Hurndell v Hozier & Anor

The claim concerned 33,309,940 ordinary shares in Stanelco plc which the claimant alleged had been given to him in December 1996. The defendant case was that the shares were merely parked in the claimant's name as nominee for one of the controlling shareholders, Mr White. The court's determination turned on assessment of documentary material and the credibility of witnesses and addressed the authenticity of a handwritten note dated August 2001, the execution of stock transfer forms in 2002, the parties' contemporaneous public statements (including directors' reports and the listing document) and a significant delay in asserting any claim.

The judge found material parts of the evidence of several principal witnesses to be untruthful or unreliable but accepted the defendants' account on the central point. The August 2001 note was held to be genuine and signed by the claimant; the stock transfer forms transferring nearly all the shares to companies controlled by the defendants were found to bear the claimant's signature; and there was no satisfactory explanation for the long delay before litigation. On the balance of probabilities the shares (other than 1.5 million left to the claimant) were held by the claimant as nominee for Mr White rather than being gifts to him.

The judge rejected the claimant's reliance on illegality principles (Tinsley v Milligan) to obtain the shares or their value, because the claimant was not and never had been the beneficial owner. Accordingly the action was dismissed.

Background and parties: The claimant, William Hurndell, alleged that 33,309,940 Stanelco plc shares (just under 5%) were gifted to him in December 1996 as part of arrangements to satisfy Stock Exchange listing requirements. The defendants, Barrie Hozier and David Hozier, maintained that the shares were held in the claimant's name as nominee for the controlling shareholder Howard White. The suit sought an account and payment of the highest value of the shares or, alternatively, the net proceeds of sale.

Procedural posture: First instance hearing in the Chancery Division before Mr Justice David Richards. Primary issues were questions of fact, credibility and the legal consequence of any illegality in the arrangement.

Key facts and chronology:

• December 1996: steps were taken to secure a full Stock Exchange listing; public documents recorded a reduction in Mr White's holding by 5%.
• 1997–2001: public accounts at different times showed inconsistent statements about beneficial ownership; the claimant was shown as a substantial shareholder in accounts from 1999 onward.
• 2000–2002: correspondence and advice from professional advisers considered transfers and regulatory consequences; in February 2002 31,809,940 shares were registered in two British Virgin Islands companies owned through a trust connected to the second defendant and later sold in 2004.
• 2005: claimant's solicitors raised enquiries and the present litigation followed.

Issues framed: (i) was the 1996/97 arrangement an outright gift to the claimant or was he a nominee; (ii) was the handwritten August 2001 note authentic and signed by the claimant; (iii) did the claimant execute the stock transfer forms used in 2002; (iv) did the claimant's delay in asserting rights affect credibility; (v) if the arrangement was illegal, could the claimant rely on illegality principles (Tinsley v Milligan) to recover value.

Court's reasoning and findings: The judge performed a holistic credibility assessment. He found parts of the evidence of both the claimant and the first defendant to be false on important points, but accepted the evidence of David and Karen Hozier about the August 2001 meeting and found the handwritten note genuine. The claimant's signatures on the stock transfer forms were accepted as genuine and the explanation for signing was not persuasive. The lengthy delay in making any complaint (from 2002 to 2005) was a significant factor detracting from the claimant's case. On balance, and taking account of contemporaneous documents and oral evidence, the judge concluded that the shares (except 1.5 million) were held by the claimant as nominee for Mr White, not beneficially gifted to him. The claimant's argument that illegality should prevent Mr White from asserting title (relied on Tinsley v Milligan) was rejected because the claimant never had beneficial title and therefore could not use illegality principles to obtain value for shares that had never belonged beneficially to him.

Relief sought and disposition: The claimant sought an account and payment or the proceeds of sale. The court dismissed the action, concluding the claimant was not the beneficial owner and could not recover value for the shares.

The claim is dismissed. The judge found on the balance of probabilities that, apart from 1.5 million shares given to the claimant, the subject shares were held by the claimant as nominee for Howard White and were never beneficially owned by him; documentary and oral evidence (including the August 2001 note and the 2002 transfer forms) supported the defendants' account, and illegality principles did not entitle the claimant to recover value for shares he never beneficially owned.