An Alleged Sale of Shares at Under Value: Rescission of Sale Claimed At the Manchester Chancery Court shares on Jan. 28, the Deputy of the Chancellor, Judge Peel, had before him an action, comiaenced by writ issued on March 30, 1936, in which Lillian Aschkenasy and Edward Cecil Ashley claimed rescission of the sale of 5200 £1 shares in A. Silverstone and Ca., Ltd., merchants, 21, Chorlton Street, Manchester, to Abraham Silverston' and Julius Goldstone, with damages; or, alternatively, against Geoffrey Tweedale, chartered accountant, 47, Mosley Street, Manchester, damages for breach of trust and negligence. Mr. Tweedale was sued as the trustee of two deeds of assignment in favour of creditors made by Solomon Aschkenasy on December 20, 1929, and by Edward Cecil Ashley on March 14, 1930, states the "Manchester Guardian."
Mr. G, Maddocks and Mr, Kenneth Burke, instructed by Messrs. Asher and Banbridge, appeared for the plaintiffs; Mr. Pritchard, K.C., and Mr. H. S. Barker, instructed by Messrs, Sale and Ca, for Mr, Tweed-ale; Mr. A. Walmsley, instructed by Mr. Marco Blumberg, for Abraham Silverstone; and Mr. A. E. Jaland, instructed by Messrs. Dunderdale, Wignall, and Ca., for Helena Theresa Goldstone and Vincent Baker Wright, the executors of Julius Goldstone.
Mr. Maddocks said the action was originally commenced by Solomon Aschkenasy and his son Edward Cee Ashley, but after Mr. Aschkena: became a bankrupt his rights of action were assigned to his wife, and an order of the: Court substituted her name as a plaintiff; Julius Goldstone who was a defendant original ly, died last year, and by order of the Court his executors were substituted.
At the outset he should say in the plainest possible terms that there was no suggestion against the bona fides of Mr. Tweedale, or in any way against his professional or po sonal honour. But negligence was alleged amounting to breach of trust when acting professionally as professional trustee under deeds of assignment for the benefit of creditors.
A Flourishing Company In 1922 Mr, Aschkenasy, Silverstone, and Mr. Goldstone formed a private limited company, A. Silverstone and Ca., Ltd., which had a nominal capital of £25,000 divided into 13,000 £1 preference shares and 12,000 £1 ordinary shares. Of these 10,000 ordinary shares had been issued, and they were fully paid, and 5,200 were issued to Mr. Aschkenasy, who transferred 500 to his son, 2,500 to Mr. Silverstone and 2,500 to Mr. Goldstone. By agreement Mr. Aschkenasy had an option to take at par the 1,800 unissued ordinary shares. All the four shareholders were directors; Mr. Silverstone and Mr. Goldstone were appointed managers, and entered into a service agreement for ten years.
The company was highly successful in its trading. Mr. Aschkehasy was responsible for the financial control, and under the conservative policy he laid down undistributed profits to a considerable amount were accumulated, in addition to paying dividends of 5 to 10 per cent. and also substantial bonuses to the managers. But trouble arose between the directors. with other securities for £7,000. On December 20, 1929, he executed a deed of assignment for the benefit of his creditors and under the articles ceased to be a director. His statement of affairs showed a surplus of assets over liabilities, and the creditors were paid in full subject to a discount of 2s. 6d. in the pound in consideration of accelerated payment by the foreign debtors.
In the meantime the transaction Of which complaint was made in these proceedings had taken place. Mr. E. C. Ashley executed a deed of'assignment for the benefit of his creditors on March 14, 1930, and Mr. Tweedale, being trustee under the two deeds, held the 5,200 shares. They constituted a controlling interest in the company, a preponderance of 200 votes, there was a valuable option to take 1,800 shares at par, and the company possessed distributable assets sufficient to pay a dividend of 100 per cent, on "the whole of the capital Mr. Tweedale sold the shares to Mr, Silverstone and Mr. Goldstone for 33s. 9d. per share, and surrendered the option. The circumstances indicated that it was a sale at a gross under-value, znd the onus was upon Mr. Tweedale to prove that it was not.
The Deputy of the Chancellor: You say you are going to prove circumstances from which the Court would be justified in inferring a sale at under-value unless the other side disprove it?
Text read from the printed page and cleaned; old type leaves the occasional error.