CR-2022-BRS-000101 - [2025] EWHC 2291 (Ch)

Preparation for the hearing before me was carried out on the basis that the petitioners would be relying, to some extent at least, on the argument that a person who has a claim to a share, not at law, but in equity, has standing to present a petition under section 994. So, for example the skeleton arguments rehearse the relevant caselaw, on the basis that the argument is live. However, by the time of the hearing itself, the petitioners’ position had shifted, and they now say that they have standing on the basis of legal title to shares in the two companies, or (in the case of the fourth petitioner, in relation to the eighth respondent) at least under section 994(2), set out above. However, this position was not accepted, or at any rate not expressly accepted, by the active respondents at the hearing in relation to the eighth respondent. So I think that for safety’s sake I need to deal with the equitable interest argument for myself.

The legal owner of an asset may declare a trust of it, or transfer it on trust, for the benefit of another person. That other person has no legal title, but can assert an equitable interest in it. Or a person may agree to buy an asset for valuable consideration, and so is generally regarded as having a beneficial interest in the asset from the moment of the contract, and before the legal title is transferred, as long as the contract is one of which equity will decree specific performance: see eg Shaw v Foster(1872) LR 5 HL 321, and cases there cited. Similarly, where a person can establish a claim to an asset by way of proprietary estoppel or common intention constructive trust, that person (“the beneficiary”) may, though not must, be awarded a proprietary remedy by virtue of which the legal owner holds the asset on trust in whole or in part for the beneficiary: see eg Motivate Publishing FZ LLC v Hello Ltd [2015] EWHC 1554 (Ch), [56]-[61]. That third possibility is in fact what appears to have been alleged in the present case.

Fundamentally, however, they all come down to the same thing. There is someone whom the law regards as the owner of the asset. But there is someone else who is regarded by equity as the beneficial owner, in whole or in part. Can the someone else bring the claim? The answer under the general law of trusts, is No. Where there is a legal owner who holds the asset for the benefit of that other (the beneficiary), the legal owner (the trustee) has the duty to protect the interest of the beneficiary. That will include repelling any attack on the legal title (from which the beneficiary derives his own equitable rights) and indeed vindicating the asset and the bundle of rights inherent in it. Of course, there are special circumstances in which a beneficiary may sue a third party on behalf of the trust because the trustee is unable or unwilling to do so: see Roberts v Gill [2011] 1 AC 640, [45]-[62]. But, absent such circumstances (which of course would have to be pleaded), the rule is that the legal owner alone brings proceedings against third parties. No such circumstances are pleaded in the present case.

The further question which then arises is whether there is anything special about a claim under section 994, to distinguish it from other cases where a legal owner holds an asset for the benefit of a beneficial owner. There is authority on this question which I need to consider. The first case is Re a Company 007828 of 1985 (1986) 2 BCC 98,952, a decision of Harman J. In that case, H, B and S brought unfair prejudice proceedings under the predecessor of section 994, section 459 of the Companies Act 1985. The primary respondent was R, who held 51% of the shares in the company. H held 49% of the shares. The petitioners alleged that R had agreed to transfer shares to B and S but had failed to do so. R applied to strike out the petition in relation to B and S for lack of standing to present the petition. It was argued that B and S had standing by virtue of the constructive trust arising out of their share transfer agreement. Harman J made the order striking out B and S as petitioners.

He said (at 98,954, col 1):

“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. In my view, transmission by operation of law means some act in the law by which the legal estate passes even though there be some further act (such as registration) to be done; and in my view the mere allegation that there arises a constructive trust – remembering that a constructive trust is frequently a matter of a remedy supplied by a court by way of imposition upon the conscience of the person affected, rather than an existing act in the law – cannot possibly amount to a transmission by operation of law.”

A second case was similar. It was Re a Company 003160 of 1986 (1986) 2 BCC 99,276, a decision of Hoffmann J, as he then was. Four individuals agreed to purchase a company and run a business through it. Three of them took shares in their own names. The fourth, being subject to a possibly relevant restrictive covenant, arranged for his wife to take up “his” shares, and he became simply an employee of the company. When the relationship between the four individuals broke down, the husband and wife petitioned under section 459 of the Companies Act 1985. The respondents accepted that the wife was a member, but applied to strike out the husband on the basis that he lacked standing. Hoffmann J made the order sought.

The judge said (99,278, col 2 – 99,279 col 1):

“The motion is to strike out the name of Frederico as a petitioner on the ground that he has no locus standi to petition either under sec. 459 or for winding-up. For the purposes of the motion I must assume the truth of the allegations in the petition and I am willing to treat these as supplemented by the allegations in Frederico's affidavit. Section 459 says that a petition may be presented by a member of a company. ‘Member’ is defined in sec. 22 [of the 1985 Act] as the subscribers to the memorandum and, in subsec. (2) –

‘Every other person who agrees to become a member of the company and whose name is entered in its register of members … ’

Frederico did not subscribe to the memorandum. If he agreed to become a member, it was according to his affidavit only with effect from January 1986. Whether or not this is sufficient to satisfy the first limb of sec. 22(2), his name has never been entered in the register of members and he therefore does not satisfy the second limb. On the language of the statute it seems to me plain that Frederico is not a member and there is in my judgment no authority which suggests the contrary.

Section 459(2) also confers the right to present a petition upon certain persons who are not members. They are persons to whom shares –

‘ … have been transferred or transmitted by operation of law.’

This language echoes the provisions of sec. 183 [of the 1985 Act]:

‘(1) It is not lawful for a company to register a transfer of shares in … a company unless a proper instrument of transfer has been delivered to it …

(2)

Sub-section (1) does not prejudice any power of the company to register as shareholder … a person to whom the right to any shares in … the company has been transmitted by operation of law.’

In my judgment the word ‘transferred’ in sec. 459(2) requires at least that a proper instrument of transfer should have been executed and delivered to the transferee or the company in respect of the shares in question. It is not sufficient that there should be an agreement for transfer. This construction accords with the view expressed by Harman J in Re a Company No 007828 of 1985 (1986) 2 BCC 98,951. In this case Giuseppina may have agreed to transfer her shares to her husband but there is no allegation that she has executed a transfer and there has been no transmission by operation of law. Accordingly Frederico has no locus standi to present a petition under sec. 459.”

The same result was come to in Re Quickdome Ltd (1988) 4 BCC 296, a decision of Mervyn Davies J. A stock transfer form was signed by the registered shareholder as transferor and handed over to the petitioner in blank. It was held, following the words of Hoffmann J in the last paragraph of the quotation above, that no proper instrument of transfer had been executed, and that the petitioner had not established standing. It is not necessary for me to cite from that decision.

The next case with which I deal in detail is Re Brightlife Ltd [2004] 2 BCLC 191, a decision of Jonathan Crow QC (as he then was, sitting as a deputy judge of the High Court). In that case, an unfair prejudice petition was brought by (1) a company (JGR) which was a shareholder in the company the subject of the petition (Brightlife), (2) a Mrs Barton, for whose benefit JGR held those shares, but who did not otherwise hold any shares in the company, and (3) Mrs Barton’s husband, who was neither the legal nor the beneficial owner of any shares in the company. The respondent sought to strike out the petition as against those three petitioners. In relation to JGR, it was argued that it had no standing because, being a nominee shareholder, it had no economic interest in Brightlife. In relation to Mrs Barton, although it was accepted that she had a beneficial interest in Brightlife shares, she had no legal ownership of them. In relation to Mr Barton, he had neither a legal nor a beneficial interest in such shares. The deputy judge struck out Mr and Mrs Barton as petitioners, but left JGR in as a petitioner, notwithstanding that it was a nominee shareholder.

In his judgment, the deputy judge dealt first of all with Mr and Mrs Barton. He said:

“31.

… The right to petition the court under s 459 is conferred only on members and those to whom shares have been transferred by operation of law, and neither Mr nor Mrs Barton falls within those categories. No rights are conferred on them by s 459, and although there may be room for nominal defendants in certain types of proceedings, there is in my view no room for nominal petitioners in this context.”

He then went on to deal with the position of JGR:

“37.

It is striking that this specific point, relating to a nominee shareholder as petitioner, seems never to have been argued or decided before. However, it is also striking that numerous cases have been argued and decided on the assumed basis that a nominee shareholder is fully entitled to complain under s 459 about any diminution in value of the shares registered in its name, and that its ‘interests’ are for these purposes co-extensive with the interests of the beneficial owner: see Estill v Cowling Swift & Kitchin [2000] Lloyd’s Rep PN 378 at [101], Arrow Nominees Inc v Blackledge [2000] 1 BCLC 709 at 711, Lloyd v Casey [2002] 1 BCLC 454 at [48]–[49], and Rock Nominees Ltd v RCO (Holdings) plc [2003] EWHC 936 (Ch) at [2]–[3], [2003] 2 BCLC 493 at [2]–[3]. It is, I suppose, entirely possible that all the learned counsel and judges involved in those cases (including, in Lloyd v Casey, junior counsel for the Reedbest parties in this case) completely failed to miss a knock-out point, but it seems highly unlikely. More probably, the point was never taken in any of those earlier cases because it is simply wrong.

38.

For the purposes of this strike-out application, all I have to decide is whether it is properly arguable that the ‘interests’ of a nominee shareholder under s 459 are capable of including the economic and contractual interests of the beneficial owners of the shares. In my judgment, based on both the language of s 459 and the authorities mentioned above, I consider it to be well arguable: indeed, if I had to decide the point, I would find that it was correct.”

This decision, by one so experienced in this field as the deputy judge, at least suggests, if it does not actually confirm, that the position for petitions under section 994 is the same as that under the general law, as set out in Roberts v Gill, albeit that the rule in this jurisdiction is the result of the words of the statute, rather than of the general caselaw. The trustee can present the petition, but not the beneficiary.

A fifth case is Re Starlight Developers Ltd [2007] BCC 929, a decision of Briggs J (as he then was). The respondents sought to strike out a petition under section 459 of the 1985 Act on the ground that the petitioner lacked standing to present it. The petitioner accepted that his name was not on the register of members, and that he was not a member, nor a person to whom shares had been transferred or transmitted by operation of law. But he claimed that the register should be rectified with retrospective effect to show him as the owner of shares by allotment under a pre-incorporation agreement with the respondents. It was common ground that the claim to rectification raised triable issues, and could not be determined summarily or as a preliminary issue in the petition. Briggs J declined to strike out the petition immediately. Instead, he stayed it on terms to enable the rectification claim to be tried out separately.

He referred to the decision of Harman J in Re a Company No.007828 of 1985 (1986) 2 BCC 98,951, and said (933F):

“It is to be noted that that was not a case in which it was suggested on behalf of the petitioner that execution of the constructive trust on which he sought to rely by the court would lead to retrospective replication of the register of members.”

He referred also to the decision of Hoffmann J in Re a Company 003160 of 1986 (1986) 2 BCC 99,276, and said (933G):

“Again there was no suggestion made on behalf of the petitioner that he could seek rectification of the members register with retrospective effect.”

He referred also to the decision of Mervyn Davies J in Re Quickdome Ltd (1988) 4 BCC 296. He said (933H):

“Again it is to be noted that it was not suggested on behalf of the petitioner in Re Quickdome Ltd that his locus could be made good by an application for retrospective rectification.”

After considering these and other authorities, Briggs J said:

“18.

I must now express my conclusions as a result of the effect of those authorities and the parties’ submissions. First, before the coming into force of the Civil Procedure Rules there was a body of authority to the effect that firstly, the restriction as to the types of person with standing to present a s.459 petition should be firmly enforced by striking out non-qualifying petitions. Secondly, in relation to winding-up petitions, a bona fide dispute as to the petitioner’s standing to present a petition should lead to the dismissal or striking out of the petition, leaving the petitioner first to establish his or her standing by separate proceedings. Thirdly, no case had established that the principle which I have just identified in relation to winding-up petitions should be applied to s.459 proceedings where no winding up is sought in the alternative. Fourthly, in none of the cases under s.459 was it alleged that the petitioner could have perfected his or her standing by retrospective rectification of the register of members and on their facts it seems to me that retrospective relief by way of rectification would not have been obtained even if the allegations relied upon by the petitioners in those cases had been made good.

[ … ]

20.

The existence of a triable claim with reasonable, i.e. not purely fanciful, prospects of success for retrospective rectification from a date ante-dating the presentation of the petition means, first, that the court cannot be sure today that rectification will not lead to the petitioner having been deemed to have had the necessary standing throughout. Secondly, there is therefore a risk that if the petition is struck out now, the time and money so far spent on it will have to be re-spent on a substituted identical fresh petition in due course if this petition is struck out. Thirdly, if the petition is dismissed with costs now but the petitioner shows later that it was only due to the respondents’ fault that the petitioner was not registered as a member throughout, that order may work a real injustice. By contrast, if the petition is stayed now with costs reserved, neither of those two adverse consequences or risks would flow.

[ … ]

22.

In the result, therefore, it seems to me that I have a discretion whether to stay or to dismiss this petition. A stay involves making no order on the petition which would be without jurisdiction due to the petitioner’s present lack of standing. On the contrary, it postpones the exercise of any jurisdiction or powers under ss.459–461 until the facts relevant to the petitioner’s standing have been established one way or the other. Therefore, I propose to stay this petition for the reasons given. In my judgment, a stay is a solution more in accordance with the overriding objective than to strike out the petition now, but I intend to do so on terms … ”

The judge clearly distinguished the case where the claim under section 459 included one to retrospective rectification of the company’s share register from one where the claim sought to compel the transfer of shares prospectively. But there was no suggestion that an equitable interest in shares was by itself sufficient for standing to present a petition. This was all about standing by way of legal ownership of shares. What made it possible to impose a stay on the petition in that case, pending resolution of the parallel claim to rectification, was the fact that the rectification sought, if granted, would have retrospective effect on the legal ownership of the shares in question.

The last decision to which I need refer is that of ICC Judge Greenwood in Re Contingent & Future Technologies Ltd [2023] EWHC 2451 (Ch). In this case, a company was founded by three individuals, each of whom was allotted shares and became a director. The relationship between them subsequently broke down, and the company (acting by two of the three) purported to dismiss the third, Mr Onea, as an employee, and to remove him as a director. Moreover, he was treated as a “bad leaver” under the articles of association, so his shares became deferred shares and were transferred to one of the other two at nominal value. The name of Mr Onea was then removed from the register of members. He presented a petition under section 994 of the 2006 Act, including a claim to retrospective rectification of the register of members. The other two members, respondents to the petition, applied to strike out the petition for lack of standing, or alternatively for abuse of process. The ICC judge went through the authorities, and ultimately ordered a split trial of the petition, the first stage dealing with rectification of the register and standing, and the second with the allegations of unfairly prejudicial conduct.

The judge said:

“111.

First, in my view, as matters stand, Mr Onea’s claim to retrospective rectification of the register of members on the basis that he left the Company as a ‘Good’ rather than a ‘Bad Leaver’ (and has therefore at all material times since before the Petition was presented been entitled to 120,000 ‘Good Leaver Shares’) is credible and based on reasonable grounds; it has, at least, a real prospect of success.

[ … ]

113.

Second, this is a case (unlike both Starlight Developers and, certainly to some extent, Re I Fit Global) in which, as I have described, the allegations of unfair prejudice are very substantially similar to the grounds on which the petitioner claims an entitlement to retrospective rectification of the register. I accept that they are not wholly identical, and I accept that the Applicants are yet to serve Defences, but it is plain nonetheless that there will be very significant common territory.

114.

Third, Mr Onea does not seek a winding-up order against the Company.

115.

In those circumstances, I do not accept that it would be just to strike out the Petition, and effectively compel Mr Onea to commence fresh proceedings in which to establish, if he can, his membership, before commencing fresh proceedings under section 994. In my view, in substance, that step would be inconsistent with the approach taken by Briggs J in Starlight Developers, and in any event, is not justified by reference to the court’s duty to manage cases in accordance with the overriding objective. As in Starlight Developers, if the Petition were now to be struck out in its entirety, with costs payable to the Applicants, but Mr Onea were subsequently to show that he was at all times entitled to membership and was only removed from the register due to the fault of the Respondents, there is a risk that the order would (to adopt the words of Briggs J) “work a real injustice”. Mr Onea would be compelled to spend time and money reproducing steps already taken, and the costs paid to the Applicants would almost certainly be irrecoverable.

116.

The real issue in this case is whether to adopt the Applicants’ third alternative (to strike out paragraphs (1) – (4) of the Prayer, and otherwise stay the Petition pending proof of membership in proceedings to be commenced and concluded separately, as, essentially, in Starlight Developers) or the Petitioner’s preferred course (to order a split trial, as in Re I Fit Global). In my view, the Petitioner’s suggestion is plainly preferable; it is quicker, fairer and more efficient … ”

The decision in this case does not go beyond the principles laid down by Briggs J in Starlight Developers. Indeed, the ICC judge seeks loyally to apply them to the facts of the particular case before the court. These included the fact that the petitioner was (as in Starlight Developers itself) making a claim to a retrospective rectification of the share register. Once again, however, there is no suggestion in the judgment that an equitable interest in shares is of itself sufficient for standing to present a section 994 petition.

In their skeleton argument in the present case, the petitioners submit:

“19.

This overriding objective-focused decision suggests that Re Company (No 007828 of 1985) would not be decided in the same way 40 years on. In 1985, the court did not have to consider the factors in the modern overriding objective such as delay, cost and proportionality. It is submitted that the nuanced and pragmatic modern approach in Re Contingent and Future Technologies [2023] EWHC 2451 is to be preferred to the pre-Woolf doctrinaire rigidity of Re a Company (No 007828) of 1985).”

I do not accept this submission. The approach of the ICC judge in Contingent and Future Technologies does not strike out in a new direction. It follows existing post-CPR authority (Starlight Developers), which itself was consistent with the pre-CPR authorities where there was no claim to retrospective rectification of the share register. There is no reason to suppose that, if there had not been such a claim in the case, the ICC judge would still have reached the same conclusion.

In my judgement, the law is that standing to present a petition under section 994 is governed by the requirements of that section. These provide for a bifurcated approach. Either of two limbs will do. One limb focuses on membership of the company, which itself depends on being on the register of members. As I have already said, this does not require the ownership of shares. There is no room for such a thing as “equitable membership” of a company. If the register is rectified retrospectively, the person concerned always was a member. If not, then he or she never was. The other limb does however focus on shares. They are shares which “have been transferred or transmitted by operation of law”. The decisions of Harman J and Hoffmann J in 1986 show that these words refer to the transfer or transmission of the legal ownership of the shares, and that equitable or beneficial ownership is not enough. The post-CPR decision of Jonathan Crow QC in Brightlife reflects the latter point. The post-CPR decision of Briggs J in Starlight Developers casts no doubt on the earlier decisions on the meaning of section 994(2). Nor does that of ICC Judge Greenwood in Contingent and Future Technologies. In my judgment the law on this point is settled. Whether pre- or post-CPR, equitable or beneficial ownership of shares is not enough.