Dickinson & Anor v NAL Realisations (Staffordshire) Ltd & Anor

The Duomatic principle requires informed assent by all shareholders entitled to attend and vote, unless valid delegation makes another person’s assent effective. Beneficial membership of a pension scheme does not suffice where the trustees hold the shares and the beneficiaries are not absolutely entitled to the whole trust fund.

Companies Act 2006, section 1157, can apply to proprietary claims arising from a director’s breach of duty. Relief remains discretionary and is unlikely where it would effectively transfer company property. On a company’s purchase of its own shares, section 691(2) requires actual payment when the purchase occurs. An immediate contractual obligation or later loan entry is insufficient.

The appellants challenged findings that a 2005 transfer of NAL’s factory premises to Mr Dickinson and a 2010 share buy-back were invalid. The High Court held that the property transfer lacked authority, refused relief under section 1157 of the Companies Act 2006, and held the buy-back void for non-compliance with section 691. It also considered the buy-back a transaction defrauding creditors under section 423 of the Insolvency Act 1986.

The appeal concerned whether shareholder assent validated the property transfer, whether section 1157 extended to the proprietary claim and, if so, whether relief should be granted, and whether leaving the buy-back price outstanding as loans amounted to payment on purchase.

1. Disposition. The appeal was unanimously dismissed. The property transfer and share buy-back remained void and ineffective.
2. Property transfer. The Duomatic principle, stated in Re Duomatic Ltd [1969] 2 Ch 365 and EIC Services Ltd v Phipps [2003] EWHC 1507 (Ch), requires assent by all shareholders entitled to attend and vote, with knowledge of the relevant facts. The Court assumed, without deciding, that a beneficial owner’s assent could suffice. That did not assist the appellants. Mrs Dickinson had not given unqualified agreement, and the pension scheme’s members were not its only potential beneficiaries. The trust was therefore not one in which the members were absolutely entitled to the whole beneficial interest. The registered trustees had not delegated authority to Mr Dickinson and had not approved the transfer. The broader submission that beneficiaries could control trustees’ voting was rejected, subject to the limited issue addressed in Butt v Kelson [1952] Ch 197.
3. Section 1157 relief. The natural meaning of section 1157(1) of the Companies Act 2006 was wide enough to cover a proprietary claim caused by a director’s negligence, default, breach of duty or breach of trust. Dingemans LJ agreed, observing that a narrow construction would produce arbitrary results. The jurisdiction did not require relief to be granted. The judge was entitled to refuse it because Mr Dickinson had not properly considered NAL’s separate interests, the transaction’s value or commercial benefit, and relief would effectively discharge the trust and transfer company property.
4. Share buy-back. Section 691(2) requires shares to be paid for when the purchase is effected. It is not enough that the contract provides for immediate payment, or that the price is later recorded as a loan. Payment need not be in money, and genuinely separate transactions may suffice, but no such payment occurred here. The buy-back was therefore void, and it was unnecessary to determine the alternative section 423 issue.

• Court of Appeal (Civil Division) — In [2019] EWCA Civ 2146, the appeal was dismissed.
• High Court of Justice, Chancery Division — In [2017] EWHC 28 (Ch), Judge Cooke held the property transfer and share buy-back void, refused relief under section 1157 of the Companies Act 2006, and made consequential proprietary orders.