Summary

The court acceded to a request to grant declarations of right, in terms agreed by the parties, that two transfers of shares in a company were, and always had been, void on the basis that the transferor lacked the necessary mental capacity to make them.

Facts

The first and second executors of a prior administratrix (P) of the estate of her husband and the third applicant substituted administrator de bonis non applied for declarations of right as against the respondent (R) in respect of the validity of two share transfers. Following the death of her husband, P had executed two transfers of shares in the husband's former company in favour of her niece (R). Later, P commenced proceedings to set aside those transfers on the basis of undue influence or, in the alternative, for lack of mental capacity. P died before the resolution of the claim. Thereafter, the parties entered into an agreement to dispose of the claim, agreeing that R had been wrongly registered as the holder of the transferred shares and providing various mechanisms for the resolution of the dispute.

Held

Before acceding to an application for a declaration of right to be made in the absence of a trial where the parties had reached an agreement to dispose of the relevant claim, the court would first have to be satisfied that (a) the compromised claim was seriously arguable; (b) if the claim had succeeded at trial, the court would have been likely to have considered that the declarations sought were necessary to afford justice to the claimant; (c) the grant of the declarations was not likely to have any adverse repercussions for third parties, Wallersteiner v Moir (No1) (1974) 1 WLR 991 CA (Civ Div), Patten v Burke Publishing Co Ltd (1991) 1 WLR 541 Ch D and Lever Faberge Ltd v Colgate-Palmolive Co (2005) EWHC 2655 (Pat), (2006) FSR 19 applied, and Animatrix Ltd v O'Kelly (2008) EWCA Civ 1415 followed. In the instant case, a court would have had no hesitation in granting the necessary declarations that the transfers of shares by P were voidable for undue influence and had been avoided. However, the court was not asked to make declarations in those terms but was asked to make declarations to the effect that the transfers were, and always had been, void on the grounds that P lacked the necessary capacity to make them. In view of the ruling in Animatrix and the terms of the parties' agreement, it would be wrong not to accede to the application for declarations.

Declarations granted