Dixon & Anor v Blindley Heath Investments Ltd & Anor

Estoppel by convention may arise where parties mutually conduct themselves on a shared assumption which differs from the true legal or factual position. The assumption may result from mistake, ignorance, misrecollection or forgetfulness. It must be manifested between the parties, relied upon in their mutual dealings, and attended by sufficient benefit or detriment to make departure from it unconscionable.

A transferee of company shares is entitled to registration unless the board resolves to reject the transfer within a reasonable time. An obvious misnomer in the transferee’s corporate name does not invalidate the transfer where the intended company is objectively identifiable and there is no competing entity.

The appeal arose from a struggle for control of a private company. Certain shareholders sold 200 shares to Blindley Heath Investments Limited (“BHIL”), despite contractual pre-emption rights contained in shareholders’ letters. The Deputy High Court Judge held that the rights existed, but that the shareholders opposing the sale were estopped by convention from enforcing them. She also held that the board had informally and unanimously approved the transfers.

The appellants challenged the findings on estoppel, the effect of the October and November 2011 board meetings, and the validity of stock transfer forms which misstated BHIL’s corporate name. BHIL’s contingent cross-appeal concerned its unsuccessful warranty and misrepresentation claims against the vendors. There were also applications for permission to appeal aspects of the costs orders.

The central issues were whether forgetfulness could support an estoppel by convention, whether the parties had sufficiently manifested and relied upon a common assumption, and whether BHIL was entitled to registration.

1. The substantive appeal was dismissed. The parties had conducted their affairs on the mutually manifested assumption that no valid pre-emption restrictions prevented transfers of the company’s shares. Estoppel by convention is not confined to conscious mistakes. Misrecollection, ignorance and forgetfulness may support the doctrine where the parties have adopted and acted upon a common conventional basis: Amalgamated Investment [1982] 1 QB 84 and Grundt (1937) 59 CLR 641 applied.

2. The assumption must cross the line between the parties. It is insufficient that each party independently holds the same view. Assent may nevertheless be inferred from conduct or silence. The person to be estopped must have assumed some responsibility for the adoption of the assumption; the other party must have relied upon it in subsequent mutual dealings; and sufficient benefit or detriment must make departure from it unjust or unconscionable. Those requirements were satisfied by the parties’ dealings and their consideration and approval of earlier share transfers.

3. Having obtained the benefit of the assumption while pursuing control of the company, the appellants could not repudiate it to prevent the vendors and BHIL obtaining the corresponding benefit. The estoppel therefore prevented enforcement of the pre-emption rights against the sale.

4. The October board meeting also amounted to a unanimous decision not to reject the transfers. Under section 771 of the Companies Act 2006, a transferee is entitled to registration unless the directors resolve to reject the transfer within the permitted reasonable period. Formal approval is not a condition precedent. The Court expressed reservations about extending the Duomatic principle to proxy or representative assent, but did not decide that issue.

5. The Court considered that a board might sometimes be entitled, or obliged, to reconsider an earlier decision before registration, including to protect applicable pre-emption rights. It reached no concluded view because estoppel disposed of the appeal and the point had not been fully argued.

6. The incorrect corporate name in the stock transfer forms was an obvious misnomer. Inquiry would have identified the intended BVI company, and there was no competing entity. BHIL was entitled to be registered as holder of the 200 shares. Its contingent cross-appeal on misrepresentation and warranty was consequently redundant.

7. Permission was granted for BHIL to appeal most of the identified costs rulings, and for Mr Dixon to challenge the proportion of costs imposed on him. Permission concerning the costs of BVI expert evidence was refused.

1. Court of Appeal (Civil Division): The substantive appeal was dismissed: [2015] EWCA Civ 1023. BHIL was entitled to registration of the transferred shares. Its contingent cross-appeal became redundant. Permission to appeal specified costs orders was granted in part.

2. High Court, Chancery Division: A Deputy Judge held that contractual pre-emption rights existed but could not be enforced because of estoppel by convention. She alternatively held that the board had informally and unanimously approved the transfers. No neutral citation is stated in the judgment.