Hurndell v Hozier & Anor

Where shares are placed in another person’s name as a nominee, that person does not acquire beneficial ownership merely because the arrangement is concealed or inaccurately disclosed. The court must determine the parties’ actual agreement from all the evidence, including contemporaneous documents, subsequent conduct and the credibility of witnesses. A claimant cannot obtain the value of property which never beneficially belonged to him. Illegality may prevent a party asserting a title, but it does not confer ownership or its value on another party.

The claimant alleged that approximately 33.3 million shares in Stanelco plc had been given to him in 1996, when the controlling shareholders reduced their combined holding to satisfy the requirements for a full listing. He claimed an account of the value of shares later transferred to companies connected with the defendants.

The defendants contended that the claimant held the shares as nominee for Howard White, apart from 1.5 million shares retained by the claimant. The court had to determine the parties’ agreement, the effect of a handwritten acknowledgment and stock transfer forms, and whether the claimant’s delay affected his case. An alternative argument relied on illegality and Tinsley v Milligan [1994] 1 AC 340.

1. Claim dismissed. The court found that the claimant was not the beneficial owner of the disputed shares. The arrangement made in 1996 was that the shares would be placed in his name as nominee for Howard White. Only 1.5 million shares were intended to belong beneficially to the claimant.
2. The conclusion depended on the evidence taken as a whole. The court attached weight to the listing documents, directors’ reports, correspondence with professional advisers, the 2001 handwritten note, the stock transfer forms, the proposed transfers to the Hozier family, the claimant’s prior use as a nominee or conduit, and his unexplained delay in asserting any claim. The public statements and accounts were inconsistent with the defendants’ case, but the court found that Barrie Hozier knew the true position and that the misleading disclosures were part of an arrangement to park the shares with the claimant.
3. The court accepted that the claimant signed the handwritten note in August 2001 and the stock transfer forms used in February 2002. The claimant’s evidence denying the meeting and the note was rejected. His delay after learning that most of the shares had been transferred was a significant factor against his case, although it was not decisive by itself.
4. The illegality argument failed. Even if the undisclosed nominee arrangement breached statutory or Stock Exchange requirements, the principle relied on from Tinsley v Milligan [1994] 1 AC 340 could not give the claimant title to shares which never beneficially belonged to him. Illegality might defeat a claim, but it could not enable the claimant to recover the shares or their value.
5. Accordingly, the action was dismissed.

First-instance decision. No earlier appellate decision is stated in the judgment.