him accountable for an error of judgment. Administration in bankruptcy would be impossible if the Trustee must answer at every step to the bankrupt for the exercise of his powers and discretions in the management and realisation of the property."

That case was an application under the Bankruptcy Act of 1914 whose wording differs somewhat from section 303. I was also shown a number of recent cases on applications under the modern section including a case where the scope of the test was carefully considered. In Osborn v Cole [1999] BP IR 231 Registrar Baister accepted:

"It is the duty of the Official Receiver to get in, realise and distribute the estate of the bankrupt, and to use his discretion in so doing".

On a submission that the stringent Charles Harman J test no longer applied under Section 303, he said this:

"The application which Harman J had to consider was one made under Section 80 of the Bankruptcy Act 1914. The wording of that section differed in two respects from Section 303 of the present Act: it gave locus to apply to the bankrupt, any creditor, 'or any other person…aggrieved by any act or decision of the Trustee'. The word …"aggrieved" has now been replaced by the word "dissatisfied"; in addition, Section 303 allows an application to be made in relation to any omission of the Trustee. Mr Connerty (Counsel for Mrs Osborn) submits that the use of the word "dissatisfied" lowers the threshold to be applied so as to allow the Court to intervene in favour of some person who is merely dissatisfied with a decision or omission of the Trustee that is unreasonable. He contends that all Mrs Osborn has to show is that the Trustee has acted unreasonably. In support of that proposition he refers to Muir Hunter on Personal Insolvency at paragraph 3.202. The authors allude to the change in wording, and under the heading "Omission" give an example which "might be [the Trustee's] refusal to take legal proceedings, eg to enforce the estate's alleged claim to an asset…". Ms Lucas says that the test formulated by Harmon J in Re a Debtor still holds good. She relies on two recent authorities, Re Hans Place Ltd [1992] BCC 737 and Re Edennote Ltd [1996] BCC 718. In Re Hans Place Ltd Mr Edward Evans-Lombe QC (as he then was) accepted the submission that the rule in relation to a similar application concerning the conduct of a liquidator was that the Court would not interfere with the decision of a liquidator unless that decision was taken in bad faith or was so perverse that no liquidator properly advised could have taken it (p 745 H). He rejected a submission to the contrary following an attempt to distinguish the old test, thereby upsetting the earlier authorities (p 746 D-G). He explicitly linked the test applying to liquidators with that which applied under the Bankruptcy Act 1914. In Re Edennote Ltd the Court of Appeal applied the same test, referring in doing so to fraud and bad faith and again making the same link (Nourse LJ at p 722 B-H).

It seems to me that the test I should apply is, as Ms Lucas has submitted, the one that was applied in the line of authorities to which she has referred. In spite of the rather tentative indications in Muir Hunter and elsewhere that there may be some difference between a person aggrieved and a person dissatisfied, in practice I think there is none: a person aggrieved is a person dissatisfied, and a person dissatisfied is a person aggrieved; the difference, in my view, is no more than a difference of language or usage as between one generation and another. It follows that it can only be right for the Court to interfere with the decision the Official Receiver has taken if it can be shown that he has acted in bad faith or so perversely that no Trustee properly advised or properly instructing himself could so have acted, alternatively if he has acted fraudulently or in a manner so unreasonable and absurd that no reasonable person would have acted in that way."

That decision was made on 27 July 1998.

It was the submission of the Trustee in Bankruptcy that this was the appropriate test to apply in the present case.

However on behalf of Mrs Bayliss it was suggested that the Osborn v Cole test was a convenient test in many cases but it is not exhaustive and depends on the circumstances. My attention was drawn to Re TH Knitwear (Wholesale) Co Ltd [1987] Ch 275 at p288B-C and the holding that a trustee must "behave as honestly as other people" and "in an honourable and high-minded way". Further, by reference to Re Condon ex parte James [1874] 9 Ch App 609 that a trustee must "act in accordance with standards of fairness over and above what may be required by the strict application of law".

I do not need to decide this issue in this case because nothing I have seen or heard in the evidence and submissions supports any proposition that the Trustee acted other than in an honourable and high-minded way or did not behave as honestly as other people. However, it seems to me that the novel formulation of the test by Mr Nathan is in truth unlikely to add anything to the notion of the exercise by a Trustee "in good faith of his discretion," as it was described in In re a Debtor (No 400 of 1940).

I note that the facts in the cases said to support this principle were different from the instant case. In Re TH Knitwear the Court of Appeal was considering an argument on behalf of the Customs & Excise Commissioners that a liquidator in a voluntary winding-up should be considered to be in the same position as an officer of the court, and be subject to the principle in Re James (above) which imported these duties. I also note that Slade LJ described the principle as follows at page 289E:

"The entire basis of the principle, as I discern it from the cases, is that the Court will not allow its own officer to behave in a dishonourable manner. There is no doubt much to be said in favour of the principle. However, where it is invoked it is likely, save in the most obvious cases, to introduce a less welcome element of uncertainty."

There is nothing in the cases I have seen that suggests that in the present case, on the present facts, anything other than the test articulated in Osborn v Cole should apply and much, given the rationale for that rule, and also the comments of Slade LJ in TH Knitwear about any broader test, that suggest it should not.

I also agree, as the Trustee submits, that there is nothing in the authorities that suggests any different or more onerous duty falls on upon a trustee who seeks to contract with a third party, and further, that to impose special duties upon him with regard to third parties who seek to enter contracts with him, would impair his obligations, set out at the beginning of this section, to act in the interests of the creditors.

Accordingly, I accept the submission that the test in Shepherd v Official Receiver [2007] BPIR 101, a decision of Gabriel Moss QC sitting as a Deputy Judge of the Chancery Division, contains a correct articulation of the "stringent" and "very difficult test for challenging such decisions" [paragraphs 11 and 15] that I should apply. This is not a departure from the test set out in Osborn v Cole. I reject the submission of Mr Nathan that the Deputy Judge somehow went wrong in his decision because he did not consider or apply the appropriate tests for the exercise of the Court's jurisdiction under section 303 or any duty derived from the principle in Re James.

I have also had the benefit other cases giving consideration to the 1986 Act, including Re Don Basil Williams [2003] BPIR 545, Port v Auger [1994] 1WLR 862 and I have seen nothing to persuade me that the test in Shepherd, reflecting Osborn, is incorrect.

I also note the admonition in many of the cases against seeking to formulate a single test of universal application. Nothing I say here is intended to do that.

I heard evidence from Mr Bayliss on behalf of his wife. Mrs Bayliss did not give oral evidence at the hearing. There were various doctors' letters within the bundle which indicate that she had suffered and appeared still to be suffering symptoms that were stress-related, possibly cardiac-related and that she should avoid circumstances of stress. I was satisfied that Mr Bayliss was well able to give direct evidence about a number of material matters having acted on behalf of his wife at all stages and being himself very closely involved with the company that became UKBW over the past years.

I also had the benefit of oral evidence from Ms Vahey, insolvency practitioner, as indicated, Mr Dudley, solicitor, and also Messrs Miller and Kesek.

Analysis

I have examined carefully the correspondence passing between the parties' representatives, and listened to the evidence of Mr Miller, Mr Kesek and Ms Vahey who is herself an experienced insolvency practitioner. I was given great assistance by Ms Vahey in her evidence elicited by Mr Booth QC as to the context of the share sale and the nature of the trustee's task in a situation such as this, with a small family company and a limited market for its shares.

She agreed that shares in private companies are always a question of "horse trading" as regards who is prepared to offer what. There may well be a problem getting any outside party interest, and the only way competitive bidding will ever occur in which higher offers may be elicited, is if the parties in the position of the Peckhams and Baylisses are not agreed, or have not reached terms as to what should happen to the shares. If they were to reach an accord for the sale of the Peckham shares to the Baylisses the market for the Trustee's shares would collapse. The Trustee holding shares is to a greater or lesser extent caught in the crossfire of whatever competing argument existing shareholders have.

A Trustee's actions must always be judged against his duties to the creditors. In this case, as he indicated, Mr Miller was seeking to maximise as best he might such value as he held on behalf of the creditors in the shares of this small family company. Perhaps inevitably, his best market for such shares would be one or other of the families previously involved in running that company. Whilst he may, erroneously or otherwise, have believed he was bound by the terms of some shareholders' agreement, that belief and the presence of the agreement did nothing either to condition the terms on which he eventually dealt or his understanding and execution of his duties in maximising a return for the creditors.

Mr Bayliss explained the family's desire to obtain control of the company and told the Court how he had been intimately involved with it and its customers, who knew him personally, for 12 years. It was clear to me that he identified himself with the company and was deeply upset at the events which had happened. However, it was also clear that in the Bayliss' attempts to buy UKBW shares at the best price from whomever they could, they took calculated risks concerning the proposed acquisitions. One of the risks they took, as explained by Mr Bayliss in cross-examination, was delaying providing the £30,500 to the Trustee which, although easily available to them, they held off paying, in order to consider what steps if any were being taken by Mr and Mrs Peckham who were also interested in taking control of UKBW. Unknown to Ms Vahey, there had been negotiations to buy shares from them running in parallel with the Trustee negotiations.

This then is the background against which I must examine the actions of the Trustee in this case. The Trustee submits that, absent a contract, he was not bound to hold his hand regarding any other avenues of disposal for the shares. On 6 March the Trustee had no reason to believe that Mrs Bayliss would not, as intimated in the email on her behalf dated 28 February, provide £30,5000.00 "within the next 14 days", i.e. by 14 March 2007. The solicitors for the Trustee accordingly wrote on 13 March urging Mrs Bayliss to contact the Trustee if it was her intention to progress the purchase of the shares and reminding her of her obligation to re-transfer the shares she had received at an undervalue from her husband. This prompted the telephone conversation of 14 March in which, in my judgement, the two parties were clearly at cross-purposes.

Mr Dudley on his own admission had not read the correspondence, indeed, he had not been given it at that point by Mr Bayliss, and had an incomplete understanding of the position reached between the parties. It would seem that what he knew derived from Mr Bayliss. His intention in instigating the conversation, at the behest of the Baylisses, was to indicate to the Trustee that his client did still wish to buy the shares and to speak about time for payment. He says in a letter following the conversation that he understood there was "no specific date for the timing of the purchase" but that "around the end of the week" (i.e. 20 March) would be satisfactory to the Trustee.

It is made perfectly clear in correspondence over the next few days with Mrs Bayliss' representatives that receipt of the money was required. Still no money was received. On 21 and 22 March, a week after Mrs Bayliss had intimated she would be capable of transferring the funds, the Trustee's solicitors found it impossible to contact the solicitors for Mrs Bayliss. The next step taken, rather than the transfer of any moneys, was the service upon the Trustee of a copy of the Unfair Prejudice Petition issued by Mrs Bayliss on the morning of 23 March. This was coupled with the request for the Trustee to stay his hand pending (firstly) the whole case, later modified to the hearing on Thursday 28 March.

I agree with the Trustee that had he awaited the Petition, whether the full hearing or an initial hearing on Thursday, he ran the risk that he might have lost the opportunity to sell the shares at any meaningful value at all. Had the Baylisses and Peckhams done a deal between themselves there is no guarantee that the Trustee would have realised as much money as he might in a sale to one or the other, or indeed, have realised any money for the estate. Mrs Bayliss did not provide the money she said she would within 14 days, nor did she do so one week or indeed within almost two weeks thereafter. In the presence of an offer followed, within 24 hours by the money, albeit in a lesser sum, the Trustee was in my view acting prudently to defend the creditors' interests by taking the bird in the hand rather than waiting for the two birds in the bush.

Properly analysed the actions of the Trustee cannot be characterised as in any way unfair to Mrs Bayliss. It is unreal to suggest that the Trustee was under some obligation to inform her of his other negotiations and to offer her a last chance to finally come up with the money that had hitherto not been forthcoming. Not only were the Trustee's actions not unreasonable they were professional, prudent and well-judged.

As the Trustee has pointed out, he is not there to protect the interests of Mrs Bayliss nor her or her family's desire to obtain control of the company. The reality is the Trustee must take a view as to how best to realise money for the creditors and anything other than transfer on cash settlement would have been highly foolish on the facts of this case.

I deal more particularly with the case against the Trustee as put on paper, in Mrs Bayliss' statement and in the final written submissions of her representative.

(a) The suggestion that there was a sale and, in the face of that legal obligation, the Trustee sought to sell elsewhere, this being typical of his approach.

This allegation fails. The Trustee at no time either entered or indeed thought that he had entered into a binding agreement to sell the shares to Mrs Bayliss.

(b) In spite of the issue of the Section 459 Petition, selling the shares to Mrs Peckham without further notice.

This allegation fails. It was most prudent of the Trustee to take steps to sell before any action was decided or in train between the two parties most likely to be buyers of the shares. The market could easily have been destroyed and the creditors have thereby suffered. Further, there was no obligation on the Trustee to tell Mrs Bayliss that he was contemplating sale to another. In any event he had in fact warned her of that possibility in his correspondence before this date. The background of parallel negotiations through others and directly with the Peckhams shows the Baylisses were alive to the risk of purchase of the shares by others.

(c) Selling the shares for £20,000.00 and not £30,500.00.

There is nothing in this allegation. The Trustee considered that £20,000.00 in hand was worth more to the creditors than an uncertain promise of £30,500.00 in future. Not only was such a view within his wide discretion it was in my view plainly the right decision in the circumstances.

(d) The conduct requiring the return of 187 shares at an undervalue was generally wrong.

To the extent that this was pursued, it discloses no breach of obligation at all. Mrs Bayliss admitted her obligation to return the shares at an early date.

(e) "Rapidly arranging for the shares to be sold" in order to steal a march on Mrs Bayliss' injunction.

This allegation fails. Not only did the Trustee not "rapidly arrange" for the shares to be sold, there is no evidence of any motive improper or otherwise in the Trustee's actions other than, properly, the protection of the creditors' interests. For the reasons given above the Trustee was entirely within his discretion and right not to await the application in the Chancery Division.