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High Court of Justice in Northern Ireland Chancery Division Decisions
You are here: BAILII >> Databases >> High Court of Justice in Northern Ireland Chancery Division Decisions >> Townsley v McCay Holdings (Belfast) Ltd & Ors [2001] NICh 13 (06 October 2001)
URL: http://www.bailii.org/nie/cases/NIHC/Ch/2001/13.html
Cite as: [2001] NICh 13, [2001] NIJB 409
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Neutral Citation no.[2001] NICh 13
Ref:
GIRF3502
Judgment: approved by the Court for handing down
Delivered:
06.10.2001
(subject to editorial corrections)
2001 No. 1818
IN THE MATTER OF THE COMPANIES (NORTHERN IRELAND) ORDER 1986
BETWEEN:
Applicant;
1. McCAY HOLDINGS (BELFAST) LIMITED
2. NEW CAR HIRE (LIMESTONE ROAD) LIMITED
3. JAMES McCAY AND RONALD ELLIS McCAY
Respondents
GIRVAN J
Introduction
This matter comes before the court on an application by the respondents for a direction by the court that the present proceedings be either dismissed on the grounds that they should have been instituted by way of writ of summons or alternatively that the court direct that the originating summons by which the proceedings were instituted should be treated as a writ with subsequent delivery of properly formulated pleadings. Mr Thompson QC appeared on behalf of the respondents with Mr Marrinan. Mr Brangham appeared on behalf of the applicant.
Facts
The applicant who was born in 1951 is the daughter of the late James Ewing Campbell McCay deceased ("the deceased") who died on 22 November 1973. James McCay and Ronald Ellis McCay, the third named respondents, are her brothers. The deceased was in the business of the motor trade involved in the sale and hiring of vehicles. The business was incorporated in March 1965 originally under the name McCay Cars Limited. That company is now called McCay Holdings (Belfast) Limited ("McCay"). According to the applicant's affidavit the original shareholding of the company was divided thus: 6150 shares held by the deceased, 1350 shares held by his wife, 3000 shares held by each of the brothers and 1500 ordinary shares originally held in the names of K E D Mackrell and Ulster Bank Limited ("the Bank") under the terms of a settlement dated 29 March 1965 ("the settlement"). Under the trusts of the settlement 1500 shares were to be held for the applicant if she should attain the age of 21 years and subject thereto for the brothers in equal shares.
On 13 May 1963 New Car (Limestone Road) Limited ("New Car") was incorporated. Originally the shares were held as to 100 by the deceased, 50 by his wife and 50 by James McCay Junior and 49 by Ronald McCay. The annual returns at 31 December 1977 show that 10 shares were transferred to the applicant and that those shares were subsequently transferred to McCay. The current shareholding appears to be 249 shares held by McCay and 1 by Ronald Ellis McCay.
Following the death of the deceased the applicant asserts that her brothers assumed control of both companies. She alleges that she was unaware of the fact the deceased had established the trust in her favour. She was not aware of the existence of and relationship between the two companies. She said that she learnt from her mother the deceased had left her 500 shares in the company. Some time in the 1970s she became aware also from her mother that she had an entitled to 1500 shares in McCay, but she had no contact with the trustees or her brothers about the ownership of the shares. She took little interest in the running of the companies.
Documentation unearthed by the applicant appears to indicate that the Bank, as the surviving trustee of the trust of the settlement, transferred 750 shares to each of the applicant's brothers thus vesting in her brothers the 1500 shares to which she was beneficially entitled under the settlement. The applicant denies any knowledge of that and said it was done without her authority or consent. Two other transfer documents purporting to be signed by her showed the transfer to each of the brothers of 255 shares (which would total 510 shares, 10 shares more and 500 shares which she believed she was entitled to under the will of her father). These transfers purport to have been effected in consideration of £1 per share. The applicant denies that she signed such documents and says that she did not receive any consideration for the shares. She asserts that her surname is incorrectly spelt on the transfer documents, that the house number shown on the address is wrong and the street name is incorrectly spelt.
In relation to the 10 shares to which she was entitled in New Car, under her father's will, she said she has no information as to how the bank dealt with those duties as executor of her father's will and does not know how the registration of the shares to which she was beneficially entitled came to be effected in the name of New Car or Ronald Ellis McCay.
The proceedings
The applicant brings the present proceedings by way of an originating summons and seeks to declaratory relief together with orders for rectification of the registers of the companies. In paragraph 1 of the summons she seeks a declaration that she is entitled to the beneficial ownership of 1500 shares in McCay and by virtue of the settlement and she seeks a declaration that she is entitled to be registered as the owner of the said 1500 shares.
In paragraph 6 she seeks a declaration that she is entitled to the ownership of 500 shares under the provisions of the will of the deceased and in paragraph 11 she seeks a declaration that she is entitled to the beneficial ownership of 10 shares in New Car under the provisions of the will of the deceased and a rectification of the register of the company.
The relevant statutory provisions
Under article 367 of the Companies (Northern Ireland) Order 1986 it is provided so far as material as follows:
"(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) ….."
The relevant rules of court
Order 102 Rule 3(c) provides that an application for rectification of the register of members of the company "must" be by originating motion.
There are various modes of commencement of proceedings prescribed by the rules of court. The Civil Justice Reform Group in its Final Report pointed out that the Rules display a sometimes bewildering range of options that not infrequently provide the basis of additional dispute. This has happened in the present case. In reality there is no difference in principle between an application by originating motion on the one hand and an application by originating summons on the other, the difference lying only in the wording of the originating document and somewhat different time requirements. The point of distinction between originating motion summons proceedings and proceedings begun by writ lies on the fact that the former are not generally regarded as suited to resolving matters of factual dispute. Order 5 Rule 2 provides that subject to the provisions of any statutory provision or of the rules, by virtue of which any proceedings are expressly required to be begun otherwise than by writ, the proceedings therein referred to must be begun by writ. Those include proceedings "in which a claim made by the plaintiff is based on an allegation of fraud".
It is also necessary to bear in mind the provisions of Order 2 Rule 1 dealing with the effect of non-compliance with the rules. Under Rule 1(1) of that Order where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of anything done or left and done been a failure to comply with the requirements of the rules, whether the respected time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings or any step taken in the proceedings. Under Order 2 Rule 1(2) the court may on the ground that there has been such a failure and on such terms as to costs or otherwise as it thinks just set aside either wholly or in part the proceedings in which the failure occurred, any step taken in those proceedings or any document, judgment or order therein or exercise its powers under the rules to allow such amendments, if any, to be made and to make such order dealing with the proceedings generally as it thinks fit. Rule 1(3) provides that the court shall not wholly set aside any proceedings for the writ or other originating process by which they were begun on the ground that proceedings were required by any of the these rules to be begun by an originating process other than the one employed. The rules of court now provide an overriding objective set out in Order 1 paragraph 1A the overriding objective of the rules being to enable the court to deal with cases justly. Dealing with a case justly includes, so far as is practicable, ensuring that the parties are on an equal footing, saving expense and dealing with the case in ways which are proportionate to the amount of money involved the importance of the case, the complexity of the issues and the financial position of the parties. It should also ensure that the matters are dealt with expeditiously and fairly.
Notwithstanding the apparent mandatory wording of Order 102 Rule 3 which prescribes that rectification proceedings must be begun by originating motion it appears that an application for rectification may be initiated by originating motion or by an action begun by writ (see Halsbury Volume 7(1) paragraph 395).
In Re Greater Britain Products Development Corporation Limited (1924) TLR 488 the Divisional Court held that an application for the rectification of the register if there is some question in dispute requiring investigation the practice is for the judge not to make an order for rectification but to make an order dismissing the summons of motion and leaving it open to the applicant to bring an action.
Counsel's contentions
Mr Thompson QC argued that it was essential for the proper disposal of the case that a statement of claim should be served and that an appropriate order should be made under Order 28 Rule 8 treating the proceedings as if commenced by writ.
Mr Brangam argued that bearing in mind the breadth of the jurisdiction of the court under Article 367 it was a practical, efficient and in the interests of justice that each of the respondents should set out in affidavit the circumstances in which of them allege that the plaintiff agreed and arranged each transfer, the circumstances in which each of them allege that the controllers of the companies caused to alter the registers and in the case of the brothers the circumstances in which it is alleged they acquired or became entitled to the shares. It may become desirable depending on what is stated in the affidavits for the court to order a party to serve particulars, points of claims or points of defence. He referred to Order 18 Rule 12(3). Until the respondents made some attempt to articulate their defence there can be no need for determination of any complex issue. He argued that the applicant's case was simple, she said she did not authorise the transfer of the shares to her brothers and the documents were not signed by her.
Mr Brangam accepted that the proceedings should have been instituted by way of originating motion and he sought leave to amend the originating summons so that it should be treated as an originating motion.
Conclusions
I am prepared to exercise my powers under Order 2 Rule 1 to treat the application as brought by originating summons as if brought by an originating motion. I have indicated that there is no difference in reality between the two sets of proceedings. I must then go on to consider whether those originating motion proceedings should be dismissed on the grounds that there are substantial questions of fact which should more properly be pursued by action begun by writ. I think it would be unnecessary and undesirable to strike out the notice of motion and require the applicant to issue a writ. In regard to the overriding objectives set out in Order 1 Rule 1A and the width of the court's powers under Order 2 Rule 1 the court is reluctant to set aside proceedings on the grounds that they are not properly constituted if the proceedings can continue in a satisfactory form.
There is however a matter which the parties did not develop in argument and which is significant for the future conduct of the case. The Bank, the surviving trustee of the trust of the settlement relating to the 1500 shares in McCay which executed the transfer of the shares, is not a party to the present proceedings. The Bank as trustee was the legal owner of the shares at the time the share transfer documentation was executed. It seems to me that the Bank is a necessary and proper party to the proceedings. It appears to be the applicant's case against the Bank is that it was in breach of trust in transferring the shares and that the brothers have become constructive trustees of the shares, taking with knowledge of the breach of trust.
Such a case while interrelated with the claim for rectification of the register needs to be properly and clearly formulated and the Bank as the former legal owner of the shares requires to be made a party. The Bank as executor of the deceased is also a necessary and relevant party in relation to the shares which formed part of the estate of the deceased.
In the circumstances I consider that the present matter should proceed as if begun by writ so that the applicant's full case is properly formulated and pleaded setting out the proper and full causes of action relied on and joining all necessary and proper parties.
Accordingly I shall direct that the originating summons amended to become an originating motion should stand as a writ in the proceedings and I direct the delivery of the plaintiff's statement of claim within three weeks of the completion of the joinder of all necessary parties. Following delivery of the statement of claim the matter will be reviewed. Having regard to the width of the court's powers and having regard to Order 1 Rule 1A the court retains the power to direct the defendants to furnish replying affidavits in addition to any defence to the applicant's statement of claim. (See Practice Direction No. 4 of 1997 "Witness Evidence" paragraph 2).
2001 No. 1818
IN THE MATTER OF THE COMPANIES (NORTHERN IRELAND) ORDER 1986
BETWEEN:
Applicant;
1. McCAY HOLDINGS (BELFAST) LIMITED
2. NEW CAR HIRE (LIMESTONE ROAD) LIMITED
3. JAMES McCAY AND RONALD ELLIS McCAY
Respondents