Summary

A company was entitled to a declaration that it was the beneficial owner of the four issued shares in a second company where it had established that it had been the intention of all of the parties involved that those shares were to be held on a resulting trust for it.

Facts

The court was required to determine as a preliminary issue whether the first claimant company (F) should be granted a declaration that it was the beneficial owner of the four issued shares in the fifth defendant company (D). F had been set up by the first defendant (C) and the second claimant (B) as part of a venture to market football clubs and sport generally via an interactive email format. Other individuals, including the third defendant (Z), invested in F and a number of business ideas were developed, one of which was for the integration of mobile phones into marketing and promotional ideas with the use of mobile phone credits as a financial incentive for customers, known as "Dialtime", for which a patent application was made. It was agreed that a new company would be set up to develop the Dialtime idea. D was subsequently set up and four shares in it were issued which in due course were allocated each to B, C, Z and the sixth defendant formation agent in the course of her setting up D as an off-the-shelf company. The businesses of F and D were run together by C's son, the second defendant. F's financial position deteriorated and it assigned its intellectual property rights in Dialtime to D. B subsequently expressed concerns as to the legal status of D and F as separate companies and in respect of D's shareholding. In a derivative claim, B brought proceedings on behalf of himself and D's other shareholders in respect of the allegedly improper assignment to the fourth defendant company of intellectual property rights belonging to D, and the court ordered the trial of the preliminary issue. F contended that there was a resulting trust in relation to each of the four shares in D, which was registered in the names of B, Z, C and the sixth defendant respectively. In support of that claim, F relied on the decision of Shephard v Cartwright (1955) AC 431 HL in which a resulting trust was found to have arisen in respect of the allotment of shares in private companies formed for the purpose of engaging in further business activities.

Held

(1) The consideration for the shares allotted to each of D's shareholders had been the personal liability of that shareholder to meet any call by D for payment in respect of the share registered in his or her name. Each shareholder had "paid" for his or her own share by assuming a personal obligation to D in respect of it. That was different to the situation in Shephard, as in that case the consideration for the allotted shares had been cash paid by the company's promoter, Shephard distinguished. (2) Whether a resulting trust arose or not was based on the court's assessment of the true, or most likely, objective intention to be ascribed to the parties to a transaction involving the acquisition of property as to the ownership of that property, based on a factual presumption taken to arise from the identity of the person who paid for the property. The presumption was rebuttable, and its force and whether it was rebutted or not had to be assessed in the light of the particular circumstances of the specific case. In the instant case, all of the parties had regarded D as a company set up by F and at its cost. For all practical purposes, F was regarded as the person who had paid for D to be established. A rebuttable presumption therefore arose upon the formation of D that the shares in it were to be held beneficially upon a resulting trust for F. (3) The correct approach to examination of the intentions of the relevant parties as to the beneficial ownership of the shares which were issued in D was an objective one, Gissing v Gissing (1971) AC 886 HL applied. On the evidence, the common intention was that the shares in D held by the individuals were to be held in such a way as to allow D to be treated as part of F's association of companies, and in such a way as to allow for the Dialtime business opportunity which D was to develop and exploit to be presented as one of the business opportunities which F could put before investors. That intention both reinforced and was reinforced by the presumption that a resulting trust arose by virtue of the use of F's assets to set up D. The court, accordingly, declared that F was the beneficial owner of all four shares in D.

Declaration granted in favour of first claimant