I regard these criteria as equally applicable to a legal personal representative undertaking a sale of estate assets for purposes of administration.
Assessment of the first defendant's conduct
45 One aspect of the plaintiffs' claims may be disposed of at once. As I have said, the allegation of the plaintiffs is that the first defendant acted wrongfully in exercising his power of sale because of three factors: first, that he sold for a price he knew to be much less than the value of the shares; second, that he sold without the consent of the plaintiffs; and, third, that he sold against the express wishes of the plaintiffs. The second and third aspects do not represent any valid basis for complaint. A legal personal representative's power to sell for the purposes of administering an unadministered estate is in no way dependent on the consent or wishes of the residuary (or any other) beneficiaries. The beneficiaries have a right to have the estate properly and duly administered but that does not entail any right to determine how, for what price or to whom a sale is to be made.
46 There is, however, one respect in which I consider that a finding of failure to adhere to the required standards of conduct is warranted. The position the first defendant took in the proceedings is that he invited an offer for the shares from the plaintiffs, allowed what he considered to be ample time for them to make such an offer and, when no such offer was forthcoming, sought offers from the second defendant and Perry and then sold to the second defendant at the price offered by him, taking the view that that price was a proper price in light of the view expressed to him orally by Mr Edwards as to the value of the shares.
47 Such an approach overlooks a significant matter. As the defendant knew, the plaintiffs (or, at least, the first plaintiff as the purported representative of all) had an expectation of receiving the shares as residuary beneficiaries. That had been made clear to the first defendant by the first plaintiff in the conversation of 17 October 2000 - and they were, after all, the children of the founder of the company. The plaintiffs (or, again, the first plaintiff purportedly on behalf of all) said in specific response to the letters of 2 November 2001 from Braye Cragg inviting them to submit an offer for purchase, that there was no need to sell the shares since the deed took care of expenses that would otherwise be a burden on residue so that it was unnecessary for the sole item of property making up the residuary estate to be converted into cash. These understandings, conveyed to the first defendant through his solicitors by the first plaintiff's letter of 19 December 2001 and repeated in the first plaintiff's letter of 30 January 2002, were no doubt incorrect understandings. But that is beside the point. The letters showed that the plaintiffs (or, at least, the first plaintiff) had an expectation of receiving the shares without having to buy them.
48 A prudent prospective seller, focussed on the need to effect any sale in an advantageous way, would not have acted as the first defendant did. Such a prudent prospective seller, realising that the plaintiffs, who had an expectation of receiving the shares, were under a misapprehension that there was no need for the shares to be sold, would have recognised that the absence of any offer to purchase or other expression of interest in purchasing by the plaintiffs was a product of the misapprehension. The prudent prospective seller, having recognised that the plaintiffs, who, to his knowledge, wished to own the shares, were actuated by a misapprehension in the response they made to his invitation to treat, would have taken steps to dispel their misapprehension. He would have done so not because of any duty he owed to them. Rather, he would have seen that the prospects of effecting a sale advantageous to the estate would be enhanced by making it clear to persons known to be desirous, to some degree, of owning the shares that their belief that a sale was unnecessary was wrong, with the result that there would be a sale if a buyer could be found willing to pay a price judged by the administrator to be a proper price. Had the plaintiffs been told this, there is a possibility that they would at least have considered making an offer to purchase.
49 When the first defendant received the second defendant's offer on 20 March 2002, he had, for the first time, an indication of what someone was prepared to pay for the shares. Acting prudently and with due regard for the nature of his duties, he should then have considered whether it might be possible to obtain a more favourable sale, particularly as the benchmark of $2,250 that had then been set was, in absolute terms (and without regard to views as to value), within the reach of potential buyers even of relatively modest means. Instead, on that very day or the next day, he instructed his solicitors to accept the second defendant's offer. And he did so without having taken any step to communicate again with the plaintiffs on the subject of possible purchase by them after the first plaintiff's letter of 30 January 2002 reasserted that there was no need for the shares to be sold. It was, of course, no part of the first defendant's functions as administrator exercising his power of sale to be concerned that one buyer rather than another might be more compatible with him as a co-shareholder in ADS; nor, I might say, is there evidence to suggest that any such consideration entered into his decision-making. But it is nevertheless clear that he had, but did nothing to pursue, an opportunity to seek to negotiate a price greater than $2,250 with persons who, to his knowledge, wished to be the owners of the shares. It was in not recognising and following up that opportunity that the first defendant failed to live up to the standards properly to be expected of a fiduciary in the circumstances. He failed to cover all the ground necessary to ensure that the sale he in fact made was to the best advantage reasonably to be had in the particular circumstances.
50 Having said that, I should add that I do not think that the first defendant's conduct deserves criticism on any wider basis. In particular, the closely held nature of the company, its unusual capital structure and the nature of the B class shares (of which more will be said presently) would not have warranted a wide-ranging search for potential buyers. I think that, in the particular circumstances, it was open to the first defendant to confine his efforts to persons with some connection with ADS, as he did. What he failed to do was to investigate sufficiently within the confined group with a view to making a sale to the best advantage reasonably achievable.
51 My conclusions with respect to the first defendant is, in summary, that he acted in a way that fell short of the standards of conduct to which he was subject as administrator effecting a sale for the purposes of administration when he sold 10 B class shares to the second defendant at $2,250 without having taken steps to ascertain whether the plaintiffs, disabused of their misapprehension and aware that a sale was to be made regardless of their view that it was unnecessary, would have made an offer at a higher price.
Legal principles relevant to the second defendant's conduct
52 It is therefore necessary to consider consequences. That inquiry is best undertaken, however, after an examination of the claims made by the plaintiffs against the second defendant. The statement of claim, after pleading in paragraph 10 the sale of the shares by the first defendant to the second defendant for $2,250, said in paragraph 14:
"In entering into the agreement referred to in paragraph 10 above the second defendant knowingly participated in and procured the first defendant's breaches of duty.
Particulars
The second defendant was aware, or ought to have been aware, that the Shares had a value greatly in excess of $2,250. The second defendant was aware the Shares were held beneficially for the plaintiffs."