When entering into business relationships, it is always sensible to record any agreements in writing to minimise the risk of later disputes. The point was demonstrated in a recent case in which the High Court upheld a man's claim that he was entitled under an oral agreement to his father's shares in a company.
The father and son had set up the company in 2003 in order to carry on a construction business. They each held 40 per cent of the shares, with the father's wife and the son's wife holding 10 per cent each. After the father died in 2009, his shares were recorded at Companies House as having been transferred to the son. The son claimed that he was entitled to the shares as the family had agreed at a meeting in 2003 that, if either he or his father died, the deceased's shares would pass to the survivor. His father's widow denied that any such agreement had been made and claimed that the subject of what should happen if either her husband or her son died was not raised at the meeting. Her husband's will had left his estate on trust for her absolutely.
The Court heard evidence from the company's accountant, who recalled asking at the meeting what the family intended in the event that the father or the son passed away. It had been 'quickly and unanimously' agreed that if the father died, his shares should pass to the son and vice versa. The father had said that they were a close family and trusted each other.
The Court preferred the evidence of the son and his witnesses and concluded that there had been an oral agreement as the son claimed. The transfer of shares had been recorded at Companies House at a time when the relationships within the family remained close: they had not fallen out until 2017. The Court considered it inherently plausible that the accountant had asked what should happen to the shares in the event of the father or the son dying. The company was a vehicle for them to carry on in business, and if either of them died, the other would be the sole means of keeping the business going.
