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Harris v Jones (2011)


John Dagnall appeared for William Harris (“Harris”) who set up a joint-venture with Richard Jones (“Jones”) called Zetnet Limited (“Zetnet”) each holding one share (50% each).  Harris transferred his one share to Jones who executed an express declaration of trust in favour of Harris and a stock-transfer form back to Harris.  In 2007 Jones and others effected a series of transactions without informing Harris by which they lent £70,000 to Zetnet and reconstructed the shareholding with Harris’ share supposedly amounting to 0.1% of the total, Jones having 40% and others having 59.9%.  In 2008 the entire shareholding was sold for a net £252,000.  Jones asserted that Harris was left with 0.1% i.e. £252 (it having turned out that a rebate on the purchase price, had in fact been funded by solicitors).  Harris asserted breach of trust and company unfair prejudice.


Jones had acted in breach of trust by participating in the reconstruction (although an alternative claim regarding a duty to sell the shares failed).  Equitable compensation was assessed at £110,000 plus (compound) interest on the basis of 50% of what Harris would have received had matters been dealt with properly.  Harris was entitled to petition under Part 30 of the Companies Act and there had been unfair prejudice but there was no need for a further separate order as the equitable compensation would be sufficient.  Various post-judgment freezing relief was granted.


This is an example of the twin-track approach of seeking remedies in both equity and in company law where possible.  In this case the mere execution of the stock transfer form was sufficient to found a jurisdiction to petition, and the judge implied that, notwithstanding a subsequent sale of the shareholding, a compensation remedy would have been available even in company law.  Otherwise this case is a warning to those who engage in unwarranted share dilutions.  A point of some practical importance was that the Judge effectively allowed Jones to use against Harris material from Harris’ divorce litigation with his ex-wife notwithstanding the implied undertakings as to non-user of such material as explained in the decision in Clibbery v Allan (although the judge did hold that the question of Harris seeking to hide the share from his divorce did not go to any legal issue – Tinsley v Milligan - but only to credibility).

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14 Jun 2011

Chancery Division
Morgan J

​[2011] EWHC 1518 (Ch) : LTL 16/6/2011

Practice areas
Company, Partnerships & LLPs
Private Client