Pennington & Ors v Crampton & Ors

LORD JUSTICE WALLER: There is before us an application for permission to appeal a decision of Lloyd J of 25 March 2004, a decision by which he construed certain provisions of a Tomlin Order made by the Court of Appeal on 19 February this year. That Tomlin Order related to a proposed settlement of disputes that arose in relation to the transfer of certain shares in a company called Crampton Bros (Coopers) Limited ("the company").

Disputes followed the death of the majority shareholder, a lady called Ada Crampton, in November 1994. The disputes are, in essence, between members of the extended family of that lady. There is also an application to stay the order of Lloyd J following his resolution of the proper construction of that Tomlin Order. But at the forefront of the application today is an application by Mr Hurst, who represented himself before Lloyd J and has represented himself today, that the application for permission to appeal should be adjourned so that he can get representation, and that there should be a stay in the meanwhile.

As we indicated to Mr Hurst when he made the application to adjourn and for representation, it seemed to us that, he having detailed knowledge of the whole history, he being in fact himself a qualified barrister, and having regard to the fact that this application to adjourn in order to seek representation was made at a very late moment in time, he should proceed to try and persuade us that there was a basis on which he should be given permission to appeal, and if there was that basis, then there might be a basis on which some stay might be ordered, and of course if he were to obtain permission to appeal, he would then be able to be represented at an appeal.

The background to the application which was before the judge on 25 March 2004 is long and complicated and is set out in some detail in the judge's judgment. Shortly before the death of Ada Crampton, she executed a transfer of 400 shares in favour of her husband's nephew, Harold Crampton Jun. The transfer was registered before her death, but following a dispute over the effect of the transfer document, the matter came before the court and the court ruled (HHJ Howarth) that the transfer was effective in equity and the shares were held in a bare trust for Harold Crampton Jun.

On Mrs Crampton's death the remaining 1,100 shares in the company were vested in her executors, who were Jack Pennington and Janice Reason (the latter replaced by Stephen Breen), and they were the subject of specific bequests, again one to Harold Crampton Jun and the other to Philip Waine.

There were proceedings before Jacob J (as he then was) in relation to the transfer of the 400 shares, that is the gift during the lady's lifetime, it being asserted before Jacob J that the transfer of the 400 shares was in breach of the pre-emption rights in the company's Articles. Article 8(B) of the company's Articles affords to other shareholders in the company an opportunity to purchase shares at a valuation where a shareholder proposes to transfer shares unless the proposed disposition is to a member of a privilege class set out in Article 8(A), and Harold Crampton Jun was not a member of that privilege class.

That matter came to the Court of Appeal and permission was refused to appeal the judgment of Jacob J.

There was further litigation relating to the pre-emption rights, and that litigation came before Lloyd J in July 2003 and he delivered a judgment on that occasion in which he made rulings, a number of which were against the submissions being made by Mr Hurst. That resulted in declarations being made contrary to the arguments that Mr Hurst had been putting forward, and also resulted in orders for costs being made against him.

Looking at the matter overall, it is sufficient just to say this, that the battle for control of the company appears to be on the one side between Harold Crampton Jun and Philip Waine -- Harold Crampton Jun being the person to whom Ada wished to give the 400 shares and to whom she left part of the remainder of her shares; and on the other side, Mr Hurst, he says acting as a nominee but at most stages of this litigation, it seems, with the support of Harry Crampton Sen, that is the father of Harry Crampton Jun, and with the support of William and Steven Crampton. During the course of the litigation, Mr Hurst has held one share in the company provided to him by Harry Crampton Sen, and it is on the basis of that share that Mr Hurst has been submitting that he has been entitled to exercise the pre-emption rights.

The judgment of Lloyd J, given on 3 July 2003, came to the Court of Appeal. Just prior to the hearing of the appeal, a settlement was negotiated and it was a settlement which, one imagined, all hoped would bring an end to this lengthy litigation. The terms of the settlement, which was to be reflected in the Tomlin Order, was negotiated in correspondence, but ultimately the terms of the settlement were reflected in a schedule to an order made on 19 February 2004 and signed by counsel, Mr McGhee QC, for Harold Crampton Jun and Philip Waine, and by John Wardell QC, who was at that time acting for Mr Hurst.

Certain other members of the extended family and other shareholders were not in fact parties to the appeal, and it is for that reason that there were certain provisions of the Tomlin Order which required the procurement of other parties' agreement to what the Tomlin Order was seeking to agree.

By paragraph 1 of the Tomlin Order, Mr Hurst agreed to pay to Harold Crampton Jun and Philip Waine a sum of £190,000 in full and final settlement of the costs, and it provided for certain payments of those costs to be made on or by certain dates. For today's purposes, it is sufficient to say that the second payment was to be a payment of £40,000, to be paid to DLA (the solicitors for Harold Crampton Jun and Mr Waine), and that was to be paid by 18 March 2004. By paragraph 6 of the Tomlin Order, it was provided that:

It also provided by paragraph 2 of the Tomlin Order that:

I pause just to explain that one of the issues before Lloyd J, which he resolved by his judgment dated July 2003, was what the appropriate date of valuation was so far as a sale notice issue by the company was concerned. Mr Hurst had been asserting before Lloyd J that the correct date was October 1998, that being the date when Mrs Crampton purported to give the 400 shares to Harry Crampton Jun and the opposition were contending that the proper date of valuation was the date when the auditors actually valued the shares. The judge had decided that the right date for valuation was the date of valuation, and valued the shares at £1.325 million. The compromise was thus reflecting the position which Mr Hurst had taken up at the hearing before Lloyd J and was pursuing on the appeal.

The Tomlin Order then provides that, once the company has issued a sale notice, Mr Hurst would purchase 100 shares and that no other member of the company would indicate that they were willing to purchase any of the 400 shares. That would allow the 300 shares, ie the remainder of what are described as the gift shares, to go to Harold Crampton Jun. Paragraph 4 reflects the price of the 100 shares to be paid by Mr Hurst (£260,000), by 29 April. Paragraph 7 provided that it was a condition precedent to the agreement for the purchase by Mr Hurst of the 100 gift shares that:

The Tomlin Order then provided by paragraph 8, critically, that:

Following the drawing up of that order matters still did not go smoothly, to put it mildly. Before Lloyd J, who had to construe the effect of the Tomlin Order, it was asserted by those representing Harold Crampton Jun and Philip Waine, first of all that Mr Hurst had failed to procure the agreement of the members of the company so that the company could issue the sale notice by 26 February 2004. It asserted that the sum of £40,000 had not been paid by 18 March 2004. It was further asserted that Mr Hurst had failed to procure that the three other shareholders did not object to or delay the vesting of 300 shares in Harold Crampton Jun and Philip Waine by 18 March 2004, as required by paragraph 3(3).

The judge ruled that Mr Hurst was in breach of the Tomlin Order in all those three regards. He thus ruled that the provisions of paragraph 8(3) had come into play, and he ultimately decreed specific performance of paragraph 8(3). It is also right to say that he refused permission to appeal. He also, in a separate judgment, refused a stay pending the appeal, and it is in those circumstances that the matter has now come before this court as to whether there should be permission to appeal and as to whether there should be a stay.

So far as the grounds of appeal are concerned, Mr Hurst really has not pursued an argument that the judge was wrong to find the breaches that the judge found. Indeed, he has not sought to argue that, in relation for example to the £40,000, that there was not a failure to pay that sum by 18 March 2004. That sum was not paid to DLA and made freely available to them or paid into the right account; it was paid so as to retain the same for Mr Hurst pending the hearing before the judge in relation to the proper construction of the Tomlin Order. But Mr Hurst accepts that there is and was a failure to pay that £40,000 and that time was of the essence. What Mr Hurst has sought to argue, as he argued before the judge, is that this is a case in which equity should intervene. He accepts that, if the judge is right on the proper construction of the agreement, then the effect is that paragraph 8 has come into play, that he has no longer any right to purchase the 100 shares and the 400 shares will then go to Harold Crampton Jun, subject to one point on specific performance to which I will come. But he says that the circumstances are such that there is an arguable point that equity should intervene. He really puts that in two ways. First, he submits that equity would effectively relieve against forfeiture. This is a point which was in his skeleton argument before the judge, but which the judge commented was not pursued in oral argument by Mr Hurst. The reason commented on by the judge why it was not pursued below was because of the authority Union Eagle v Golden Achievement [1997] AC 514. That was a case in which time was of the essence for the payment of the price in relation to the contract for the purchase of a flat, and the would-be purchaser was only 10 minutes late. But the court held that that was not a case where equity would grant relief. In essence, if two persons enter into a commercial bargain under which it is plain on the face that certain things are to be done by a moment in time, which is made of the essence and which reflects what will happen if that does not happen, then equity will not interfere with the commercial bargain that has been made by the parties. That first way of putting it was hopeless before the judge and, as it seems to me, is a hopeless point so far as the Court of Appeal is concerned.

Mr Hurst seeks to put his reliance on equity in a rather different way. He says that the effect of the provisions of this agreement are penal. What he really means by that is that (and I put it perhaps rather crudely) it just seems very unfair that, having failed to pay £40,000, he should lose the right to have these 100 shares, and that Harold Crampton Jun should now have the 400 shares. In my view, his argument about penalty is totally misplaced. This was a commercial bargain for the settlement of this dispute under which, if the terms of the bargain were kept to, he would receive 100 shares, and Harold Crampton Jun would get the 300 shares. But if the bargain was not kept to, Mr Hurst would not have the 100 shares and Harold Crampton Jun would have 400 shares. As it seems to me, there is no prospect of persuading the Court of Appeal that equity would intervene on the basis that these provisions are penal.

That leaves a final point in relation to the order that the judge actually made. The judge ordered specific performance of Mr Hurst's obligation under paragraph 8(3), and that term was a term under which Mr Hurst undertook that he would not object to or delay, and would procure that no other member of the company objects to or delays all of the issue of the shares being vested for nil consideration in Harold Crampton Jun. One notes that it was not that he would use best endeavours, reasonable endeavours or anything of that sort; it was that he will procure, and that is a bargain that he was able to enter into on 19 February, at which time he was confident that the extended members of the family that were on his side, would raise no objections and would allow the 400 shares to go to Harold Crampton Jr. Mr Hurst tells us that he argued before the judge, that the judge should not make orders which required him to procure third parties to do things, without evidence that the third parties would do what he would procure. As it seems to me that is putting the matter the wrong way round. There is no reason why the judge should not take the view that Mr Hurst would not have entered into this bargain unless he could procure what he said he could procure. Unless there was evidence that the circumstances had changed since the agreement had been made, which might affect whether an order for specific performance should be made, then the judge was entitled to make his order.

It is right to say that Mr Hurst has sought in affidavits before us to suggest that circumstances have changed since the judge made the order. This judgment is already over-lengthy and it seems to me not right to go into the details of that because there are contentions on both sides as to exactly what it is that has happened since. All I need to say is that, if the circumstances have changed so that the order that the judge made is now one that cannot be complied with, then the right Tribunal to take that before is the judge himself, and Mr Hurst can make an application to the judge explaining how it is that the circumstances have changed.

What all that leads to is that, in my judgment, Mr Hurst has not demonstrated that there is any reasonable prospect of persuading the Court of Appeal to reverse the decision of the judge on any matter. It follows that there is no basis on which any stay should be ordered, and in those circumstances, I would dismiss this application.

LORD JUSTICE CHADWICK: I agree.