Key Choice Financial Planning Limited v Timothy Evoy

The court considered the proper construction of the company’s articles, in particular Article 25.1 and the related provisions (Articles 23–32), and whether a power to serve a "call notice" and to forfeit shares extended to any debt owed by a shareholder or was confined to sums payable in respect of the shares themselves. The judge applied the iterative interpretive approach in Arnold and DnaNudge, reading Article 25.1 in the context of the articles as a whole and commercial common sense. He concluded that calls and forfeiture under Articles 25–32 are limited to sums payable in respect of specific shares (in the nature of unpaid share capital), and that the appellee’s forfeiture was therefore ineffective.

The decision turned on textual inconsistency between Article 25.1 (which, read in isolation, appeared broad) and subsequent articles which repeatedly tie calls, notices of intended forfeiture and the effects of forfeiture to sums "in respect of" particular shares; on the unusual lien drafting in Article 23; and on the draconian nature of forfeiture which the articles must be read to limit.

Background and procedural posture:

• This is an appeal from the order of District Judge Wales dated 19 March 2024 (permission to appeal having been granted by Zacaroli J). The Judge below allowed a CPR Part 8 claim by Mr Evoy and declared that the purported forfeiture of his 57 ordinary shares was ineffective.
• The appeal was heard on the papers and oral submissions before Mr Justice Michael Green.

Facts:

• The company was incorporated in October 2014 and adopted modified model articles. All shares were fully paid. The respondent (Mr Evoy) held 57 ordinary shares and ceased to be a director in January 2019.
• Following a dismissed contributory’s winding up petition, the respondent was ordered to pay the company’s costs on an indemnity basis; a large costs judgment remained unpaid and interest accrued.
• By letter dated 28 September 2021 the company served a "call notice" under Article 25.2 demanding payment of the costs liability and, after a notice of intended forfeiture on 20 October 2021, purported to forfeit the respondent’s shares on 12 November 2021 under Article 30.

Nature of the application and issues:

• The respondent’s Part 8 claim sought a declaration that the purported forfeiture of his shares was ineffective.
• The principal issue on appeal was the construction of Article 25.1: whether a "call" could extend to any debt owed by a shareholder or was limited to sums payable in respect of the shares (i.e. calls on unpaid share capital). Related issues included the proper reading of Articles 23–32 (lien, calls, notice of intended forfeiture, effects of forfeiture and disposal of forfeited shares) and commercial common sense in construction.

Reasoning:

• The court followed the unitary, iterative approach to contract and article interpretation explained in Arnold and applied in DnaNudge. Article 25.1, read in isolation, could be read broadly but must be construed consistently with the scheme and purpose of the articles as a whole.
• Many provisions following Article 25.1 expressly tie calls, notices and forfeiture to sums "in respect of" particular shares (see Articles 26.1, 26.2, 29.1.2, 29.1.6, 30, 31.3.4, 31.4 and 32.4). That consistent drafting makes sense only if "call" is limited to amounts payable in respect of specific shares. The unusual wording of Article 23 (a broad lien) and other drafting oddities created ambiguity but did not support the broader construction advanced by the company.
• Forfeiture is a severe remedy and the articles must be interpreted so as to avoid an outcome in which the company could retain the value of forfeited shares without accounting for it, effectively imposing a penalty on the shareholder. The commercially sensible and coherent construction limits calls and forfeiture to unpaid sums in respect of the shares.

Conclusion: The appeal was dismissed. The court upheld the Judge below’s declaration that the purported forfeiture of the respondent’s shares was ineffective because the company’s articles only authorised forfeiture for non-payment of sums payable in respect of the shares themselves.

This was an appeal and it is dismissed. The court held that Articles 25–32 must be read as a coherent whole and that a "call" and the power of forfeiture are limited to sums payable in respect of particular shares (i.e. calls on unpaid share capital). The company’s attempted forfeiture for non-payment of an external costs judgment therefore lacked proper contractual basis under the articles and was ineffective.

Appeal from the Order of District Judge Wales dated 19 March 2024 (High Court in Bristol, case no BL-2023-BRS-00005). Permission to bring the appeal was granted by Zacaroli J. The present judgment is [2025] EWHC 4 (Ch).