Re Hoicrest Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MUMMERY,LORD JUSTICE KENNEDY |
| Judgment Date | 03 November 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J1103-12 |
| Docket Number | Case No: CHANI 1998/1548/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 November 1999 |
[1999] EWCA Civ J1103-12
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
COMPANIES COURT
HIS HONOUR JUDGE RICH QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Kennedy
Lord Justice Mummery
Case No: CHANI 1998/1548/3
Mr M Collings (instructed by Messrs Needleman Treon, DX 44403, Marble Arch, for the Appellant)
Mr S Taube (instructed by Messrs Mark Gilbert Morse, DX 61056, Newcastle Upon Tyne, for the Respondent)
Wednesday 3 November 1999
In form this appeal is concerned with the powers of the court under section 359 of the Companies Act 1985 (the 1985 Act) to rectify the register of members of a company called Hoicrest Limited (the Company) by striking out the name of Mrs Carolyn Martin as the holder of 49 shares and by inserting the name of the Appellant, Mr Robert Keene, in her place. The application, if successful, is probably a prelude to an even more prolonged battle between the parties in the form of a petition by Mr Keene under section 459. In substance the appeal is about who should pay the considerable costs already incurred in proceedings which have taken 2 years to get nowhere.
Section 359 provides that
"(1) If —(a) the name of any person is, without sufficient cause, entered in or omitted from a company's register of members… the person aggrieved, or any member of the company, may apply to the court for the rectification of the register.
(2)…
(3) On such application the court may decide any question relating to the title of a person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or expedient to be decided for the rectification of the register".
HHJ Rich QC (sitting as a Judge of the High Court) held in his judgment of 10 November 1997 (now reported in [1998] 2 BCLC 175) that the court has no jurisdiction to entertain Mr Keene's application under section 359, as he cannot produce a legal transfer of the 49 shares to him. Until he can, there is a "sufficient cause" for omitting his name from the register of members.
The Judge relied principally on section 183 of the 1985 Act which provides that
"(1) It is not lawful for a company to register a transfer of shares in…the company unless a proper instrument of transfer has been delivered to it…."
See also Article 7 and regulation 23 of Table A. No proper instrument of transfer of the 49 shares has been delivered to the Company. No vesting order of the shares has been made by the court in favour of Mr Keene. Mr Keene has not established a legal transfer of, or right to, the shares which the Company has refused to register. Mr Keene's Originating Motion dated 9 September 1997 (to which the Company as well as Mrs Martin is a respondent) seeking an order for rectification does not therefore disclose a reasonable cause of action. For these reasons it was struck on out 10 November 1997 on the application of Mrs Martin by motion dated 16 October 1997
No application was made to the judge by either side for the exercise of the discretion of the court under section 359 (3) or for procedural directions in the current proceedings to resolve the disputed title to the 49 shares.
Mr Keene now appeals with the permission of this court. A Respondent's Notice has been served seeking to uphold the decision on the additional grounds that (1) the procedure under section 359 is intended to be a summary procedure which is inappropriate for resolving the conflict of fact in this case and (2) Mr Keene's claim is bound to fail on the merits. The court was informed at the outset of the hearing that the second point is not pursued on this appeal. Leave was granted to serve a notice raising the summary procedure point.
The Facts
In November 1991 the Company was formed for the purpose of acquiring from the receiver of Tower Heritage Hotels PLC the lease of The Christopher Hotel in the High Street at Eton. Originally Mr Keene and Mrs Martin held 1 share each. They were both directors. In February 1993 98 shares of £1 each were issued. They were all allotted to Mrs Martin on 23 February 1993. She had lent £38,000 to the Company to fund the acquisition of the lease.
At that time Mr Keene and Mrs Martin were living together. Their personal relationship broke down in 1995. Their business relationship also came to an end.Mr Keene requested the transfer to him of 49 shares. The basis of his claim was an oral agreement allegedly made in about April 1992, without the benefit of professional advice, that Mrs Martin should have security for the loan and that she should hold 49 of the shares in trust for Mr Keene pending the repayment of the loan. If the business were sold before the loan was repaid the net proceeds would be divided between them after the repayment of the loan. He claims beneficial ownership of the 49 shares and entitlement to a legal transfer of them.
By 31 March 1995 the loan had been repaid, but Mrs Martin refused to execute a transfer of the 49 shares. She denies that the agreement relied on by Mr Keene was ever made and that he has any beneficial interest in any of the shares held by her. She claims that she is the sole legal and beneficial owner of all the shares registered in her name.
The Issues
The following questions arise for decision on this appeal:-
(1) Does Mr Keene have a reasonable cause of action for rectification?
(1) Does Mr Keene have a reasonable cause of action for rectification?
(2) If so, does the court have power under section 359 to entertain and determine his claim?
(3) If so, should the court exercise its discretion to allow the claim to proceed under section 359 or should it stay it or strike it out as an inappropriate use of that section?
(4) If the court exercises its discretion to allow the claim to proceed under section 359, what directions should it give for the future conduct of the case and on what terms, for example as to costs?
Reasonable cause of action
In my judgment, it cannot fairly be said at this stage that Mr Keene has no reasonable cause of action. His claim to the 49 shares is faced with the obvious difficulty that it is not based on any written declaration of trust, deed or contract in writing. Mr Taube for Mrs Martin contended that the claim is legally unarguable because (a) there is no evidence that Mrs Martin declared that she held the 49 shares in trust for him on or after the date when they were issued (February 1993) and (b) there cannot in law or equity be a valid voluntary declaration of trust of property not yet in existence, as "Equity will not assist a volunteer" : Re Ellenborough ...
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