Bryan v Arpan
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BRIGGS |
| Judgment Date | 23 May 2007 |
| Neutral Citation | [2007] EWHC 1660 (Ch) |
| Date | 23 May 2007 |
| Court | Chancery Division |
[2007] EWHC 1660 (Ch)
IN THE HIGH COURT OF JUSTICE 3782 of 2006
(CHANCERY DIVISION)
The Royal Courts of Justice
The Strand
London WC2A 2LL
Mr Justice Briggs
In the Matter of Starlight Developers Ltd
Mr S Thrower appeared on behalf of the Petitioner
Mr J Brettler instructed by Desor & Co Solicitors appeared on behalf of the First Respondent.
Ms T Kyriakides instructed by Lewis Cutner & Co appeared on behalf of the Second Respondent.
Wednesday 23 rd May 2007
There are before me two applications to strike out a petition presented under section 459 of the Companies Act 1985, one application by each of the first and second respondents to the petition. They are Jagdip Arpan and Samantha Yau (as heard) both of whom are shareholders in the third respondent which is described in the petition as Starlight Builders Ltd but which the respondents say is properly called Starlight Developers Ltd. I shall refer to it as the company.
The petition was presented on 26 th May 2006 by a Mr Dean Bryan claiming to be a member of the company. Directions were given on 10 th July 2006 by Mr Registrar Rawson for pleadings and evidence and for the stay of any advertisements. Points of claim were served on 24 th August 2006 and the respective applications of the respondents were issued as, for the second respondent on 8 th November, and by the first respondent on 12 th December 2006.
Both the applications are based upon the petitioner's alleged lack of locus standi or, in modern language, standing to present the petition. It is said that the petitioner was not a member of the company within the meaning of section 459(1) or a member of the extended class of persons given the right to apply under section 459(2), either at the time of the presentation of the petition or, for that matter, now.
The reference to “member of the company” in section 459(1) is defined by reference to section 22 of the Act as follows:
(1) “The subscribers of a company's memorandum are deemed to have agreed to become members of the company and on its registration shall be entered as such in its register of members,”
(2) “Every other person who agrees to become a member of a company and whose name is registered in its register of members, is a member of the company.”
The petitioner is not a subscriber within the meaning of section 22(1) and does not claim to be within the extended class given the right to petition under section 459(2) which reads as follows:
“The provisions of this Part apply to a person who
is not a member of a company but to whom shares
in the company have been transferred or transmitted
by operation of law, as those provisions apply to a
member of the company; and references to a member
or members are to be construed accordingly.”
Mr Simeon Thrower for the petitioner now accepts after the recent evidence and the production in court of the company's Register of Members that he is unable to show that the petitioner's name was at the date of the presentation of the petition or ever has been registered in the company's Register of Members. As matters stand, therefore, the petitioner was not entitled to petition in May 2006 and is not entitled to pursue such a petition now. But the petitioner claims to be entitled to have the register of members rectified and with retrospective effect from 1999 so as to show him as the holder by allotment rather than transfer of 45 shares in the company pursuant to a pre incorporation agreement with the first and second respondents, subsequently adopted by the company. This is hotly disputed by the respondents. They say he was never allotted any shares and that he gave up any beneficial interest which he might have had in the company's shares for cash in April 2001. They point to a letter purportedly signed by the petitioner to that effect, but which the petitioner denies signing. The respondents produce a number of other documents in addition to the company's Share Register which they say support their case but the petitioner relies upon annual returns made by the company in 2000 and 2001 showing the petitioner as a shareholder, albeit as the holder of fewer than 45 shares, which is the amount forming the basis of his claim.
It became common ground before me, firstly, that the petitioner's claim to rectification raises triable issues and that it is not possible at this stage to describe the petitioner's prospects of obtaining rectification with retrospective effect as fanciful. Secondly, that the petitioner's claim to retrospective rectification is not suitable for summary determination within the procedure contemplated by section 359 of the Act and, thirdly, that his claim is not suitable to be dealt with by way of preliminary issue in the section 459 petition itself albeit that the petition seeks such relief as part of the prayer for relief. In my judgment, having looked at the evidence it seems to me that the concessions made by both sides, which are inherent in that common ground, were all rightly and sensibly made.
The petitioner accepts that the petition must be stayed pending his pursuit of a rectification claim by separate proceedings, and offers to submit now to stringent case management directions for the prosecution of that claim with the sanction that non-compliance with those directions will, unless relieved, lead to the striking out of the petition with costs.
By contrast, the respondents submit that the petition is an abuse committed by the petitioner with his eyes open and that the petition should be struck out, either because retrospective rectification would not cure a lack of standing which existed in May 2006 or, alternatively, because, even if it would in theory, the courts should not by declining to strike out the petition sanction an abuse consisting of the presentation of a petition without the petitioner being able to show standing to do so then or for that matter now.
I turn to the relevant law. It is common ground that the court can grant rectification of a company's Register of Members with retrospective effect. The leading authority to which I was referred on that question is Re Sussex Brick Company [1904] 1 Ch 598, a decision of the Court of Appeal. It is plain from the judgment of the Court of Appeal that although rectification of the Company's Register of Members was a statutory remedy, even in 1904 the jurisdiction to rectify was discretionary, and was exercised on broadly the same principles as the well-known equitable remedy. Where ordered with retrospective effect the document rectified, in this case the company's Register of Members, is to be treated as if it had been in its form as rectified for all purposes as from the date specified, save to the extent that the court may direct otherwise, for example, for the protection of third parties. At page 605 Lord Justice Vaughan Williams said this:
“Now, in this case there can be no doubt but that
The names of these gentlemen ought to have been
on the register at a date earlier than the time of the
holding of the meetings in relation to the reconstruction
of this company. Under those circumstances when one
looks at Nation's case, which was a decision by Lord
Romily MR, there can be no doubt that that is an
authority for the proposition that when it is right
that an order for rectification should be made,
whether it be for rectification by taking a name off
The register or by putting a name on, the court may
make an order not only that the right name shall be
put on or taken off (as the case may be) but that
The register shall be treated as if the name had been
on or off at the time it ought in fact to have been on
or off.”
The respondents relied on three decisions where section 459 petitions had been struck out due to a lack of standing on the part of the petitioner. The respondents submitted that they laid down a clear, simple and salutary rule that petitions presented by persons who were not or who could not show that they were members or were within the extended class in section 459(2) at the time of presentation will be struck out regardless of any rectification claim which they might have, even a claim to retrospective rectification.
The first of those authorities is a decision of Mr Justice Harman given on 11 th December 1995 in Re A Company 007828 of 1985 [1986] 2 BCC 98, 951. In that case the petitioner was not and was not alleged to be a member of the company but alleged that he was a transferee by operation of law within section 459(2) by virtue of an alleged constructive trust of the relevant share in his favour. The petitioner failed to bring his case within section 459(2) and at page 954 in the report I extract the following two passages from Mr Justice Harman's judgment:
“The courts, in the Companies Act, are not concerned
for a moment with trusts. Companies are required
not to pay attention to trusts. The nature of the title
to shares in companies with which the company is
concerned is at all times that of the registered
holder, who has a “legal estate.” The person who holds
The shares is entitled to vote them. Of course,
there are equitable remedies if that person holds them
as trustee but those are remedies for the Chancery Court
and not for the Companies Court and they have nothing
to do with the statutory remedy of petition and the statutory
rights arising under the Companies Act.”
Then later he said:
“Mr Brisby contended, and I accept, that it is thoroughly
undesirable to clutter up the Companies Court and
proceedings by a petition, where the machinery is
quite unsuited to precise...
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