PT-2024-000315 - [2025] EWHC 3011 (Ch)

Ground 4 – alleged failure to exercise independent oversight of the company

The next ground is the assertion that there is currently no independent oversight of Millpledge.

This allegation is directed primarily against Paddy – the Claimants submit that Paddy has an irreconcilable conflict of interests arising as a result of his position as a director of Millpledge and as one of the trustees of the Trust, which conflict is said not to be authorised by the terms of Graham’s will (save in respect of remuneration, which is said to be catered for in the will). It is also submitted that the other Trustees are not properly supervising Paddy in his performance of his role as a director of the company.

As Mr Learmonth KC pointed out in his submissions, this allegation began life as an insinuation that Paddy was using his position on the board of Millpledge to obtain an improper profit for himself. Thus, in his witness statement, Nathan said that “[s]ince Paddy became chairman, he has agreed with the Trustees to (1) pay himself a salary, (2) pay himself a profit share, (3) have income in lieu of private healthcare which increases the value of his profit share, (4) have a company pension and (5) have a company car on a lease which is below market rate. There is plainly a complete lack of oversight between the Trust and the Company.” The tenor of that paragraph seems to me to be an insinuation that Paddy is drawing remuneration and other benefits from the company which are not justified, and this is being allowed to happen because nobody is supervising him.

In the event, no allegation that Paddy has in fact abused his position as a director of Millpledge has been pursued by the Claimants. The allegation is really now therefore that having one of the Trustees sit on the board of the company is structurally inappropriate, unauthorised by Graham’s will, and means that there is a lack of fiduciary oversight of Paddy’s actions in his capacity as a director.

In his oral submissions, Mr Burton acknowledged that Graham’s will contains a provision which on its face appears to authorise any conflict inherent in one of the Trustees sitting on the board of the company: in particular, clause 19.3.1 provides that the Trustees may “bring about join in or accept the appointment of one or more of themselves as directors or other officers or as employees of the company and any trustee so appointed may keep for himself any reasonable remuneration or other benefit received from the office or employment.” However, Mr Burton submitted that neither this clause nor the ‘anti-Bartlett’ provision at clause 19.3.5 of the will permits the Trustees to wash their hands of any oversight of one of their number so appointed. He submitted that there is no evidence (for example, contemporaneous minutes) indicating that the Trustees have performed this duty of oversight; in any event, he submitted that the Trustees must act unanimously, such that Paddy could block any attempt at independent oversight by the Trustees of the performance of his role as a director of Millpledge.

In response, Mr Learmonth KC submitted that no allegation had been made (or at least persisted with) by the Claimants that the Trustees had failed to prevent mismanagement by Paddy, or by the board of directors as a whole, in respect of the affairs of Millpledge. As I have said above, he noted that there was no evidence and indeed no sustained allegation that Paddy had profited improperly from his role as a director of Millpledge. Mr Learmonth KC also relied on the fact that Graham’s will authorised the Trustees to appoint one of their number to the board of the company; that Graham had himself appointed Paddy as a director of the company; and that Graham’s letter of wishes had made it clear that Graham wished Paddy to act as the first Chairman of the board of Millpledge after his death. He submitted that the Trustees did not rely on the ‘anti-Bartlett’ provision in Graham’s will; rather, he said that the Trustees were complying with their duty to supervise the affairs of the company.

In relation to this ground, I do not think it can be said that Paddy’s role as one of the directors of Millpledge created an irreconcilable conflict that was not authorised by the terms of Graham’s will. In my judgment, the will clearly contemplates that the Trustees might appoint one or more of their number to act as one of the directors of the company, and authorises the conflict that would otherwise prevent the payment of remuneration to that trustee-director.

As to whether Graham envisaged Paddy playing this role, there is something of a tension in Graham’s letter of wishes: on the one hand, Graham writes that he would like Paddy to act as the Chairman of the company “[i]n the first year after my death”, and that “in subsequent years the Chairman will be elected annually by the Trustees by unanimous agreement” (incidentally, it is not clear whether Graham envisaged that Paddy might be re-elected to the role of Chairman, as has happened). On the other hand, Graham stipulates that “I do not want any of the Trustees to also be appointed as directors of the Company unless there are no other suitable alternatives to take on this position. In this event, and in this event only, all four trustees should agree with the appointment.” Since a chairman of the board of directors is ipso facto one of the directors, these wishes are not easy to reconcile, although it may simply be that Graham viewed the roles as “Chairman” and director as being distinct from one another. In any event, I do not think it can be said that Paddy’s role as a director of Millpledge is contrary to Graham’s wishes as expressed in the letter of wishes.

Accordingly, in my judgment there is nothing inherently impermissible about Paddy serving as one of the directors of Millpledge. Further, I do not think that the evidence establishes that the Trustees have failed to supervise the activities of the board of Millpledge, or in particular Paddy’s actions as a director of Millpledge.

In light of the final conclusion I reach on the claim, as set out below, which will in any event resolve any concern as to lack of oversight over the board of Millpledge, I do not further lengthen an already long judgment by addressing this ground in more detail. It suffices to record that I do not consider that any alleged impropriety on Paddy’s part in his role as a director of Millpledge, or the alleged failure by the Trustees to supervise Paddy’s actions as a director, has been proven.

I therefore conclude that ground 4 does not support the claim to replace the Trustees in office although, as I explain below, in the overall evaluative exercise I do take into account the desirability of having independent oversight of the board of Millpledge.