Hurndell v Hurndell & Ors

A registered holder of shares does not necessarily acquire the beneficial ownership of them. Where shares are transferred into a person’s name without an intention to make a gift, the beneficial interest remains with the existing owner, subject to any resulting trust. The court may determine disputed evidence by testing witnesses against contemporaneous documents, objective facts, motives and the overall probabilities. A nominee who agrees to transfer shares on the beneficial owner’s instructions cannot establish beneficial ownership merely from registration. The claim was dismissed because the claimant had never beneficially owned the disputed shares.

The claimant alleged that approximately 32 million shares in Stanelco plc had been stolen from him after he signed blank stock transfer forms. The defendants contended that he had held the shares as nominee for Howard White, who later directed their transfer to Barrie Hozier or nominees, while allowing the claimant to retain 1.5 million shares.

The claim followed an earlier trial at which the claim was dismissed. The Court of Appeal admitted new evidence and ordered a retrial of all issues. The central questions were whether the claimant had received the shares beneficially, whether he had agreed to the later transfers, and what legal consequences followed from his registration and execution of the documents.

1. Evidence. The court assessed the conflicting evidence by reference to objective facts, contemporaneous documents, the witnesses’ motives and the overall probabilities, following the guidance in Ocean Frost [1985] 1 Lloyds LR at 57. The claimant and Mr Davis were found to have given deliberately untruthful evidence on material matters.
2. Beneficial ownership. The shares were arranged to be parked with the claimant as nominee for Mr White. The apparent reduction of the Davis and White interests for listing purposes did not make the claimant beneficial owner. Following the 1997 appointment, the shares remained beneficially owned for Mr White.
3. Registration. Registration of the claimant as legal owner on 6 February 2001 did not transfer the beneficial interest. There was no enforceable contract or intention by Mr White, or an authorised person, to make a gift. The presumption of a resulting trust was not rebutted.
4. Later directions. Mr White subsequently directed that approximately 32 million shares be transferred to Mr Hozier or as he directed, while the claimant retained 1.5 million shares beneficially. The claimant signed the St Tropez note and later signed two blank stock transfer forms for that purpose. The subsequent registration of Khaki and Finale was therefore not a conversion of shares beneficially owned by the claimant.
5. Disposition. The claimant was never the beneficial owner of the disputed shares. The claim was dismissed.

1. High Court (Chancery Division). David Richards J dismissed the claim at the first trial on 19 March 2008.
2. Court of Appeal. In [2009] EWCA Civ 67, the court unanimously admitted new evidence. The Chancellor would have dismissed the appeal, but Pill LJ and Lloyd LJ allowed it and ordered a new trial of all issues.
3. High Court (Chancery Division). The retrial resulted in dismissal of the claim.