Mark Lane & Anor v Pamela Lane

This is a first‑instance judgment resolving two linked proceedings concerning AGM Brickwork & Stonework Ltd: (1) a claim by Mark that, under an oral agreement made in September 2003 between the four prospective shareholders, the 40 shares held by his father Alan would pass to Mark on Alan’s death (the "Share Agreement"); and (2) an unfair‑prejudice petition by Pamela complaining about the company’s use of an offshore "Remuneration Trust" and the non‑payment of dividends.

The court found on the balance of probabilities that an oral Share Agreement was made at the September 2003 meeting and that it was intended to have legal effect; alternatively Mark would have succeeded by proprietary estoppel or constructive trust. As a result Mark was entitled to the disputed 40 shares and an order for transfer from Pamela as executrix was appropriate.

On the petition, the court held that Pamela had participated in or acquiesced in the Remuneration Trust in 2008, had understood and received payments from it (which were loans rather than undisclosed dividends), and therefore could not establish unfair prejudice from the scheme or the historic failure to pay dividends. The unfair‑prejudice petition was dismissed. The court also addressed directors’ duties (ss. 171, 172, 174, 175 Companies Act 2006) and limitation issues (Limitation Act 1980), but the primary disposals were (i) transfer of the disputed shares to Mark and (ii) dismissal of the petition.

Background and parties

• AGM Brickwork & Stonework Ltd was incorporated in September 2003 with issued shares: 40 to Alan, 40 to Mark, 10 to Pamela and 10 to Suzanne. Alan and Mark ran the business; Pamela and Suzanne were nominally shareholders in order to obtain tax advantages.
• Alan died on 3 November 2009. Companies House records showed Alan’s 40 shares transferred to Mark. Pamela contended the shares formed part of Alan’s estate under his will; Mark alleged a contemporaneous oral Share Agreement that Alan’s shares would pass to Mark on Alan’s death.

Procedural posture and relief sought

• Two hearings tried together: (a) the Claim in the Business List in which Mark sought recognition and transfer of the disputed shares by contract, proprietary estoppel or trust; and (b) Pamela’s unfair‑prejudice petition under s.994 Companies Act 2006 seeking a buy‑out (purchase) of her shares, adjusted for alleged prejudice arising from the Remuneration Trust and non‑payment of dividends.

Issues framed by the court

• Whether an oral Share Agreement was made in September 2003 and if so whether it was legally binding (contract), or alternatively gave rise to proprietary estoppel or a constructive trust in Mark’s favour.
• Whether the Remuneration Trust and the directors’ conduct (including non‑payment of dividends and the pattern of loans/transfers) amounted to unfair prejudice to Pamela as a member, and whether any limitation defence barred parts of the petition.
• Whether documentary and handwriting evidence supported or undermined the parties’ accounts of loan documentation and the payments to Pamela.

Court’s reasoning and findings

• The court found the oral Share Agreement was made: it preferred the evidence of Mark, Suzanne and the accountant (Freeman) over Pamela’s denial. The agreement was held to be intended to have legal effect as a mutual promise among the four prospective shareholders and sufficient consideration existed in the mutual promises. In the alternative proprietary estoppel would have provided relief.
• The court found Pamela had attended the 2008 meeting that approved the Remuneration Trust, that she understood the arrangement and that she received substantial payments from the trust (evidence supported genuineness of signatures and that she had signed or acquiesced). Given her assent and receipt of payments known to be loans, she could not now complain of unfair prejudice arising from replacing dividends with Remuneration Trust payments.
• On directors’ duties the court observed directors must act for the benefit of the company and fairly between members (ss. 171, 172, 174, 175 CA 2006) but concluded the evidence did not establish unfair prejudice or culpable breach of duty by the directors in the respects relied on. Limitation principles (Limitation Act 1980 and the Court of Appeal authority THG v Zedra) were considered; the petition was assessed within those constraints but the complaint that related to the 2008 establishment of the trust was in any event not pursued.

Outcome

• The Claim succeeded: the court will order Pamela, as executrix, to transfer the 40 disputed shares to Mark (simple transfer order anticipated).
• The unfair‑prejudice Petition was dismissed: unfair prejudice was not established.

First instance: The Claim succeeds and Mark is entitled to the disputed 40 shares. The court found an oral Share Agreement was made in September 2003 (alternatively proprietary estoppel/constructive trust would have provided relief) and ordered that Pamela, as executrix, transfer the shares to Mark. The unfair‑prejudice petition was dismissed because Pamela had participated in or acquiesced to the Remuneration Trust, received payments she understood to be loans from it, and therefore had not established unfair prejudice arising from the remuneration structure or non‑payment of dividends.