Zeital & Anor v Kaye & Ors

A person who owns only the beneficial interest in shares cannot make an effective gift of that interest merely by handing over a stock transfer form signed in blank by the registered owner. The equitable interest must be transferred by a written assignment complying with section 53(1)(c) of the Law of Property Act 1925, or by a valid declaration of sub-trust or written assignment to a trustee.

For a legal owner, the Rose principle applies only where the donor has done all within his power to procure registration, including supplying required title documentation. A missing certificate that the donor could procure prevents the beneficial gift. A general liberty to apply in a perfected final order permits working out or directions, not re-argument of concluded issues.

Raymond Zeital died intestate, leaving his widow and daughters as beneficiaries and administratrices of his estate. The dispute concerned the beneficial ownership of two shares in Dalmar Properties Limited and the resulting entitlement to proceeds from the sale of a flat owned by the company.

The liquidator sought directions in the High Court. After a trial, the deputy judge held that both shares had been beneficially gifted to Stefka Appostolova and that the shares had subsequently been transferred to companies controlled by her. The Zeitals appealed in respect of the second share only, arguing that Raymond’s alleged gift of his beneficial interest was imperfect. Stefka and the companies cross-appealed against a later costs order limiting recovery to the assets of Raymond’s estate. The central issues were whether the gift was effective and whether the High Court had jurisdiction to revisit the perfected costs order.

1. Primary appeal allowed. Raymond intended to make a gift of the second share, but immediately before the alleged gift he owned only its equitable interest. He therefore could not transfer the legal title by handing Stefka a stock transfer form signed in blank by the legal owner, Mrs Kumar.
2. Raymond could have transferred his equitable interest by declaring himself trustee for Stefka, by a written assignment satisfying section 53(1)(c) of the Law of Property Act 1925, or by a written assignment to a trustee for her. He did none of these things. The form signed by Mrs Kumar was intended to enable a future transfer of legal title and did not assign Raymond’s equitable interest. There was no evidence that Mrs Kumar was his authorised agent for that purpose.
3. The principle in the two Rose decisions, [1949] Ch 78 and [1952] 1 Ch 499, applies where a legal owner has done all within his power to transfer shares. Pending registration, the legal owner may hold the shares on trust for the donee. The court assumed that handing over the undated form was sufficient as regards that formality, but Raymond had not supplied the share certificate. Its whereabouts were unknown, and he could have asked Mrs Kumar to procure a duplicate. He had therefore not done all within his power. The special facts in Pennington, where the certificate was held by the company, did not assist Stefka: [2002] EWCA Civ 227.
4. The alternative constructive-trust or change-of-position argument was unsupported by evidence, had not been found proved below, and was not raised in a respondents’ notice. It was not open to Stefka on the appeal.
5. A general liberty to apply in a perfected final order permits further directions or working out of the order. It does not permit a party to re-argue issues finally decided. The High Court therefore had no jurisdiction to entertain the later application to vary the perfected costs order. The order nevertheless remained effective until set aside. The court treated the cross-appeal as challenging the operative costs order and dismissed it. Personal representatives involved in hostile litigation ordinarily have no special protection limiting their personal costs liability to the estate, although a Beddoe application may produce an indemnity from the estate: [1893] 1 Ch 593.

The Zeitals were entitled, as administratrices, to Raymond’s beneficial interest in the second share. Dalmar 2004 was not to be treated as a member of Dalmar for the purposes of the liquidation.

• Court of Appeal (Civil Division): In [2010] EWCA Civ 159, the appeal concerning the second share was allowed and the cross-appeal concerning costs was dismissed.
• High Court, Chancery Division: The deputy judge delivered judgment on 30 June 2008, ordered costs on 11 July 2008, and gave a supplemental judgment on 4 November 2008. A further costs order was made on 24 April 2009. The Court of Appeal held that the finding on the second share was wrong and that the later application to vary the perfected costs order had been entertained without jurisdiction.