第7章 Article Twelve

There is no article twelve. I want to lead with that, because the chapter is called Article Twelve and it is not. The Construction Application (Determination) Act is, in this jurisdiction, in two parts. Part One is general and preliminary and takes up about nine pages and includes section 2, which defines what a construction application is, and section 7, which sets out the period for making one, and section 9, which is the provision about the discretion of the adjudicator, and section 14, which is the rule about costs. Part Two is the substantive part and runs from section 15 to section 41 and is headed "Determination of applications." There is no article twelve. There are no articles. The drafting is by section and by subsection, and where a provision is divided it is by paragraph and by sub-paragraph, and everybody in the field refers to it the way they refer to a rule in a set of rules. So when I come to write about the argument of June 2026, which is the argument that is actually about clause twelve of a codicil, and which everybody including my partner and the judge and Mr Lowe refers to as the article twelve argument, I am going to be clear that I am using a word that is wrong, that everybody in that room was using wrongly, and that in about four years' time somebody will write a note in a law journal about the fact that this case is the one that made "article twelve" a common word for a codicil clause in this city. Here is the codicil, in the parts that matter, and I am going to set it out because I have read it more times than any document in my life and because a person reading this who has not been to a hearing in this jurisdiction should not have to. "11. I GIVE my residuary estate to my trustees absolutely upon the trusts and with the powers declared in my settlement of the twenty-second of April 2011 ('the 2011 Settlement') and I DIRECT that Article 12 of the 2011 Settlement shall not apply to this codicil." "14. To Nadia Prentice of Brannock Vey, solicitor, of the city, my entire holding in Dugray Precision Limited ('the Company') to be held by her absolutely for a period of two years from the date of this codicil and thereafter to be transferred to Hale and Marchetti of the city, or such of them as shall be entitled to the same at the date of my death, in each case absolutely." That is the whole of the mechanism and it is in two clauses and it does not take a long time to explain and it took two junior solicitors and a silk four months to argue about. Here is the problem in bare terms. Article 12 of the 2011 Settlement is a pre-emption provision. It says, in effect, that if the testator proposes to dispose of shares in the company during his life, or to do anything that would dilute or alter the family's holding, then certain persons — and it is a defined term, they are called "the Protected Persons," and there are three of them and two of them are my client's family and one of them is a trust — have a right of first refusal. Clause 11 says that Article 12 of the 2011 Settlement does not apply to this codicil. So on the face of it, the testator has switched Article 12 off for the purposes of the codicil, and therefore nobody has a right of first refusal, and therefore the gift in clause 14 can go through, and therefore I get the shares for two years, and then Hale and Marchetti get the residue. And on the face of it, Mr Lowe's position is that Article 12 is switched off, the gift is made, and Dugray Precision Limited gets the shares back at the end of two years, and the application is granted. And on the face of it, the application is granted in about eleven weeks and there is nothing in any of this. Now here is the argument, and I want to give both constructions cleanly because the court did, and because I have been told by a man from a newspaper that the case is interesting and I have explained it to him twice and he has written it wrongly both times. The Protected Persons, if Article 12 applied, would have had a right to first refusal over any transfer of the Company's shares. That is the whole of the provision. It is an ordinary shareholder protection provision and there is nothing unusual about it. Mr Lowe's construction is that Article 12 is in any event spent. It was drafted in 2011 and it has not been invoked since 2016, and he says, and I am paraphrasing, and he put it better, that a pre-emption right that has not been exercised in nine years in a family company of which the testator was the controlling shareholder has lapsed by implication, and that clause 11 is nothing more than a confirmation of a position that had already been reached. My construction, which is my partner's construction, which is a silk's construction, and which I have to be honest is not the construction that anybody on this earth wanted in June 2026, is this. Article 12 protects the Protected Persons from dilution. It does not protect them from transfer to a third party, and that is why it is drafted the way it is drafted, and the drafting history of the 2011 Settlement is about nine hundred pages and it is in the bundle and I have read most of it. And therefore, if clause 11 switches Article 12 off for the purposes of the codicil, and if clause 14 then gives the shares to a stranger for two years, and then gives the shares to the residue — and the residue is held on the 2011 trusts, and the 2011 trusts give the residue to the Protected Persons — then the Protected Persons will get the shares back in year three, less two years of dividends, less whatever happens to the company in those two years. And that is not a gift. That is a two-year interruption of a family company's ownership, in favour of a stranger, at the end of which the family gets it back. And a construction which produces that result, in a document executed by an eighty-one-year-old man who founded the company in 1968 out of four hundred pounds and a loan from his wife, is a construction that requires something to explain it, and there is nothing in nine pages that explains it, and the only person who could explain it is a woman of fifty-one who gave a statement in March and who has not been asked a single question about the construction at all. I argued that on the eleventh of June 2026, in about forty minutes, badly, at the end of a nine-day hearing, and I have the transcript, and I am going to describe the last four minutes of it, because the last four minutes are the reason for any of this. I was asked by the judge to sit down about eleven minutes before that. I sat down for about forty seconds and then I got up again, which I was not supposed to do, and I said, "My Lady, may I add one thing." And she said, "Mr Prentice, you have said one thing." And I said, "Then I will say nothing." And she said, "No. You may say it. You will not have another opportunity, so say it properly." I want to record what I said, because I have been asked by two men, one of whom is a journalist and one of whom is not, whether I had rehearsed it, and the answer is that I had it in about ten words in a file and everything else was in the room. I said: "My Lady, article twelve is not switched off and it should not be. My learned friend's construction produces a document in which my client hands a company to a stranger for two years and gets it back. The only person in the world who could want that is somebody who has been told by somebody that the stranger is harmless, and the only person in the world who could arrange it is somebody who has access to a house on Ardmore Road, and the person who has access to that house is the man who signed the receipt on the third of March, and he is not a witness to anything, because he is dead." And then I said, "Which is nonsense, and I withdraw it, and I apologise." And the court said, "You had better be sure, Mr Prentice, because that was a very serious thing to say about a dead man's partner." And I said, "I am sure, my Lady, and I withdraw it, and I apologise, and I would like to withdraw it in those terms because I do not know what else to do with it and I am not going to sit in this room and pretend I have a case if I do not have a case." And then the judge said something that I have thought about every day since, and Theo Marchetti wrote it down at the time in his notebook in a hand that I can read, and he has given me the notebook, which is why I know it exactly. She said: "You have a construction and you have a letter dated the fourteenth of October 2017 and you have a box in a house in Hallam Row. You have told me about a receipt and you have not told me about a letter, and I have been sitting here for nine days, Mr Prentice, and I would like to hear about the letter, and I would like to hear about it now, and I would like everyone in this room to understand that I have decided I am going to hear about it now."