Alistair Kenneth Bruno Trow v Durmast Group Ltd

A misrepresentation claim fails where the alleged representations and reliance are not proved on the balance of probabilities. A loan-note redemption notice may be valid if it substantially conveys the required demand, even if the certificate is not enclosed and the notice is unsigned but sent with an authorised solicitor’s letter. A remuneration arrangement may distinguish between contractual salary and a personal understanding to procure dividends or bonuses. Payments from related entities may be credited against the contractual salary obligation. Assurances about employment benefits given by a solicitor acting for the employer may bind the employer. Directors who increase benefits to punish a shareholder act for an improper collateral purpose, making the transaction unenforceable against the company.

This was the first-instance trial of three consolidated claims arising from the sale of two family businesses to Durmast Group Ltd, controlled by Duncan Trow. The claimants sought payment of loan notes and employment-related sums. Durmast alleged that Alistair and Stephen Trow had misrepresented the inter-company margin between the trading companies and claimed damages. The employment claims concerned salary, dividends or bonuses, pension contributions and private medical insurance. The court determined whether the alleged misrepresentations had been made and relied upon, whether a redemption notice was valid, and the contractual and fiduciary consequences of the remuneration and pension arrangements.

1. Misrepresentation. The misrepresentation claim was dismissed. The court found that none of the alleged statements about a 20% inter-company margin had been made. Duncan had access to the relevant financial information and did not establish that Durmast entered the buy-out in reliance on any representation. The court therefore did not need to determine the legal issues concerning silence or alleged duties to correct a misunderstanding.
2. Loan notes. Alistair and Stephen were entitled to payment of the principal sums due under their loan notes. The absence of Stephen’s certificate from the redemption notice was not fatal. The relevant condition required delivery of the certificate at the time for redemption and provided an alternative obligation to set the money aside. A notice was substantially in the prescribed form where an unsigned form identifying the notes was enclosed with a solicitor’s signed letter clearly demanding repayment on the noteholder’s authority. Stephen was therefore entitled to default interest from the accelerated payment date.
3. Remuneration. Duncan and Alistair had a personal understanding that Alistair would receive total remuneration of £120,000 per year, later supplemented by a profit share. Only £89,034 was a contractual salary obligation of Durmast. The balance was intended to be implemented through dividends or, if approved, bonuses, and was not itself a contractual liability of Durmast. Payments made to Alistair or his wife by Durmast, PFC, or other entities were credited first against Durmast’s salary obligation. Alistair was entitled to any remaining salary shortfall, but not to the additional profit share from Durmast.
4. Pensions and benefits. Assurances that existing benefits would continue were binding on Durmast, despite an erroneous reference to TUPE. Alistair was entitled to continuation of the pre-existing employer pension contributions, subject to accounting for increased payments made after the aborted sale. Any increase authorised to punish Duncan for refusing to sell his shares was for an improper collateral purpose and unenforceable against PFC. The claim for BUPA contributions was recoverable because the contractual obligation had not been varied or waived.
5. The parties were invited to agree the resulting order and financial figures, or directions for the necessary accounts.

First-instance trial of three consolidated claims in the High Court (Chancery Division). No appeal history is stated in the judgment.