26/4/24
MITCHELL v SHEIKH MOHAMED BIN ISSA AL JABER [2024] EWCA Civ 423
The defendant was a company director who had caused legal title to shares owned by the company to be transferred to a third party recipient, at a time when he had no power to act as a director. The defendant was held to be subject to fiduciary duties as if he had been a director [36] and liable for breach of trust for intermeddling in the company’s affairs by causing title to the shares to be registered in the name of the recipient. It made no difference that the defendant did not receive the shares personally [47]. Although he had no power to transfer the shares, the transfer had been made to appear to have taken place at a time when he had power to act as a director of the company [48] and the practical effect had been to cause the transfer to be registered and so confer legal title on the recipient [49]. On the facts, however, it had not been proved that the shares would have been sold but for the transfer [78] and since they had later lost any value, no loss was established [80]. Unless a party objects at trial that a point was not properly pleaded, it cannot be challenged on that basis on appeal [91]. The court also considered principles on which an unpaid vendor of shares can claim a lien [92]. On the facts, the parties had intended to exclude any lien arising [100]. The recipient of the shares was, however, liable for knowing receipt [103].
20/12/23
BYERS v SAUDI NATIONAL BANK [2023] UKSC 51
A claim by a company against a bank for knowing receipt of shares transferred in breach of trust by a defaulting trustee failed because under the foreign law applicable to the transfer, the bank received unencumbered title to the shares. A claim cannot be made for knowing receipt if the claimant’s proprietary interest in the property is lost as a result of the transfer by the trustee. It will be lost if it is overreached or overridden such as when a trustee has power to dispose of the property free of any beneficial interest, or if the transfer is to a bona fide purchaser for value without notice of any breach of trust, or if legislation applies to confer unencumbered title on the transferee such as under s.2 Law of Property Act 1925. Although personal and proprietary remedies exist for knowing receipt, neither remedy is available if the claimant’s proprietary interest is lost by the time the recipient receives the property, even if the recipient later acquires knowledge of the breach of trust.