MCC Proceeds Inc. v Lehman Brothers International (Europe)
| Jurisdiction | England & Wales |
| Judgment Date | 19 December 1998 |
| Date | 19 December 1998 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Lord Justice Hobhouse, Lord Justice Pill and Lord Justice Mummery
Equity - bona fide purchaser for value - equitable owner cannot assert right against
A person who had only an equitable interest in goods was not entitled to assert a right to damages for their conversion against another who had acquired the legal title to the goods as a bona fide purchaser for value without notice of the prior equitable claim.
The Court of Appeal so held in reserved judgments, dismissing an appeal by the plaintiffs, MCC Proceeds Inc, against the order of Mr Justice Harman made on February 5, 1996, whereby he granted an application by the defendants, Lehman Brothers International (Europe), under Order 18, rule 19 of the Rules of the Supreme Court, to strike out the plaintiffs' statement of claim for damages for conversion on the ground that it disclosed no reasonable cause of action.
The judge refused to strike out the claim on the defendants' additional ground that the claim was vexatious and an abuse of the process of the court since the issues raised had already been litigated inMacmillan Inc v Bishopsgate Investment Trust plc (No 3)WLRWLR ([1995] 1 WLR 978; [1996] 1 WLR 387).
In 1990, Macmillan Incorporated, a Delaware company taken over in 1988 by Maxwell Communications Corporation plc, controlled by Mr Robert Maxwell and members of his family, placed shares in its wholly owned subsidiary, Berlitz International Incorporated, together with the relevant share certificates, in the name of Bishopsgate Investment Trust plc, a nominee company also controlled by Robert Maxwell.
An agreement provided that Bishopsgate would hold the bare legal title of the shares as nominees for Macmillan and would, upon Macmillan's written demand, immediately transfer the shares to Macmillan, who retained the beneficial interest in the shares and certificates. Without Macmillan's knowledge or consent, Bishopsgate pledged the certificates with the defendants as collateral under a stock lending scheme.
The defendants, who were ignorant of Macmillan's interest in the shares and share certificates, subsequently arranged for the cancellation of the certificates on transfer of the shares into a central depository paperless system in New York. The defendants subsequently sold the shares to an associated company, Shearson Lehman Brothers Holdings plc, following Bishopsgate's non-compliance with recall notices under the stock lending scheme.
The plaintiffs, who were Macmillan's successors and assignees, alleged by their statement of claim, inter alia, that Macmillan had an immediate right to possession and delivery up of the certificates; that the defendants had dealt with the certificates inconsistently with Macmillan's rights and had permanently deprived Macmillan of them; that Shearson Lehman had failed to restore the shares to Macmillan; and that, in the premises, the defendants had wrongfully interfered with and converted the certificates, whereby the plaintiffs had suffered loss.
Sir Patrick Neill, QC, Mr Murray Rosen, QC and Mr Paul Smith for the plaintiffs; Mr Charles Aldous, QC and Mr Robert Hildyard, QC, for the defendants.
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