Pinfield v Eagles & Anor

In a joint commercial venture, an express agreement for equal ownership need not be established before equity can arise through constructive trust or proprietary estoppel. The court may infer the parties’ agreement and determine each party’s fair share from the whole course of dealing, including their respective contributions to the venture’s initial financing. A director’s power to allot shares cannot be used for a purpose foreign to the company’s interests. Shares allotted without the registered shareholder’s consent and outside any contractual entitlement may be set aside.

The claimant and the first defendant were involved in acquiring and operating residential care homes through three companies. The claimant contended that they had agreed to undertake the venture as equal partners. Alternatively, she claimed an equitable interest arising from their dealings and her contribution of work and financial support.

The proceedings also challenged purported increases in share capital, share allotments, changes in directorship and other Companies House filings. The court therefore had to determine the parties’ beneficial interests, the validity of the impugned corporate steps, the validity of the first defendant’s appointment as a director of one company, and the validity of the claimant’s allotment of shares to herself.

1. Beneficial interests. The claimant failed to establish an operative agreement that the companies were to be owned equally when the homes were acquired. She had, however, established a genuine belief that she would receive an interest beyond that of a salaried working director, and that the first defendant had encouraged her to commit herself to the venture while knowing of that belief.
2. Applying the principles in Oxley v Hiscock [2004] EWCA Civ 546, an agreement giving rise to a constructive trust could be inferred, or an equity could arise by proprietary estoppel, in a joint commercial enterprise. The fair share was to be assessed by reference to the whole course of dealing between the parties.
3. The parties were treated as having contributed equally to procuring commercial finance of £1,436,000. The balance of approximately £415,000 was procured by the first defendant alone. The appropriate beneficial proportions were therefore 39 per cent for the claimant and 61 per cent for the first defendant.
4. The claimant was entitled to relief invalidating the corporate steps recorded in relation to the purported share issues, appointments and constitutional changes. The first defendant’s appointment as a director of WG at the April 2004 meeting was valid, although it could not be backdated.
5. 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 in any agreement between the parties.