Pinfield v Eagles & Anor

In a joint commercial venture, an equity may arise through constructive trust or proprietary estoppel even where no express agreement fixes the parties’ shares. The court assesses the appropriate proportions by considering the whole course of dealing and the parties’ contributions to the venture. A company director must exercise a power to allot shares for a proper corporate purpose. An allotment made for a purpose foreign to the company’s interests, without the registered shareholder’s consent and without contractual authority, may be set aside. A director’s appointment cannot be back-dated, but may otherwise be valid where the parties intended the appointment and the relevant corporate requirements were satisfied.

The claimant and first defendant developed a business acquiring and operating residential care homes through three companies. The claimant managed the businesses and alleged that they had agreed to become equal partners. The first defendant denied that she was to receive any equity, while concealing the true source and intended ownership of the venture’s funding.

The claimant brought a Part 8 claim concerning allegedly invalid company filings, appointments and share allotments. The court was also required to determine the underlying beneficial ownership of the companies. The central issues were whether an express agreement existed, whether the claimant had acquired an equity through constructive trust or proprietary estoppel, what proportions were appropriate, and whether the impugned corporate steps were valid.

1. Beneficial entitlement. The claimant failed to establish an operative agreement that the companies would be owned equally. The evidence nevertheless showed that she genuinely believed she would receive an interest beyond a salary and that the first defendant knowingly encouraged her to commit herself to the venture. On those findings, the principles discussed in Oxley v Hiscock [2004] EWCA Civ 546 were potentially applicable to establish a constructive trust or proprietary estoppel.
2. Quantification. The appropriate question was what would be a fair share having regard to the whole course of dealing. The parties were treated as contributing equally to the commercial finance of £1,436,000. The balance of approximately £415,000 was procured by the first defendant alone. The claimant was therefore entitled to 39% of the net equity and the first defendant to 61%, subject to the treatment of the funds advanced by Yvonne.
3. Corporate acts. The claimant was entitled to relief invalidating the steps recorded in the impugned Companies House filings. The first defendant’s appointment as a director of WG at the April 2004 meeting could not be back-dated but was otherwise valid because that was the parties’ intention and the company’s issued shares were then held by the claimant and the nominee shareholder.
4. Share allotments. The claimant’s allotment of 50 shares to herself was set aside. It was made for a purpose foreign to the interests of the companies, without the consent of the only registered shareholder, and without authority under any contract or agreement with the first defendant.

This was a first-instance decision. The judgment records that District Judge Bird directed the Part 8 proceedings to proceed to trial after permitting a defence and Part 20 claim to be filed.