Signing away testamentary freedom
The High Court handed to a judgment considering the circumstances in which a promise to make a Will favouring particular people was binding in Colicci v Grinberg. Why is a Company/Commercial solicitor writing this, rather than a member of our Private Client team? Because deeds like this are highly relevant to corporate arrangements in shareholders agreements and it’s something for shareholders to think about, especially in family businesses, when they’re instructing us to prepare a shareholders agreement. It is possible to sign away your testamentary freedom to make a Will benefitting anyone you want with a deed of the kind used in Colicci v Grinberg. Whether it’s desirable is a different matter and the factual background to Colicci v Grinberg may help you to think about the personal issues involved when considering whether to enter into such a deed.
Ernesto Colicci died in January 2021. He and his first wife, Josephine Colicci, had run a business since the early 1980s (setting up a company, ECSI Limited (the Company), in 2003) and continued to run it until Mr Colicci’s death, although they divorced in 2011. They had two adult children in their 30s, Robert and Rosanna Colicci, who began working in the business after finishing their formal educations. In 2017, Robert was appointed as a director of the Company. Rosanna left the Company to run her own business from the same premises as the Company but until about 2019, she continued to help out in the accounts department without payment.
Mr Colicci remarried in 2014 to Nora Grinberg. She was sued by Mrs Collici and her children as executrix of Mr Colicci’s Will. The claim was also brought against the Company.
Following their 2011 divorce, Mr Colicci and Mrs Collici entered into a shareholders agreement, under which they were each allowed to transfer their shares during their lifetime to Robert and Rosanna (or to trusts for their benefit) but were not allowed to transfer to anyone else. Upon the death of the first of them, the survivor had the right to acquire, at full value, any of the deceased’s shares which would not pass to their adult children under the Will of the deceased.
By 2015, both Mrs Colicci and Ms Grinberg were expecting children, Ms Grinberg with Mr Colicci. Mrs Colicci proposed all shares in the Company should pass to Robert and Rosanna on the death of Mr Colicci or Mrs Collici and that the shareholders agreement should be revised to reflect that agreement. Whilst seeming to agree with her, Mr Colicci didn’t respond to her solicitors. Instead, without telling her, he made a Will in March 2016 leaving his shares to be divided equally between Robert and Rosanna and his new (not yet born at that point) baby. At the same time, Mr Colicci wrote a letter to be opened after his death, which laid out the content of his Will and went on:
‘I love Roberto and Rosanna very much and this split is no reflection on how I feel about them. I have provided both with significant funds in their lifetimes, and I have set them up with properties, rental properties, and provided them with careers in my company, ECSI Ltd. They are independent adults now with financial security. I have left them interests in my rental properties, and my company, which is my most substantial asset in terms of financial value. I consider this more than sufficient provision for Roberto and Rosanna.
My [infant child] is due to be born April 2016 …. [He/she] will not have had the benefit of my generosity in her lifetime as Roberto and Rosanna have. It is for these reasons, which I consider fair and just, that I have left my residue as I have.’
In May 2016, Mr Colicci made another Will, the only change being that Mrs Collici was no longer named as the guardian of his new baby if he and Ms Grinberg both died, because of a falling out over keeping the two pregnancies a secret from Robert and Rosanna who were extremely upset to learn they were to have two half siblings at the last minute. He didn’t tell his first family about either of these Wills.
Despite the two Wills leaving a third of his shares to his baby and the rest to his first two children, Mr Colicci agreed (this time without telling Ms Grinberg) the terms of a deed with Mrs Colicci and Robert and Rosanna a few weeks later (dated 1 June 2016). The deed said that:
- Ownership of all of Mr Colicci’s and Mrs Colicci’s shares would:
‘pass without cost and free of all taxes to Robert and Rosanna in equal parts or to the survivor of them’; and
- Each of Mr Colicci and Mrs Colicci then covenanted:
‘with each other and separately with Robert and Rosanna that (a) each of them will forthwith make a will or codicil leaving the shares free of all taxes to such of Robert and Rosanna as shall survive them and if both the shares shall be divided equally between them and (b) neither of them will revoke or in any way change the aforementioned bequests…’
The question facing the Recorder was whether the 1 June 2016 deed was enforceable against Mr Colicci’s estate in all the circumstances because things weren’t left at that. In March 2017, Mr Colicci and Mrs Colicci gave a 10% holding in the Company to each of Robert and Rosanna and replaced the 2011 shareholders agreement with a new one which made it clear that the ability of Mr Colicci and Mrs Collici to give away their shares during and after their lifetime only applied to gifts to the two adult children and not to either of their respective infant children. It also dealt with the possibility of their wanting to sell the whole of the Company to a third party. The new shareholders agreement also contained an ‘entire agreement’ clause:
‘This Agreement, and any documents referred to in it, constitute the whole agreement between the parties and supersede any arrangements, understanding or previous agreement between them relating to the subject matter they cover, including the Shareholders Agreement between GC and EC dated 8 December 2011.’
In April 2017, Mr Colicci made his final Will and left everything to his wife, Ms Grinberg. His solicitor’s evidence on his instructions about the shares was as follows:
‘I explained to him that if he didn’t do anything at the moment, then his entire estate went to Nora on his death and if Nora wasn’t here, it went to [his infant child], which means his children from his first marriage would get nothing. Ernie was not concerned by this. He said he and his ex-wife had done a shareholders agreement whereby should anything happen to either of them, their children, Rose and Roberto, got their shares in ECSI Limited but he said he couldn’t remember the details and he couldn’t remember where the agreement was, who did it, or in fact even if it was valid. …
‘In respect of the business … [he] fully appreciated that this may go to Nora if he hasn’t done a shareholders agreement or if the shareholders agreement is invalid but equally he said if the shareholders agreement is valid, it will go to his two children and he wasn’t concerned either way.’
In December 2018 Mr Colicci made a statement to accompany that final will:
‘I have not included my children Roberto and Rosanna (from my first marriage) in my Will. I love Roberto and Rosanna very much and my Will is no reflection on how I feel about them. I have provided both of them with significant financial funds in their lifetimes, and I have set them up with properties, rental properties, and provided them with careers. They are independent adults now with financial security. I consider this more than sufficient financial provision for both Roberto and Rosanna.
‘My wife Nora is in greater financial need than Roberto and Rosanna and my concern is therefore to provide for her and my [infant] … (who was only born in April 2016) [and] will also not have had the benefit of my generosity in [his/her] lifetime as Roberto and Rosanna have.
It is for these reasons, which I consider fair and just, that I have left my estate as I have and I hope Roberto and Rosanna will not challenge my Will and respect my wishes.’
The Recorder also reported that:
‘There was another meeting in December 2019 between Ernesto and [his solicitor]. Ernesto repeated that “an agreement had been done for the business was such that his children inherited should anything happen to him or his ex-wife”. At a meeting in June 2020, he said that he was not sure what would happen to the Shares upon his death and wanted to take advice about it. He never did.’
Are you confused about what Mr Colicci’s intentions really were yet? The Recorder was left to decide whether the ‘entire agreement’ clause in the 2017 shareholders agreement revoked the 2016 deed. He noted that Mr Colicci’s secrecy over his Wills was relevant to his interpretation of this clause:
‘In particular the fact that Ernesto made two wills and a statement to accompany them is irrelevant, because those facts were not known to the claimants.’
Later in his judgment, he notes:
‘there is very limited evidence about Ernesto’s state of mind about any of the matters relevant to this dispute. He was conspicuously uncommunicative. There is not a single email from him in evidence, and neither was he forthcoming in face-to-face communications. For example, despite advice by Ms Bhargava to discuss his will with the adult children, he never did so. He never told Nora about the 2016 Deed or about the 2017 Agreement. He was even reluctant to share information with his lawyers, as some of Ms Bhargava’s attendance notes specifically record.’
The Recorder decided that:
‘Ernesto had no reason to think that the 2017 Agreement superseded the 2016 Deed and so probably did not think that. I think it is unlikely that he gave the matter any thought at all.’
He concluded that:
‘The subject matter of the 2016 Deed was a mutual promise that any Shares still held by Ernesto and Josephine at death would pass to the adult children, and a promise to make wills to that effect. It created testamentary obligations. It removed Ernesto’s and Josephine’s freedom to dispose of their Shares on death,’
and that:
‘the 2016 Deed imposes obligations on Ernesto and Josephine as testators, and confers benefits upon the adult children as beneficiaries, which are different from the subject matter of the 2017 Agreement, which concerns the rights and obligations of the parties as shareholders. The 2016 Deed was not a “previous agreement … relating to the subject matter” covered by clause 11.1(a).’
So, the 2016 deed was binding on its face in the first place and the ‘entire agreement’ clause in the 2017 shareholders agreement didn’t affect the validity of the earlier deed because it was sufficiently removed from the subject matter of the shareholders agreement.
What’s the takeaway from all this? I suppose that deeds of this kind can be used in appropriate circumstances but that you never know what’s round the corner in life and if your circumstances change, you may find yourself regretting signing such a deed. Mr Colicci was secretive and disorganised but it’s pretty clear that he did ultimately want Ms Grinberg and his third child to benefit from the value of the Company. You can certainly criticise him for the way he went about things but, in the end, Ms Grinberg and his third child didn’t get what he intended them to because he’d signed away his testamentary freedom in the 2016 deed.
Signing away testamentary freedom
Cookie banners 🍪, the bane of every Internet user’s life, right? Intended to give protection to individual users, instead they’ve become an ever-present justification for using site visitors’ personal information and targeted ads. The Information Commissioner and the Competition and Markets Authority aren’t pleased with this practice and they’ve issued a joint blog, statement and position paper warning website owners and developers that they run the risk of falling foul of data protection law and of consumer and competition law if they don’t design their sites so as to provide genuine protection for users.
The blog notes that:
‘Using language that suggests there’s a right or wrong decision on privacy policies. Making certain options easier to find to distort users’ choices. Presenting choices to steer users to pick a particular option. These are just some of the ways that your web design practices could be breaching data protection law and raising concerns from a consumer and competition law perspective.’
On cookies specifically, they say:
‘A website’s cookie banner should make it as easy to reject non-essential cookies as it is to accept them. Users should be able to make an informed choice on whether they want to give consent for their personal information to be used, for example, to profile them for targeted advertising.’
How often do you see that, in practice?
They also say that:
‘ICO research shows that 90% of people are concerned about their personal information being used without their permission, with 50% of people not happy about their personal information being used to suggest adverts to them.’
From the CMA’s perspective, this is all part of its ‘dark patterns’ campaign but it’s the ICO that currently has the more significant fining powers and cookie banners fall well within its remit. The blog specifically says that the ICO will be reviewing some of the UK’s most used sites and taking action where necessary. The joint statement and position paper say the ICO will take enforcement action:
‘where necessary to protect people’s data protection rights, particularly where the practices lead to harms for people at risk of vulnerability.’
The blog, statement and position paper all give the example of targeting gambling ads at an addict, suggesting they may consider gambling addicts ‘at risk of vulnerability’ and that action in that sector may be imminent.
Not all online choice architecture (OCA) is bad. The position paper gives examples of positive OCA including a quick and seamless returns process and relevant recommendations for further products or services. Design practices that the ICO and CMA regard as potentially harmful under their respective regimes when they are used to present choices about personal data processing include ‘harmful nudges and sludge’, ‘confirmshaming’, ‘biased framing’, ‘bundled consent’ and ‘default settings’. What does all this jargon mean? The position paper explains in detail:
Harmful nudges and sludge are when a site makes it easy (‘nudges’) users to make what the authors of the position paper call ‘inadvertent or ill-considered decisions’. These decisions can also be encouraged by ‘creating excessive or unjustified friction’ (‘sludge’) that makes it difficult for the user to get or do what they want eg the site may make one option much quicker and simpler than the other. Harmful nudges and sludge are often used in cookie permission pop-ups to encourage users to consent to non-essential cookies by including an option to consent to non-essential cookies with a single click (‘Allow all’) but not including an equivalent option to refuse consent to non-essential cookies at the same level (‘Reject all’). Instead, users who don’t want to consent to non-essential cookies, have to go into a settings page and, in some cases, refuse consent to individual cookies. This process is much more time consuming and onerous so users may simply click ‘Accept all’ to make the pop-up go away. To see how cookie consent should be handled, just visit the ICO’s own site.
Confirmshaming involves pressuring or ‘shaming’ someone into doing something by making them feel guilty or embarrassed for not doing it by using language that clearly suggests that there is a ‘good’ and ‘bad’ choice. Confirmshaming can be used in popups asking a user to provide their email address in exchange for a discount eg where the ‘no’ button says ‘Nahh, I hate savings’. This might seem innocuous to the website owner, aiming for a jokey feel but the position paper makes it clear that it isn’t allowed.
Biased framing involves presenting choices in a way that emphasises the supposed benefits or positive outcomes of a particular option to make it more appealing to the user (‘positive framing’) or that emphasises the supposed risks or negative consequences of a particular option to discourage a user from selecting it (‘negative framing’) eg:
‘By sharing your search history with us, we can tailor our services specifically to your needs so you get the information you need exactly when you need it. This will also increase the relevance of the ads you see when you use our other services. If you don’t share your search history with us, the information and ads you see may not be as relevant or useful to you.’
This example involves both positive and negative framing.
Bundled consent involves asking the user to consent to the use of their personal information for multiple separate purposes or processing activities through a single consent option, making it harder for users to understand and exercise complete control over what they do and don’t want their personal information to be used for. Offering an ‘Accept all’ option increases the likelihood that users will consent to all processing, even if they’d rather not. An example in the position paper is a site that offers multiple distinct services to users. As part of its account sign-up process, it asks users to provide a single consent to the processing of their personal data for use in personalising the services they receive (such as personalised recommendations and personalised advertising), as well as to set cookies for various purposes, including some not directly related to the personalisation of the account. The user can therefore consent to all the services being personalised and cookies being set, or refuse consent for all of them. They can’t pick and choose.
When designing default settings, sites offer a predefined choice that the user can only change by taking active steps. This can include default settings (including privacy or security features), default choices (such as automatically selected add-ons or pre-ticked boxes), default brands (like the browsers or other apps that come pre-installed on devices) or automatic renewal of subscriptions by default. The position paper comments that default settings:
‘reduce user friction which may align with user preferences, but can also be used strategically by firms to reduce the ability of users to make effective choices’.
The ICO and CMA lay out their expectations of sites that are using OCA in relation to choices about personal data:
- Put the user at the heart of your design choices: Are you building your online interfaces around the user’s interests and preferences?
- Use design that empowers user choice and control: Are you helping users to make effective and informed choices about their personal data, and putting them in control of how their data is collected and used?
- Test and trial your design choices: Has testing and trialling been carried out to ensure your design choices are evidence-based?
- Comply with data protection, consumer and competition law: Do you consider the data protection, consumer protection and competition law implications of the design practices you are employing?
Further details on all these points are laid out in the position paper.
What does this mean for our clients? We’re always happy to write compliant privacy policies for your website but if the architecture of your site, including its cookie banner, aren’t compliant, the policies we write won’t be enough. It’s important to discuss these issues with your site developer, for example to establish what cookies are genuinely necessary for your business, and to make it easy for users to reject the rest.
Signing away testamentary freedom
You may very well have heard about ClientEarth v Shell Plc because it’s had rather a lot of attention in the news. ClientEarth is a climate action group and holds a small number of shares in Shell. It brought a derivative claim against the directors of Shell to object to the directors’ policies on climate change. A derivative claim is one where shareholders bring a claim against a company’s directors on behalf of the company itself.
The question of whether a derivative claim like this one can succeed is an important one in an age of activism. So, what is ClientEarth v Shell all about? The Companies Act 2006 includes a section which directors will be familiar with, section 172, which requires each director to promote the success of the company for the benefit of its members as a whole. Crucially, the requirement is to do so ‘in good faith’. Section 172 sets out a non-exhaustive list of factors for directors to take into account, including the impact of their decisions on the community and the environment. Section 174, meanwhile, imposes a duty of care on directors i.e., a duty to exercise reasonable care, skill and diligence in the performance of their duties.
ClientEarth wanted to bring the claim in order to demonstrate that Shell’s directors had failed in their duty to promote the success of the Company for the benefit of the shareholders as a whole, taking into account the impact of their decisions on the community and the environment when setting their climate change risk management strategy (‘ETS’) as described in corporate documentation and in their duty to exercise reasonable care, skill and diligence in respect of the ETS. It also alleged breaches relating to the directors’ response to an order made by the Hague District Court on 26 May 2021 in Milieudefensie v Royal Dutch Shell plc but I wont get into that second point here.
There are strict procedural rules around bringing a derivative claim. You need the Court’s permission to proceed and ClientEarth fell at this first hurdle. Their claim was initially rejected in May but ClientEarth requested an oral hearing. That hearing was held on 12 July (with judgment on 24 July) and, once again, the Judge refused permission. ClientEarth requested permission to appeal but on 31 August 2023 Mr Justice Trower decided that the appeal had no prospect of success and ordered ClientEarth to pay Shell’s costs (which reportedly run to seven figures).
For a derivative claim to succeed, there must be ‘an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by one or more of the Directors’ (CA 2006 s.260(3)). It’s for the claimant at the initial, permission stage to show that their claim has sufficient merit (that it has a ‘prima facie’ case, a case on the face of it) to justify giving permission to proceed. Basically, if it went to trial and Shell and its directors gave no evidence in defence, would ClientEarth’s claim succeed?
ClientEarth argued that the duties owed by the directors of Shell included specific factors the directors should weigh ‘when considering climate risk for a company such as Shell’, namely:
- a duty to make judgements regarding climate risk that are based upon a reasonable consensus of scientific opinion;
- a duty to accord appropriate weight to climate risk;
- a duty to implement reasonable measures to mitigate the risks to the long-term financial profitability and resilience of Shell in the transition to a global energy system and economy aligned with the global temperature objective of 1.5°c under the Paris Agreement on Climate Change 2015;
- a duty to adopt strategies which are reasonably likely to meet Shell’s targets to mitigate climate risk;
- a duty to ensure that the strategies adopted to manage climate risk are reasonably in the control of both existing and future directors; and
a duty to ensure that Shell takes reasonable steps to comply with applicable legal obligations.
ClientEarth changed their approach to these issues between the initial, written, stage and the oral hearing. Initially, ClientEarth argued that the above obligations are ones to which all companies like Shell are subject. It then shifted its argument and said that, as Shell had accepted ‘that climate risk is a serious risk to Shell’s business,’ the new, detailed duties above flowed from that acceptance. So, by doing anything at all, Shell’s directors were taking on a higher burden of responsibility than if they had simply refused to acknowledge climate risk at all, or so the argument seemed to go.
So, what of Trower J’s conclusions? He refused permission on a number of grounds:
- the ‘duties’ were inherently vague and incapable of constituting enforceable personal legal duties;
- the ‘duties’ cut across the basic principle of company law that it is for the directors themselves to determine the weight to be attached to the non-exhaustive list of factors referred to in s.172;
- the ‘duties’ were incompatible with the subjective nature of the duty under s.172, which: ‘requires proof of conduct other than in good faith… there will be cases in which an absence of good faith can be inferred from the irrational nature of the conduct in issue, but it remains the case that the state of mind of the director concerned is what matters. For these purposes, good faith, not irrationality, is the cornerstone and an honest but unreasonable and mistaken belief that a particular course of action is in the company’s best interests is not sufficient to amount to a breach of s.172.’ He cited a previous judgment by Lewison J that said ‘the weighing of all these considerations is essentially a commercial decision, which the court is ill-equipped to take, except in a clear case’;
- the ‘duties’ amounted to an unnecessary and inappropriate elaboration of the statutory duty of care referred to in s.174;
- the Court wouldn’t grant an injunction where ‘constant supervision is required, which will be particularly acute as a factor if the relief sought is insufficiently precise. This would be the case if the order sought necessarily contemplated that the court may be required to adjudicate on disputes over whether or not a business is being run in accordance with [the injunction’s] terms’.
Indeed, Trower J noted that ‘it is difficult to see how the court could be satisfied that the disruptive impact which disputes over compliance [with the injunction] would have on the conduct of Shell’s business would not of itself have the serious adverse impact on the success of Shell for the benefit of its members as a whole, which ClientEarth contends that these proceedings are designed to avoid’;
- there was no evidence that the derivative claim had support among other shareholders as a whole, except for a relatively small number of other shareholders who wrote in support (the Judge complained about the template letters used to do so). Indeed, the votes at successive general meetings were overwhelmingly supportive of the ETS; and
- the derivative claim was motivated not by promoting the success of the Company for the benefit of the shareholders as a whole but by imposing ClientEarth’s preferred managerial strategy on the directors.
Interestingly, the Judge also scolded ClientEarth over its failure to introduce expert evidence at this early stage, in support of its allegations against the Shell directors. His tone is as noteworthy as the content. He said:
‘ClientEarth submits that it is unreasonable to require or expect it to adduce expert evidence at the prima facie stage. I disagree. The case it has chosen to advance relies on a breach of s.174 and attacks eleven individuals on the basis that they acted irrationally or so unreasonably that the decision making of all of them falls outside the range of decisions reasonably available to the Directors at the time. If it is not possible for ClientEarth to establish a prima facie case to the effect that the Directors’ approach to climate risk falls outside the range of reasonable responses open to the board of a company such as Shell without properly admissible expert evidence, that is simply a reflection of the very serious nature of the case it wishes to advance and the attendant difficulties which its pursuit entails. It is no reason to conclude that the normal rules on the admissibility of opinion evidence should not apply.’
The judiciary is always wary of ‘opening the floodgates’ and I’m not at all surprised that the High Court was unwilling to do so. I agree that an injunction is a blunt instrument, not a scalpel and that this kind of claim could give the judiciary an unpalatable (and unlooked for) level of control over companies.
There’s a great deal of polarisation on companies’ ESG policies, with people on both the left and the right criticising directors’ decisions. Whether you have sympathies with ClientEarth’s purpose or not, is it right to clog up corporate decision-making (and the High Court) with a parade of lawsuits by bringing derivative claims? Crowdfunded legal fees could see that this happens (ClientEarth’s solicitors acted pro bono), although the recent costs decision and the scale of Shell’s costs are as much of an inhibition against bringing a derivative claim as the original decision itself. The risk of a seven figure costs bill is an enormous one to take. In my opinion, though, directors do need to be able to take good faith business decisions without the threat of legal action.
Business continuity is important and, although it can result in decisions that we sometimes disagree with, it’s important that the ability of directors to run companies as they see fit should be maintained without micromanagement from the Courts. In most cases (although not always where there is a monopoly), the public have the option of choosing to take their business elsewhere and they frequently do these days. It’s then for the directors to decide whether to stand their ground or change course.
And has ClientEarth actually achieved anything? Publicity, perhaps? It claims that
‘Institutional investors with over 12 million shares in the company came out in support of the claim, including Nest, the UK’s largest workplace pension fund,’
and the Church of England pension fund announced recently it would be selling its Shell (and BP) shares but, really, the majority of people probably just shrugged at the allegations made against Shell’s directors, thinking ‘of course they weren’t doing enough. It’s a global oil giant, after all’.
Meanwhile, ClientEarth also says that:
‘The Board [of Shell] has since doubled down on fossil fuels, dropping its plan to reduce oil production by between one and two percent each year until 2030.’
It will be interesting to see what the shareholders who were so supportive of the ETS make of that.
Signing away testamentary freedom
You may remember that in July I wrote about the High Court judgment in DnaNudge Ltd v Ventura Capital GP Ltd. On 9 October, the Court of Appeal upheld the High Court’s decision that a conversion of preferred shares (‘Series A Shares’) into ordinary shares upon notice from an investor majority (comprised entirely of ordinary shareholders) constituted an abrogation of the rights attached to those shares and that there was a fatal drafting error in the Articles which needed to be corrected by an implied term.
The Court of Appeal held that the High Court Judge was wrong to say that the significant premium paid for the Series A Shares constituted payment for the special rights attached to them, and to take that into account in his decision but, that the decision was right on other grounds.
The Court of Appeal considered various judgments on interpretation in contracts but concluded that Articles of Association differ from a regular contract:
‘The articles of association of a company apply to the potentially fluctuating body of members who acquire shares in a company, some of whom may have no knowledge of the circumstances which applied when the articles were adopted or amended. The articles are also publicly registered at the Companies Registry, where they are available to those who wish to deal with the company, who may also have no specific knowledge of the background to the adoption or alteration of the articles. For these reasons, and in contrast to the approach when interpreting ordinary commercial contracts, the relevant background facts for the purposes of interpretation of articles of association must be very limited’.
The Court of Appeal said that the Judge was entitled:
‘to investigate whether the rival meanings of Article 9.2(a) were consistent with the other provisions of the Articles and to ask whether they produced a coherent and commercially sensible scheme for the Articles as a whole. If there were issues in that respect, the Judge was entitled, if it could conscientiously be done, to adopt an interpretation that reconciled any potentially conflicting provisions in the Articles.’
The Court of Appeal agreed with the Judge that:
‘the Company’s contention as to the meaning of Article 9.2(a) would lead to an incoherent scheme and irrational results.’
The preferred share rights were carefully designed to apply in specific scenarios but if the Company’s argument was accepted:
‘Article 9.2(a) would give an Investor Majority comprising only Ordinary Shareholders, an unrestricted power to deprive the holders of the Series A Shares of the particular benefits conferred by those special rights at any time chosen by the Ordinary Shareholders.’
The Court of Appeal noted that to argue, as the Company did, that the ordinary shareholders could have served a conversion notice immediately after the Series A Shares were issued was:
‘a bizarre conclusion which makes no commercial sense given the very creation of the Series A Shares as a separate class and the detailed terms of Articles 5 and 6.’
The Court of Appeal went on to say that it was irrational of the Company to interpret Article 9.2(a) such that it:
‘could reasonably be foreseen to have the result that the special rights attaching to the Series A Shares would be inevitably extinguished by a conversion notice served by the Ordinary Shareholders in precisely the circumstance in which they were most obviously intended to operate to the benefit of the Series A Shareholders,’
and that:
‘There is no rational or logical justification for such a bizarre regime under which the holders of the Series A Shares would be protected by having to give a class consent to every lesser alteration of their rights, but would have no such protection in the event of a conversion in which their special rights would be entirely extinguished.’
The Court of Appeal concluded that:
‘These incoherent and irrational results are striking, and I agree with the Judge that they demonstrate convincingly that the construction of Article 9.2(a) advanced by the Company is not one that should be attributed to the members of the Company. Something has plainly gone wrong with the drafting.’
The Judgment went on to consider what was to be done about the drafting error:
‘If it is clear that there has been a drafting mistake in omitting a provision from a contract, without which the contract leads to incoherent and irrational results, and if it is equally clear what that missing term should be, it is not surprising that the test for implication of terms should also be satisfied. Paraphrasing Lord Neuberger in Marks & Spencer, the missing term would be necessary to bring commercial and practical coherence to the contract, and it would fulfil the requirements of clarity and obviousness.’
Having considered a further argument by the Company that no abrogation of rights would be involved in a conversion of the ‘Series A Shares’ shares and finding against the Company on the point, the Court of Appeal concluded that the Judge was right to reach the conclusion that in order to make rational and coherent sense of the Articles, either Article 9.2(a) must be interpreted as being subject to Article 10.1, or a term must be implied to that effect and the Company’s appeal was dismissed.
Signing away testamentary freedom
You may feel you are the most competent of drivers and that the vehicle you are driving is well maintained and safe. The combination of driver and vehicle is essential whatever driving task you are engaged in. However, the one ‘component’ that nobody has direct control over is the weather.
Whenever you are driving you should consider the impact of the weather, regardless of the season. You should adapt your driving behaviour based on the potential influence adverse weather may have on your vehicle and other road users.
Whatever the weather, it is advisable to take all possible steps and precautions. If you cause an incident which was attributed to your failure to take into account road or weather conditions, then this could lead to roadside enforcement or court proceedings.
Careless driving is defined under the Road Traffic Act of “driving falling below what would be expected of a competent and careful driver” (per section 3ZA of the Road Traffic Act 1988). The Crown Prosecution Service, whether considering cases of careless driving or dangerous driving will have regard not only to the circumstances of which the driver could be expected to be aware, but also to any circumstances shown to have been within their knowledge. In essence, stating that they would have regard to numerous factors including an awareness of the prevailing weather conditions when driving.
Reducing speed in fog or doing so where there is ice on the road may be the most obvious scenarios. As could a problem caused by the sun setting or rising low in the sky, causing and impacting on visibility. Certainly, in the absence of any other clear and obvious feature that leads to a road collision and investigation into the cause, the police would also have regard to the road conditions, whether there had been rain, excessive leaves, sun or levels of precipitation.
The Crown Prosecution Service is the body responsible for bringing cases on behalf of the Crown (the Police). Whilst of course there are examples of bad driving whether that be dangerous or inconsiderate, when in the context of weather conditions, it is even the case that driving through a puddle causing pedestrians to be splashed could, dependent on the circumstances of the individual case, amount to inconsiderate driving. This is perhaps one end of the spectrum when looking at the need to adjust driving according to the weather.
(See link to CPS here https://www.cps.gov.uk/legal-guidance/road-traffic-fatal-offences-and-bad-driving)
There is a very important message when putting severe weather and driving together. This year’s summer saw unprecedented levels of rainfall. The Met Office have stated that 9 out of 10 weather related deaths and serious injuries on the roads take place in the rain. The cleaning of roadside gullies is not such a common sight as it used to be, leading to more water backup and the inevitable spray seen commonly when following vehicles ahead.
It is important to also consider road conditions do not only become more slippery as a result of ice, but also in the case of wet weather and adverse weather causing slippery road surfaces which also impacts on stopping distances. Taking into account road conditions coupled with weather conditions is essential and keeping a sufficient gap between you and the following vehicle is advisable.
It is not the case that road speed limits are a target, but a maximum speed for the road type. In the same way that approaching a T junction in the middle of a town where there is a 30 mph limit at 29 mph may be careless giving the inability to slow down in poor weather conditions, it will be expected for any driver to reduce speed to enable greater care to be taken.
The Highway Code provides guidance between sections 226 and 237 of driving in adverse weather conditions. In wet weather, stopping distances will be at least double those required for stopping on dry roads. It is typical that tyres will have less grip, brakes are affected by water and if a vehicle is driven through deep water, the brakes may be less effective.
Typical stopping distances are illustrated below (Highway Code section 126). It is perhaps shocking that even travelling at just 50 mph a stopping distance is approximately 13 car lengths (53 metres and 175 feet).

The Highway Code in normal dry weather conditions suggests allowing at least a 2 second gap between you and the vehicle in front on roads carrying fast moving traffic. It is also suggested that for the typical gap the rule is never to get closer than the overall stopping distance as indicated in the typical stopping distance diagram above. If visibility is reduced or there are adverse weather conditions, then that gap should be doubled and increased further on icy roads.
Icy and snowy weather
Driving now for school runs, business commutes, social and work lives is part of most daily routines. For vocational drivers, even more so. No one likes getting up on a cold, icy morning and clearing windscreens or removing snow off the roof. As code 229 of the Highway Code states “You must be able to see so clear all snow and ice from your windows. Lights need to be clean and number plates clearly visible and legible. Mirrors and windows should be demisted, and it is recommended to check your planned route for any delays, or any weather predicted”.
If law enforcement sees a vehicle that has not been cleared properly or even observes snow falling away from the vehicle, then a fixed penalty fine can be imposed, and points added to a licence. If a vehicle causes any difficulty to other road users because of poor driving, then section 3 of the Road Traffic Act 1988 provides for an offence where it can be shown that somebody drove “without reasonable consideration for other persons using the road or place”.
The construction and use regulations make it clear that when a driver is in control of a vehicle, they must have a full view of the road and traffic ahead at all times.
Being distracted when driving is already a common problem on the roads but in adverse weather there is an increased need to avoid distractions and heightened concentration needed. The Highway Code states “drive extremely carefully when the roads are icy. Avoid sudden distractions as these could cause loss of control”. Goods vehicles and those towing will be particularly susceptible to windy weather. Code 232 states “high sided vehicles are most affected by windy weather, but strong gusts can also blow a car, cyclist, motorcyclist or horse rider off course. This can happen on open stretches of road exposed to strong crosswinds or when passing bridges or gaps in the hedges”.
To warm up this article somewhat, we turn to hot weather where the Highway Code advises drivers to be aware that road surfaces may become soft during heat and that in itself could affect steering and braking.
Finally, don’t add to the increase in breakdowns that happen in adverse conditions, whether it be extra hot or snowing. Instead, ensure your vehicle is maintained with lights working properly and carry spare bulbs. Make sure you have sufficient fuel for your journey and accept that the journey may take longer than anticipated and avoid taking the risk where you can.
There is no question that the summer of 2023 was not the sunny and warm one anticipated, and the behaviour of the weather is out of our control, but your own behaviour can be and applying common sense to each journey can help reduce incidents and avoid getting you in “deep water” with the police.