Cooper & Ors v Fanmailuk.Com Ltd & Anor

Beneficial ownership of shares is determined objectively from all surrounding circumstances, including the parties’ words and conduct and the way the company and business opportunity were established. Where shares are issued to individuals pending an agreement on their ultimate allocation, the provisional registration does not necessarily establish beneficial ownership in those individuals. A resulting trust may be inferred where the company was formed at another company’s expense and as a vehicle for its business. Appellate courts must respect trial findings, particularly findings based on credibility and primary fact, and assess evidence in context and as a whole. Failure to mention every document does not itself establish error. Intervention requires a clear failure in the fact-finding function.

Fanmailuk.Com Limited claimed that four shares in Dialtime Plus Limited were held on resulting trust for it, although the shares were registered in the names of individuals. Sales J upheld Fanmail’s claim after an eight-day trial and made a declaration requiring transfers of the shares. In [2008] EWHC 3131(Ch), the judge found that Dialtime Plus had been established as an operating vehicle for a Fanmail business opportunity and that the share allocation was provisional, pending an agreement that never materialised.

The appellants challenged the identification and origins of the Dialtime idea, the findings on collective common intention and dishonesty, the treatment of documentary evidence, and the indemnity costs order. The central issues were whether the judge had made an error warranting appellate intervention and whether Fanmail was beneficially entitled to the shares.

The appeal was dismissed. Mummery LJ delivered the principal judgment, and Lloyd LJ and Aikens LJ agreed with it.

1. Appellate review of facts. The Court of Appeal must respect the integrity, diligence and skill of the trial judge, recognise the importance of context, and consider the evidence as a whole. A judgment is not invalid merely because it does not mention every document or give detailed reasons for every item of evidence. Intervention is justified only where the trial judge clearly failed to perform the fact-finding function, for example by misunderstanding evidence, interpreting it unfairly, or rejecting evidence plainly pointing away from the finding. The authorities cited for this cautious approach included Eckersley v Binnie (1988) 18 Con LR 1, Biogen Inc v Medeva plc [1997] RPC 1, Piglowska v Piglowska [1999] 1 WLR 1360 and Datec Electronic Holdings Ltd v UPS Limited [2007] 1WLR 1325.
2. Beneficial ownership and resulting trust. The parties’ collective common intention had to be ascertained objectively from all surrounding circumstances, by reasonable inferences from what they did and said, applying Gissing v Gissing [1971] AC 886. The evidence supported the conclusion that the shares were allocated to individuals only as a temporary holding measure while the parties expected to agree their ultimate distribution. There was no agreement that the registered holders would own the shares beneficially pending that agreement.
3. Relevant circumstances. Fanmail had established Dialtime Plus at its expense as a company through which to trade. The Dialtime idea derived from work undertaken for Fanmail, was presented as a Fanmail business opportunity, and was connected with a patent application made in Fanmail’s name. Those matters, together with the potential breach of fiduciary duty involved in diverting Fanmail’s opportunities, justified the inference of a resulting trust for Fanmail. The judge was also entitled to rely on the Scratch X business model as supporting that conclusion.
4. Other findings and costs. The findings that Mr Bob Cooper had dishonestly claimed inventorship and knew of the fabricated patent documents were findings of fact made after careful consideration of the evidence and without legal misdirection. There was no basis for interference. The judge was likewise entitled to take Mr Cooper’s conduct into account when awarding costs on the indemnity basis. The declaration and consequential orders therefore stood.

1. Court of Appeal (Civil Division) — The appeal was dismissed on 17 December 2009. The court upheld the declaration that the shares were held on trust for Fanmail and the related transfer and costs orders.
2. High Court of Justice, Chancery Division — Sales J, in [2008] EWHC 3131(Ch), upheld Fanmail’s claim on the preliminary issue that it was beneficially entitled to the four shares in Dialtime Plus Limited.