Weatherley v Weatherley & Ors, Court of Appeal - Chancery Division, November 19, 2018, [2018] EWHC 3201 (Ch)

Resolution Date:November 19, 2018
Issuing Organization:Chancery Division
Actores:Weatherley v Weatherley & Ors
 
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Case No: CR-2017-007969

Neutral Citation Number: [2018] EWHC 3201 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS ENGLAND AND WALES

CHANCERY DIVISION

COMPANIES COURT

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Date: 19/11/2018

Before:

INSOLVENCY AND COMPANIES COURT JUDGE BRIGGS (CHIEF REGISTRAR)

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Between:

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James Knott (instructed by Francis Wilks & Jones ) for the Petitioner

Ben Lynch (instructed by Brandsmiths Solicitors) for the First to third Respondents

Hearing dates: 5,6,7,8,9, 13 November

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ICC Judge Briggs (Chief Registrar):

Introduction1. This is a dispute relating to a small private company owned and managed by the Weatherley family. The dispute arose after the sudden and premature death of Mark Weatherley, aged 53 (``Mark''). A stark feature of this case is that each member of the Weatherley family has lost, in Mark, a husband, father, son, brother or brother-in-law. Weatherley Fencing Contractors Limited (the ``Company'') has lost its day to day operating director, or as his father put it ``the brains behind'' the Company. The petitioner (Fiona) was Mark's wife and his assistant in his role as director of the Company. His father (Kenneth, who prefers to be known as Ken) now 79, mother (June) and sister (Debra who prefers to be known as Debbie) are respondents to the petition. Ken remains active in the Company working at least 40 hours a week. June had a stroke in January 2018 and is now recovering from chemotherapy having suffered from breast cancer. She was unable to attend court to give evidence. Debbie has worked for the Company for her entire working life.

  1. Fiona has not worked for the Company since July 2017. She claims to have been unfairly dismissed. She and Mark married in 1997 and have three children. Two of the children do not feature in this case although are potentially affected by the outcome. The third, Aaron, worked for the Company as a young person receiving money from his grandfather. He was keen to work in the Company full-time when he reached 16, however he was still classified as a child and required to continue part-time education or training and only work part-time. The evidence of the directors of the Company is that he refused to continue part-time education. Concerned about breaching the legal requirements for employing a 16 year old, he was asked to leave. Fiona explains that she and Mark had known each other since Mark was 19 years old and she 21. Both had short first marriages and, on their respective break-downs became a couple. Fiona explains that they had ``a very, very happy and solid marriage together''. In the witness box Fiona was emotional but stoic, as was Aaron. She felt deeply that the family had wronged her at a time when she was most vulnerable. Ken came across as a man who did not wear emotions on his sleeve. Nevertheless, he had to pause at times: the strain of giving evidence about his son self-evident. At one point in his evidence he bowed his head saying ``I don't know what I am going to do without him'' and ``he was my best friend''. Debbie accepted that there were times when she had disagreements with her brother, he was ``strong headed'' but her evidence demonstrated beyond doubt that she had a deep emotional bond.

    A family business

  2. Ken started trading as a sole trader employing two people to provide fencing services to the local area. In or around 1975 he purchased a property and began a small hardware and general DIY store. From the store Ken and June sold fencing supplies to commercial customers and the public. The store had a yard where supplies could be kept. As demand for the services grew so did the business and by the late 1970s Ken and June employed five or more people full-time. In 1978 an accountant advised that Ken and June incorporate a company to give them the protection of limited liability. The Company was incorporated on 28 November 1978. Ken and June were equal shareholders and directors. Ten years later the Company had 15 or more employees and a general manager. According to Ken, Mark had commitment and enthusiasm for the work and quickly demonstrated his ability competently to manage the Company. Following his 21st birthday Ken and June gifted to him 20% of the Company's shareholding. The general manager took Mark under his wings and under his guidance he grew in confidence learning how to manage customer orders, quotations, order and maintain stock, purchase equipment and vehicles and oversee the running of the Company. As his confidence grew, so did his ambition for the Company. According to Ken he gradually took over the running of the Company and by 2003 he was not only in charge of day to day management but also strategic operations. He expanded the business selling fencing products and services, sheds, paving, ready mixed concrete, cement, block paving, and other products to trade and retail customers. It is not clear why it took so long for his appointment as director, but he was appointed director in 2006.

  3. Ken gave evidence for the duration of the second trial day. He says that when he started the Company no thought was given to succession and he was delighted when Mark showed an interest, if not a passion for the work. His evidence is that Mark had to earn his spurs as did every other family member. A person could do this by demonstrating commitment to the Company and working hard and Mark had done this ``in Spades''. Once he had earned his spurs Ken trusted him completely and says that from 2003 Mark made decisions in the business without consulting him unless he chose to seek advice. That evidence is contested by Fiona who says that Mark always consulted Ken in relation to financial matters and strategic decisions. Her evidence is that Ken remained in control of the Company at all times, albeit he was less visible.

  4. Debbie took a role managing the Company's invoicing, was gifted 20% of the shareholding in 2009 and appointed a director in 2011. Debbie gave evidence on the third day of trial. The management and ownership remained the same from 2011 until Mark's death in 2017 with Ken owning 18,333 shares (36.66%), June 11,667 (23.34%), Mark 10,000 shares (20%), and Debbie 10,000 shares (20%).

  5. Fiona undertook some temporary work for the Company around 1998-1999. Her evidence is that from mid-2013 she worked on a permanent part-time basis. Her role was secretary and personal assistant to Mark. Her evidence is that she assisted Mark by producing updated pricelists, updated the website from time to time, answered telephones, took orders and liaised with advertisers. This evidence is accepted by the Respondents. Fiona says that by 2014 her role grew to negotiating energy contracts, on occasions paying wages, and suppliers and assisting with the Company banking. These last matters are contested. Ken says that she would not be permitted to pay wages and should not have known the sums each employee was paid. Only Mark and Ken had access to the bank account before Mark died. If Fiona did have access to the bank account, it would have been because Mark had given her his bank card. She had no permission or sanction from the Company. She was not a signatory on the bank account.

  6. Peter Roscoe, Debbie's husband, also worked and continues to work for the Company. First, he was employed as a fence erector but due to arthritis his role altered, and he worked in the yard and shop. His skill set adapted because the family wanted to retain his services. Peter and Mark worked alternate weekends and so Peter gained insight into workings of the business. Peter has now succeeded Mark running the day to day operations. I do not doubt that Debbie helps him in his new role. In the witness box Peter said that he had acted on Debbie's instructions at times, and Debbie demonstrated knowledge and understanding. I have little doubt she is a most capable person and someone to whom Peter would defer. Debbie and Peter's son, Daniel, is employed as a fence erector.

  7. There is agreement that the Company was run for the benefit of the family but disagreement as to what ``the benefit of the family'' means in practice. Ken's evidence is that he started the business as a sole trader, formed the Company only because his accountant recommended it, and his ambition and that of the Company was only ever to support his immediate family. If there was ever an understanding it extended no further than that simple ambition. Fiona contends that there was an understanding about employment and ownership. First, that every member of the Weatherley family would be entitled to or have an opportunity to work in the family business. Second, that the ownership of the Company, through shareholding, would pass down each side of the family: Mark, his wife and children on one side, and Debbie her husband and children on the other. Ken says that the family company was run informally and on trust for the benefit of him, June, Mark and Debbie. Ken explains that he has six grandchildren and only two have worked at the Company: Daniel and Aaron. He had no problem with a member of the family earning some money by working at the Company, but they would have to show the commitment and hard work that he, June, Mark and Debbie had shown. The notion that each grandchild would become a shareholder in the business, he says, goes against everything he stands for. Any grandchild will need to win their spurs by demonstrating the right qualities and adding to the business. In the witness box it became clear that Ken was in the past, the sole arbiter of whether a family member had demonstrated the right qualities.

    The Weatherley family properties

  8. The Weatherley family have a complex relationship with properties that they hold. Ken explains that the family owns some...

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