Bruce v Gartlan & Ors

The court may rectify a company’s share register where entries record transfers that were never made. A person registered as shareholder may be required to account for the beneficial ownership of shares held through a nominee. A nominee or fiduciary who acquires further shares or subscription rights connected with the trust property must act for the beneficiary, not for personal benefit. An allotment procured in breach of those duties may be set aside. Beneficial entitlement does not itself give an immediate right to registration where the necessary transfer has not yet been lodged, but the court may declare the entitlement and grant ancillary relief in rectification proceedings.

The claimant sought rectification of the share register of UK Plant and Haulage Management Limited. Two individuals had originally been registered as shareholders as nominees for the claimant. The first defendant asserted that she had subsequently acquired their shares by agreement and had caused the register to be altered. She also caused further shares to be allotted, including shares allotted to her son.

The court had to determine the beneficial ownership of the original shares, whether the alleged transfers had occurred, whether the subsequent allotment was valid, and what rectification and declaratory relief should follow.

1. The court found that the two original registered shareholders had held their shares as nominees for the claimant. The alleged agreements by which the first defendant said she had acquired those shares were rejected. No valid share transfers had been executed.
2. The register had therefore been wrongly altered. It was ordered to be rectified by restoring the two shares, one each, to the names of the original nominees. The claimant was beneficially entitled to the shares and would be entitled to registration once the transfers in his favour had been lodged and duly considered by the company.
3. The first defendant could not rely on protection as a bona fide purchaser for value without notice. On the findings, she had not purchased the shares and was likely aware that the registered holders were nominees for the claimant. Any equity arising in her favour would in any event have been postponed to the claimant’s earlier equity.
4. The first defendant was the decision-maker responsible for increasing the issued share capital and allotting shares, including shares to her son. The right to subscribe for further shares belonged ultimately to the claimant as beneficial owner through the nominees. She therefore could not properly acquire those rights for herself.
5. The court was not satisfied that there had been a valid allotment. If there had been, it was liable to be set aside because it had been procured in breach of the duties owed to the beneficiaries. The allotment was deleted, leaving the company with two shares.
6. The court had power to grant a declaration of beneficial ownership as ancillary relief in rectification proceedings, including under the prayer for further or other relief. Permission to apply was granted for any further rectification required after the transfers were lodged.

Not stated in the judgment.