John Palmer & Anor v P1 Pit Stop Limited & Ors

Facts

P1 Pit Stop Limited was incorporated in August 2014 by Mr Palmer and Mr Forland, who each took 200 shares, with 100 going to a third subscriber, Mr Marmon; Mr Forland has been the sole de iure director throughout. In breach of section 113 of the Companies Act 2006 the company never kept a register of members, and its filings at Companies House contained numerous inconsistencies and arithmetical errors. After Mr Marmon withdrew in November 2015 the parties agree that Mr Palmer and Mr Forland each held 250 shares. Mr Palmer then introduced two prospective investors, Ray and Gordon, who were to take half the company; their details were never supplied and their investment never came. The annual return of 7 March 2016 nonetheless recorded Magna Secretaries Limited as holding 500 new shares, with 50 of Mr Palmer's shares shown as transferred to Mrs Forland. A confirmation statement of 22 October 2018 showed Magna's 500 shares distributed among Mr Forland, his wife and his stepson, and 10 of Mr Palmer's shares transferred to Mr Forland, leaving Mr Palmer with 24%. The two men fell out in March 2020 over the "Gainsborough transaction". By Part 8 claim form issued on 6 August 2021 Mr Palmer and Magna sought rectification under section 125 of the Companies Act 2006; the claim was transferred to Part 7 by consent in 2023 and tried over two days in March 2026, both men appearing in person.

Decision

Issues

• Whether the court may create a register of members from scratch under section 125 of the Companies Act 2006 where the company has never had one.
• Whether disputed questions of fact may be resolved in such proceedings.
• Whether 500 shares were validly allotted to Magna Secretaries Limited.
• Whether effect should be given to the transfers recorded in the confirmation statement of 22 October 2018.

Reasoning

Deputy Insolvency and Companies Court Judge Parfitt took the jurisdictional questions first. Relying on Vinelott J's decision in Re Data Express Ltd, where a destroyed register was replaced by order, he held that if the court can recreate a register it can create one from scratch: a company with no register omits from it all the information the register must contain, and the power under section 125 of the Companies Act 2006 is engaged. On disputed facts, although In re Greater Britain Products Development Corporation Ltd reflects a stricter practice, and the Privy Council in Nilon Limited v Royal Westminster Investments S.A. considered that rectification determines legal title alone, the Court of Appeal's decision in Re Hoicrest Ltd, Keene v Martin — binding on him, as Zacaroli J noted in Otto v Inner Mongolia Happy Lamb Catering Management Company Limited — permits disputes to be resolved by case management in the same proceedings, an approach endorsed in Chen v Ng where all interested parties are before the court and one which serves the overriding objective. On the substance, the judge found no contract of allotment with Magna. A person becomes a member by subscribing to the memorandum or by agreeing to become a member, allotment taking effect under section 558 of the Companies Act 2006; Magna neither agreed to subscribe nor paid, and the only contemporaneous document was Mr Palmer's bare email of 7 March 2016 supplying Magna's address and registered number so that the annual return could be completed. Mr Born's statement that Magna held on trust for Mr Palmer carried very little weight: contrary to the consent directions he did not attend for cross-examination, and his account conflicted with Mr Palmer's own emails of 5 and 14 May 2020 asserting a 50% shareholding, which the judge found had the ring of truth; Mr Palmer's belated claim of a written deed of trust was withdrawn. The 500 shares having never been allotted, only the 10 shares said to have been moved to satisfy Barclaycard could have been transferred, and no proper instrument of transfer under section 770(1)(a) of the Companies Act 2006 was produced, so Mr Palmer retained legal title to his 250 shares. Nothing in the articles, the Act or the general law permits shares to be expropriated for wrongdoing, so the Gainsborough matter was irrelevant and no findings were made about it. Registration was recorded retrospectively following Re Sussex Brick Co. The judge added, following Re Sprout Land Holdings and Kamenetsky v Zolotarev, that the members' purported written resolution of July 2020 was invalid because it had not been circulated by the company under section 292 of the Companies Act 2006, section 293(7) of the Companies Act 2006 saving only defects in circulation.

Case history