Van Collem & Ors v Van Collem & Ors

A share transfer obtained by fraud, or signed without knowledge of its contents, may be set aside. A director must comply with fiduciary obligations and the statutory duties imposed by the Companies Act 2006, including duties concerning the company’s success, independent judgment and conflicts of interest. Where the evidence establishes that a director used corporate control to misappropriate another’s funds, the court may grant declaratory relief and equitable compensation. The court may rely on properly admitted hearsay evidence where requiring every witness to attend would be disproportionate in the circumstances.

The claim arose from a family dispute concerning approximately £4m allegedly removed from accounts held through corporate structures controlled by the first defendant. The claimants alleged that the first defendant had used his control of the defendant companies to transfer funds for his own benefit and had procured documents purporting to transfer shares and alter directorships.

After the first defendant’s defence was struck out under CPR 39.3 and his applications for an adjournment and reinstatement were dismissed, the claimants proved their case through their own evidence, admitted hearsay evidence, expert accountancy evidence and expert evidence of Seychelles law. The central issues were the validity of the purported share transfer and corporate changes, the alleged breaches of fiduciary and statutory duties, and the appropriate relief.

1. Evidence and procedure. After the defence was struck out under CPR 39.3, the claimants still had to prove their case. The court permitted late service of hearsay notices because the evidence had been properly served, would cause no surprise, and requiring each witness to attend would have been disproportionate.
2. Fiduciary and statutory duties. The court considered the fiduciary principles stated in Bristol & West Building Society v Mothew [1998] Ch 1. The allegations that the first defendant acted in bad faith, profited from his position, placed duty and interest in conflict, and acted for his own benefit without informed consent were established on the evidence. The pleaded breaches of sections 172, 173 and 175 of the Companies Act 2006 were likewise supported by the evidence.
3. Share transfer and corporate acts. On the expert evidence of Seychelles law, a document produced by forgery, or signed without knowledge of its contents, rendered the purported share transfer voidable for fraud or mistake. The purported transfer in the 2007 Letter, the purported resignation and the later issue of shares were therefore of no effect. The later transfer to Peter and his appointment as director of Socrates were valid.
4. Relief. The claimants’ case was proved. They were entitled to the declarations sought and to equitable compensation for the sums unlawfully taken, together with equitable interest.