England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY

		Manchester Civil Justice Centre 1 Bridge Street West M60 9DJ
		12th April 2017

HIS HONOUR JUDGE HODGE QC:

1. This is my extemporary judgment in the matter of Lancashire Cleaning Services Limited, case number D30MA313. This is the hearing of a Part 8 claim which has been brought before this court on extremely short notice and on two occasions today. The claim form was issued on 11^th April 2017, which is yesterday. As originally issued, the claimants were Kings Court Trust Limited and Ms Lois Joanne Talbot, purportedly in their capacity as the executors of the late Eric Anthony Pilling, deceased, who died on 28^th February 2017.
2. By his apparent last will dated 17^th February 2015, Mr Pilling appointed the two original claimants and a Ms Angela Jane Pilling as co-executors and trustees of his estate. The deceased was the sole shareholder and director of Lancashire Cleaning Services Limited, which was incorporated on 30^th June 2006 and adopted the regulations contained in 1985 Table A of the Companies (Tables A - F) (Amendment) Regulations 1985 as its Articles of Association, subject to modifications. In the absence of any power in those articles for the claimants to become registered as members of the company, they require an order pursuant to section 125 of the Companies Act 2006 to rectify the register and to make the entries themselves. There is, in addition to no surviving director of the company, no company secretary either.
3. The matter is said to be urgent as the company is continuing to trade but its bank account was frozen by its bank on Friday of last week, 7^th April. The claimants intend to appoint a director to take control of the company and, since there is no company secretary and no director, there is no-one who can respond to the application on behalf of the company and so the claimants seek an order dispensing with service and an immediate hearing of the application.
4. The claim form was supported by a witness statement from Mr Anthony Robert Catterall, a solicitor and senior partner of Taylors Solicitors of Blackburn, dated 11^th April 2017, together with exhibit ARC1. The witness statement spoke to the death of Mr Pilling on 28^th February and of his last will dated 17^th December 2015, which was exhibited. It was said that probate had not yet been granted. The witness statement goes on to refer to the deceased as the sole shareholder and director of the company, which is a private company providing office cleaning services in East Lancashire. It also refers to the fact that there is no company secretary. Reference is made to the certificate of incorporation and the latest annual return. The articles of association and a copy of Table A are included within the exhibit to Mr Catterall's witness statement.
5. Under regulations 29 to 31 of Table A, the deceased's shares have passed by operation of law to the claimants as his personal representatives. Mr Catterall notes that there is no provision which would permit the personal representatives to appoint a director where, as a result of death, the company has no shareholders or directors. The claimants are therefore unable to secure by themselves their entry on the register of members and the appointment of a director.
6. Following the death of the deceased, the company has apparently continued to trade under instructions from the second claimant, Ms Talbot. A potential purchaser of the company, at an attractive price of £100,000, has been identified. However, the company's bankers, NatWest, have frozen its account with effect from 7^th April. Mr Catterall exhibits a copy of the relevant email from the bank to the executors. That freezing of the account prevents the company from paying staff wages and other creditors. There is said to be an outstanding VAT liability, and staff wages are due to be paid this Thursday, 13^th April, which is tomorrow. Obviously, if wages are not paid, there is a high risk of staff leaving, of contracts being lost, and of the business being irreparably damaged.
7. In those circumstances, the claimants wish to apply for an order under section 125 of the Companies Act 2006 to rectify the register so that the deceased is substituted by the claimants as the holders of his shares. The claimants will then pass a written resolution appointing a director. The matter is said to be urgent. There is said to be no point in serving the proceedings on the company as it has no officers. The business is currently being managed under the instructions of the second claimant.
8. That was the state of the evidence when the matter came before me at 9.30 this morning, having been interposed in my list during the course of a two-day committal application. I pointed out to Mr Berragan that there was no satisfactory evidence as to the renunciation of probate by one of the three named executors, Ms Pilling. There was also no explanation as to why probate had not been obtained beyond the statement that it had not then been granted. My concern was that, in those circumstances, I had difficulty in seeing how the requirements of section 125 of the Companies Act 2006 could be satisfied. How could it be said that the late Mr Pilling's name remained on the register without sufficient cause, or that default had been made, or unnecessary delay had taken place, in entering the names of the nominated executors on the register when no grant of probate had yet been obtained and there was no satisfactory evidence before the court, beyond the mere fact of the will, that two of the three named executors, as claimants, should be entitled to be registered?
9. Mr Neil Berragan of counsel, who appears for the claimants, recognised the evidential gap and applied for a short adjournment to supplement the claimants' evidence, which I granted. The matter was listed to come back before me today at 1.30pm and it has in fact done so at 1.45pm. I now have a second witness statement of Mr Catterall dated 12^th April. He exhibits, as pages one and two of exhibit ARC2, confirmation that the first claimant, Kings Court Trust Limited, has lodged the application for a grant of probate today, together with a copy of the oath made in support of the application. Mr Catterall also corrects an error in paragraph 2 of his earlier witness statement. He says that he had been informed that the proving executors were to be the first and second claimants. That was not correct because only the first claimant was to prove, with power being reserved to the second claimant and Ms Angela Jane Pilling. Mr Catterall apologises to the court for this error, which is said to have arisen from his partner, who was dealing with the proposed sale of the defendant company, having been told by the second claimant that Ms Pilling intended to renounce. As a result, Mr Catterall has amended the claim form to add Ms Angela Jane Pilling as the third claimant.
10. I am satisfied on the evidence that an application for probate, supported by an oath for the grant sworn by Robert William [Hannon?], an authorised officer of Kings Court Trust Limited, the first claimant, has been sent to the Bristol District Probate Registry. Therefore, there is every likelihood that a grant will be made in favour of the first claimant, with power being reserved to the second and proposed third claimants. What is therefore sought by Mr Berragan, on behalf of the claimants, is an order recording that the claim form was amended today to add the third claimant as a party (which can be done without permission of the court since it has not been served), and ordering that:

(1) service of the claim form be dispensed with;

(2) pursuant to section 125(1)-(3) of the Companies Act 2006, the register of members of the company be rectified by entering the names of the three claimants as the holders of the 1,000 £1 ordinary shares currently registered in the name of Eric Pilling and removing his name;

(3) the claimants have permission themselves to make the necessary entries on the company's register of members immediately;

(4) pursuant to section 125(4) of the 2006 Act, the claimants, within seven days of the rectification of the register, give notice of it to the registrar of companies; and

(5) there be no order for costs.

11. Mr Berragan submits that, under the terms of the company's articles, the shares in the company have devolved upon the executors named in the will and that they are entitled to be registered as shareholders. He submits that the fact that no grant of probate has yet been obtained does not prevent the claimants from either bringing these proceedings or seeking registration of the shares in their name. He relies upon observations of Mr Justice Newey in the case of Re Goodman [2013] EWHC 758 (Ch) reported at [2014] Ch 186. There the judge held that the term 'personal representative' in the Administration of Justice Act 1985 encompassed a personal representative who had not yet proved. The judge observed that, in contrast to an administrator, who only derives title from his appointment by the court, an executor derives title from the will, and the property of the deceased vests in him from the moment of the testator's death.
12. Mr Berragan notes observations in Buckley on the Companies Acts to the effect that the company should not recognise an executor or administrator until probate or letters of administration have been obtained; and that in the case of death the company must require an English grant of representation to be produced. Mr Berragan submits that, nonetheless, the approach of Mr Justice Newey should be followed, and that it is not necessary for the executors to obtain a grant of probate in order to become entitled to be registered as shareholders where there is no dispute as to their title.
13. I am entirely satisfied on the authority of Re Goodman that it is open to the claimants, who have not yet proved, to bring these proceedings. In the normal course, I recognise that a company will not register executors until they are able to prove their title as such by production of a grant of probate. It is against that background that I must consider the power of the court to rectify the register under section 125 of the 2006 Act. That provides, by subsection (1) (so far as material):

(1) If—

(a) the name of any person is, without sufficient cause, entered in or omitted from a company's register of members, or

(b) default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member,

the person aggrieved, or any member of the company, or the company, may apply to the court for rectification of the register.

(2) The court may either refuse the application or may order rectification of the register and payment by the company of any damages sustained by any party aggrieved.

(3) On such an application the court may decide any question relating to the title of a person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or expedient to be decided for rectification of the register.

(4) In the case of a company required by this Act to send a list of its members to the registrar of companies, the court, when making an order for rectification of the register, shall by its order direct notice of the rectification to be given to the registrar.

14. In the normal case, it does not seem to me that directors of a company could be said to be in default in refusing to enter on the register the name of the personal representatives of a deceased member without production of a grant of probate or letters of administration in respect of the deceased member. In such case, there will generally be sufficient cause for omitting the deceased member from the company's register, and no default or unnecessary delay in entering the executors, until such time as a grant of probate or letters of administration have been produced. However, it seems to me that in determining the question of whether there is sufficient cause to omit a deceased member from the register, and to enter his executors in his place, the court is entitled to have regard to all of the circumstances.
15. The circumstances of this case are quite exceptional. There is no power, without the intervention of the court, to enter the executors in the register or for any director to be appointed in place of the now sole deceased director. There is also no company secretary. In those circumstances, and given the imminent failure to be able to draw sufficient funds to pay wages and salaries to employees and to account for unpaid value added tax due to Her Majesty's Revenue and Customs, it is inappropriate to wait until the grant of probate has been obtained. Section 125(3) recognises that a court may, on an application under section 125, decide questions relating to the title of someone in the position of the present claimants.
16. In my judgment, in the exceptional circumstances of this case, it does seem to me that unnecessary delay is taking place in entering the names of the named executors on the company's register of members. The company is presently completely directionless, with no officer capable of acting on its behalf. It is only the court that can rectify that situation by ordering rectification of the register. Normally the company should await the grant of probate; but, in this case, it may be too late for company if it does.
17. In the circumstances of this case, which I repeat are wholly exceptional, and in order to ensure the survival of the company, I am satisfied that the court can and should exercise its power under section 125 of the 2006 Act to order rectification of the register. Given that there is no one on behalf of the company who can properly be served with this claim, I consider it to be appropriate to dispense with service of the claim form. I do so under CPR6.16 on the basis that the circumstances are so exceptional as to justify dispensing with service of the claim form.
18. I am satisfied that on the evidence now before the court, including in particular the oath in support of the application for a grant of probate, that the three named executors who are the claimants are the persons who should be registered as the members of the company in the register of members. I am satisfied that the court does have power under section 125 to order such rectification and that it should exercise its discretion to do so by entering the names of the three claimants as the holders of the late Mr Eric Pilling's 1,000 £1 ordinary shares and removing his name from the register. I am satisfied that under section 125(2) the court has the necessary power to order the claimants to make the necessary entries on the company's register of members immediately, given that there is no officer of the company who is in a position to do so. Such a power is necessarily inherent in the court's power to order rectification of the register. Without including such an ancillary provision, the court would not be fully performing the function conferred upon it under section 125(2) of ordering rectification of the register. Notice will of course have to be given of the rectification to the registrar of companies under section 125(4).
19. For all of those reasons I will make an order in the terms of, what I think is, Mr Berragan's third draft. The solicitors and counsel are to be commended, as is counsel's clerk, for ensuring that this matter could be brought on at very short notice. I emphasise once again that the circumstances of the present case are exceptional and that normally the court would not make an order under section 125 of the 2006 Act unless and until the company had failed to act on a grant of probate in favour of the executors of a deceased member. This case will constitute no precedent for the more ordinary run-of-the-mill type of case where the company still has shareholders and directors able to act and where, in normal course, they would be fully entitled to await the grant of probate as constituting sufficient title to executors named in a will. I will make an order in those terms.
[Judgment ends]