Summary

Where the establishment of an offshore company had been paid for by two persons and it had been used for their joint business enterprise, the company's share certificates in bearer form delivered by the legal owner to one of them had belonged beneficially to both from the outset.

Facts

The claimant (M) brought an action against the defendant (D) seeking a declaration of entitlement to bearer share certificates representing half the share capital of a company (N) incorporated in the Netherlands Antilles. M, a resident of Italy, and D, a resident of the United Kingdom, had carried on a business together through an English company (L) acquired by an administration company (X) in Switzerland. When it became apparent that L might become liable to UK taxation, X acquired N, through which the same business was conducted. N's acquisition costs were paid with funds earned by M and D's business. N's shares, represented by four bearer certificates, were held by X, which later forwarded the bearer certificates to D. Subsequently, D completed documents required by N's Netherlands Antilles registration agent and N's Swiss bank, stating that both he and M were beneficial owners of the shares. D also loaned money to M on the security of M's shares. M and D fell out. M demanded delivery of his shares, and D undertook to comply. He sent a letter to his Swiss bank, asking it to open his safety deposit box and deliver two of the bearer certificates to him. He sent a copy of the letter to M and told him that the bank was unwilling to act on just a letter. M brought the instant proceedings. D contended that (1) M's claim to entitlement to the shares was of recent origin and made in the knowledge that it was false, and that his own admissions and undertakings to the contrary had been made to accommodate M when in financial difficulty or to avoid embarrassment; (2) even if M could show that he would otherwise be beneficially entitled to the shares, the circumstances on which he relied, namely evasion of Italian tax, disentitled him to relief under the principle in Emery's Investment Trusts, Re (1959) Ch 410 Ch D.

Held

(1) D's evidence was self-contradictory and not to be believed. D had admitted that the certificates were not in his safety deposit box and that his letter to the Swiss bank had been a ruse. It would not be surprising if M had agreed to the certificates being sent to D, not because they were D's, but because it would not have suited M to have them in Italy. From the outset, the legal owner, X, acquired the shares for and at the cost of his principals, D and M, as beneficial owners equally entitled, whether by way of express or resulting trust, and the position remained the same when legal title passed to D. At no time was M's beneficial interest transferred to D. (2) The principle in Emery, that a person could not rely on his own illegal act to rebut the presumptions of advancement or resulting trust, did not apply since M did not need to rebut any presumption as there was a resulting trust in his favour, Emery not applied.

Judgment for claimant