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Jack Pennington & Ors v Harold Crampton Senior & Ors (2004)

Summary

Where a commercial bargain had been made, equity would not intervene to relieve against forfeiture where a court had decreed specific performance.

Facts

The applicant (H) sought permission to appeal against a decision that H had been in breach of a Tomlin Order relating to a proposed settlement of disputes that arose in relation to the transfer of certain shares in a company. The majority shareholder, AC, in a company made a registered lifetime transfer of 400 shares in favour of her nephew (HJ). After AC's death, the transfer of shares to HJ was subject to litigation on the grounds that it was in breach of pre-emption rights in the company's articles, but it was held that the transfer was effective in equity and that the shares were held in a bare trust for HJ. On AC's death the remaining 1,100 shares in the company were vested in her executors (P) and they were subject of specific bequests to HJ and another person W. There was further litigation and a shareholder, H, claimed entitlement to pre-emption rights. The Court of Appeal made a Tomlin order after a negotiated settlement whereby H had the right to purchase 100 of the gift shares, but that in default of his compliance with certain conditions he would lose that right. H was found to be in breach of the Tomlin order and the court decreed specific performance of the provision vesting all the gift shares in HJ. The majority shareholder (AC) in a company made a registered lifetime transfer of 400 shares in favour of her nephew (HJ). After AC's death, the transfer of shares to HJ was subject to litigation on the grounds that it was in breach of pre-emption rights in the company's articles, but it was held that the transfer was effective in equity and that the shares were held in a bare trust for HJ. On AC's death the remaining 1,100 shares in the company were vested in her executors (P), and they were subject of specific bequests to HJ and another person W. A struggle for control of the company ensued, on the one side between HJ and W, and on the other side, H, who claimed entitlement to pre-emption rights. The Court of Appeal made a Tomlin order after a negotiated settlement whereby H had the right to purchase 100 of the gift shares, but that in default of his compliance with certain conditions, especially as to time, he would lose that right. H was found to be in breach of the Tomlin order and the court decreed specific performance of the provision vesting all the gift shares in HJ, refusing permission to appeal. H applied for permission. H argued that equity should intervene to relieve against forfeiture, and that the effect of the provisions was penal in that he stood to lose a part-payment of £40,000 for no return. He also contended that the judge should not have made an order that required him to procure the cooperation of third parties without evidence that they would so cooperate.

Held

H's argument about penalty was totally misplaced in a case where a commercial bargain for the settlement of the dispute had been struck and there was no prospect of persuading the court that the provisions were penal. H had agreed to the terms of the Tomlin order. There was no reason why the judge should not have taken the view that H would not have entered into the bargain unless he could procure what he said he could. Unless there were evidence that the circumstances had changed since the agreement had been made in a way that might affect whether an order for specific performance should be made, the judge was entitled to make his order. There was no basis on which a stay should be ordered.

Application refused.

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Judgment
17 Jun 2004

Court of Appeal
Waller LJ, Chadiwck LJ

References
‚ÄčLTL 30/7/2004; [2004] EWCA Civ 819 

Members
John McGhee QC

Practice areas
Company, Partnerships & LLPs
Private Client