Dickinson v Nal Realisations (Staffordshire) Ltd

The Court of Appeal dismissed the appellants' challenge to the High Court's findings that (1) the 2005 transfer of NAL's freehold premises to Mr Dickinson was unauthorised and that Mr and Mrs Dickinson hold the property on trust for the company, and (2) the 2010 share buy-back was void. The court held that the Duomatic principle did not validate the property transfer because the registered shareholder (the pension scheme trustees) had not given assent, no authority was shown for Mr Dickinson to represent the trustees, and the beneficial interests were not such as to permit unilateral action by the Dickinsons. The court also upheld the High Court's refusal to grant relief under section 1157 Companies Act 2006, accepting that the judge had jurisdiction but was entitled to refuse relief on the facts. Finally, the Court of Appeal held that the share buy-back contravened section 691(2) Companies Act 2006 because the consideration was not actually paid on purchase and therefore was void.

This appeal concerned two principal questions: the validity of a 2005 transfer of the freehold factory premises by NAL to Mr Henry Dickinson and the validity of a 2010 share buy-back by NAL from Mr Dickinson, a discretionary settlement and a pension scheme.

Background and parties:

• NAL (formerly Norton Aluminium Limited) was majority-owned by Mr Dickinson (50.6%), with the H Dickinson Discretionary Settlement (39.2%) and the STB Engineering Ltd Directors SSAS pension scheme (10.2%) as other shareholders. The pension scheme had a professional / pensioneer trustee until April 2006.
• In 2005 NAL purported to transfer its freehold premises to Mr Dickinson for £224,000 with a leaseback; the formal minute was not in fact approved at a board meeting.
• In 2010 NAL purported to buy back most issued shares for ‘nominal value payable in full upon completion’ but funds were not actually transferred; journal entries and a later-dated debenture were created.
• Proceedings arose after NAL faced significant nuisance claims; NAL entered administration in 2012 and liquidation in 2013. The liquidators counterclaimed seeking to recover the property and to set aside the buy-back.

Procedural history: This Court of Appeal judgment is on appeal from His Honour Judge David Cooke (Chancery Division) [2017] EWHC 28 (Ch), who declared the property sale and the share buy-back void, held the Dickinsons held the property on trust for NAL and ordered reconveyance and accounts.

Issues framed:

1. Whether the Duomatic principle validated the 2005 property transfer;
2. If not, whether relief should be granted to Mr Dickinson under section 1157 Companies Act 2006;
3. Whether the 2010 share buy-back complied with section 691 Companies Act 2006 (payment on purchase) and whether it should be set aside under section 423 Insolvency Act 1986.

Court's reasoning and conclusions:

• Duomatic: the Court assumed, as a threshold, that assent by beneficial owners can in principle satisfy Duomatic but found it inapplicable here. Mrs Dickinson had not been shown to have given unqualified agreement and the pension scheme trustees (the registered members) had not consented; the pension scheme rules permitted contingent beneficiaries so Saunders v Vautier did not apply; no agency or authority was shown for Mr Dickinson to represent the trustees. Accordingly, the property transfer remained unauthorised and proprietary.
• Section 1157: the Court held there was jurisdiction to grant relief under section 1157 even where a claimant asserts proprietary rights, but affirmed the High Court's refusal to grant relief. The judge had considered the company and shareholder facts, concluded Mr Dickinson had not acted honestly and reasonably with regard to the company’s interests, noted the absence of valuation or commercial justification, and correctly treated the prospect of discharging the trust as a factor militating against relief.
• Share buy-back and section 691(2): the Court agreed with the High Court that the statutory requirement that shares ‘must be paid for on purchase’ requires actual payment at the time of purchase. The arrangement here, leaving the company to show a book debt or later put the amount on loan account and then documenting a debenture, did not amount to payment on purchase; the buy-back was therefore void under section 691(2). The Court did not need to decide the section 423 point.

Disposition: The appeal was dismissed.

The appeal was dismissed. The Court of Appeal upheld the High Court’s conclusions: the 2005 property transfer was unauthorised and the Dickinsons hold the property on trust for NAL (and must reconvey and account); relief under section 1157 Companies Act 2006 was available in principle but was properly refused on the facts; the 2010 share buy-back was void for failure to comply with section 691(2) Companies Act 2006 because the purchase price was not paid on purchase.

Appeal from the High Court of Justice, Chancery Division (His Honour Judge David Cooke) reported as [2017] EWHC 28 (Ch); judgment on appeal delivered by the Court of Appeal (Civil Division) [2019] EWCA Civ 2146 on 3 December 2019.