Usman Hussain Malik v Nusrat Malik & Ors (Re RN Restaurant (Stockport) Limited)

A gratuitous transfer of shares conveys both legal and beneficial ownership where the transferor’s subjective intention, assessed from the evidence and circumstances, was to make an unconditional gift. Resulting-trust presumptions carry little weight where the parties’ actual intentions are established.

In assessing presumed undue influence, the transaction must be viewed realistically and in its full context. A family transfer made for ordinary motives, including protecting a family business and the transferor’s own interests, may be reasonably explained without undue influence. A mother–son relationship does not automatically establish influence, and a gift need not be set aside merely because the recipient received no independent advice.

The claimant sought declarations that he was the legal and beneficial owner of two shares in R N Restaurant (Stockport) Ltd. The defendant mother counterclaimed, alleging that the shares were transferred for a limited administrative purpose and were held on resulting trust, or that the transfer was voidable for misrepresentation, mistake or undue influence.

The dispute followed earlier litigation concerning ownership and control of the company, including judgments at [2020] EWHC 2334 (Ch), [2021] EWHC 1405 (Ch), [2023] EWCA Civ 2 and [2023] EWHC 1433 (Ch). The central question was whether the 2016 transfer was an unconditional gift or remained subject to a trust, condition or equitable right of rescission.

1. Resulting trust. The claimant was entitled to the declarations sought. The transferor’s intention in a gratuitous transfer is subjective. A resulting-trust presumption and the presumption of advancement are only evidential tools and have little weight where the evidence establishes the actual intention. The court found that the shares were transferred to secure both the immediate removal of the transferor’s estranged husband as director and the longer-term continuation of the family business. The transfer was unconditional and irreversible, not merely an administrative convenience arrangement.
2. Misrepresentation and mistake. The alleged representation that the sons had to be shareholders before they could become directors was not made. The claims therefore failed. In any event, in the particular circumstances the representation would have been substantially true in practical terms, because the share transfer protected against pressure being placed on the transferor not to vote for the relevant resolutions.
3. Undue influence. The doctrine is unitary, although it is conveniently analysed through actual and presumed undue influence. The mother–son relationship was not automatically one of influence. Although trust and confidence existed, the transfer was reasonably explicable by ordinary motives and the family’s commercial circumstances. It was a modest transfer made to protect the transferor, her sons and the family business. The transaction therefore did not call for an explanation in terms of undue influence, and the claim failed.
4. The alternative defences were unnecessary to the result. Had relief been established, the court would not have refused it on the grounds of laches, affirmation, estoppel or acquiescence on the evidence and pleaded case.

The judgment describes earlier stages of related litigation, including decisions at [2020] EWHC 2334 (Ch), [2021] EWHC 1405 (Ch), [2023] EWCA Civ 2 and [2023] EWHC 1433 (Ch). Those decisions concerned wider ownership and control disputes and were not the decision appealed in this judgment.