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Pinfield v Eagles & Anor

[2005] EWHC 577 (Ch)

Case No: 4BS50512
Neutral Citation Number: [2005] EWHC 577 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

BRISTOL DISTRICT REGISTRY

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 6th April 2005

Before:

THE HONOURABLE MR. JUSTICE HART

Between:

JOYCE ANN PINFIELD

Claimant

- and -

(1) PAUL EAGLES

(2) STEPHEN BOURNE

Defendants

Mr. Michael Jefferis (instructed by Messrs. Moriarty Stone of Bristol) for the Claimant.

Mr. Gerard M. Heap (instructed by Messrs. Lloyd Williams of Swansea) for the Defendants.

Hearing dates: 28th February, 1st, 2nd March 2005

Judgment

Mr. Justice Hart :

1.

This case concerns the ownership of the share capital of three limited companies:

i)

Worcester Garden Limited ("WG") which was incorporated on 16th July 2002 with an authorised share capital of £100 shares divided into 100 shares of £1.00 each;

ii)

Worcester Garden (No. 1) Ltd ("WG1") which was incorporated on 9th October 2002. This appears to have had the same authorised share capital;

iii)

Worcester Garden (No. 2) Ltd ("WG2") which was incorporated on 2nd August 2002, again apparently with a £100 authorised share capital.

2.

The incorporation was in each case effected by company formation agents (D&D Law Agency Services Ltd) acting by their Mr Dwyer on the instructions of the first defendant Mr Paul Eagles. On each occasion one share only was issued, in each case to Mr Dwyer. Mr Dwyer was plainly not intended to be the beneficial owner.

3.

The project in connection with which the companies had been formed was the acquisition of residential care homes. Mr Eagles had considerable experience of such businesses having been a moving spirit behind a company called Parkland Care Homes Limited. That company had, however, gone into receivership in 2001, leaving Mr Eagles substantially exposed in relation to a number of personal guarantees and in bad odour with the regulator. By 2002, however, he had formed the intention of again venturing into that business.

4.

By this time, Mr Eagle's personal financial position was dire. His only assets of substance were in a self-administered pension scheme which owned a building which, on his evidence, was worth some £200,000. He was not yet 60 and so could not draw on that. He had, however, formed a company, Adencourt Ltd, with the idea that it might be used as an investment vehicle for the pension scheme. This company, which had no assets, was owned 50:50 between himself and the claimant Mrs Pinfield. It had been incorporated in February 2001.

5.

Mr Eagles and Mrs Pinfield had met in July 1998, from which time they were involved in a passionate and tempestuous relationship, living together at Mrs Pinfield's farm. For Mr Eagles that relationship replaced a relationship which he had previously had, and which had subsisted for 25 years, with the mother of his children Yvonne Bruce (whom I will call "Yvonne"). Mrs Pinfield is an attractive woman who presented herself to me in the witness box as calm and poised. Mr Eagles told me that he had fallen very deeply in love with her to the point of being obsessed with her. She seems, however, not to have felt secure in his affections and to have held the belief that she was in competition with Yvonne for his affections. During the course of 2001 this sense of insecurity manifested itself in a series of telephone calls made to Yvonne in which she levelled allegations of unspeakable vice against Yvonne in language that indicates a serious lack of psychological balance. These (some of which were taped and have been transcribed) resulted in complaints to the police, but no charges.

6.

By the beginning of 2002, after a number of previous hiatuses in the relationship, Mr Eagles and Mrs Pinfield were back together. They holidayed in Miami at the turn of the year, and it is common ground that on their return they discussed the idea of going into the nursing home business together. Her version of events is that there was an agreement in principle between them that they would go into the business as equal partners, the business being financed by the borrowing of 75% of the capital required to purchase the homes from a commercial lender, the balance to be found by Mr Eagles with Mrs Pinfield contributing, if necessary, up to £175,000 and thereafter working in the business. His version is that her role was to be limited to working in the business and, if required, making short term finance of up to £175,000 available. According to him, the possibility was discussed, in the event that she found she enjoyed the business, of her then buying a nursing home of her own.

7.

During the course of 2002 considerable progress was made in the project. Together they sounded out the market for nursing homes and sources of commercial finance. By June 2002 two prospects had presented themselves, one in Grimsby (The Garden House) and one in Clevedon, for which a total of some £1.8m needed to be found for purchase. They together negotiated an offer of finance from NatWest of £1.425m to be secured by legal charges and personal guarantees from both of them limited to £95,000. They also together visited Mrs Pinfield's bank and obtained an offer to her of a loan of £175,000 secured on her farm.

8.

By early August 2002, however, Mr Eagles was telling Mrs Pinfield that the whole of the £400,000 could be obtained from a family trust, and that only some £100,000 might be required from her for the provision of initial working capital. This emerges from a note of a meeting held on 6th August 2002 between Mrs Pinfield Mr Eagles and a Mr Foster, an accountant whom Mr Eagles had retained to give general advice. That note records, inter alia, a requirement for "short term additional funding of £96k" and that Mr Eagles "was considering staggering the purchase of the homes or for [Mrs Pinfield] to buy or loan". Mr Eagles told Mr Foster that he "had not come prepared to discuss the company structure" but that Mrs Pinfield and a Mr Hawkins were being considered as directors and that "shareholdings were to be via a family trust". Mr Foster was concerned about this given Mr Eagles' potential insolvency.

9.

Mr Foster had understood the reference to a "family trust" to be a reference to some existing trust under which Mr Eagles was a beneficiary. Mrs Pinfield did not know to what it referred, but maintained in evidence that since she and Mr Eagles were living together as a couple she assumed that she was "family" for the purposes of the trust. I did not find this a very convincing assertion. In fact all Mr Eagles' talk about a family trust was a piece of pure fiction designed to conceal the true source of the funding from Mrs Pinfield.

10.

The true position was revealed to Mr Foster by Mr Eagles at a meeting held on 9th August 2002 at which Mrs Pinfield was not present. It was emphasised to Mr Foster that the utmost confidentiality must be maintained as to what was revealed at that meeting. Although Mr Eagles denied it in the witness box, Mr Foster's evidence (which I accept) was that the purpose of this confidentiality was to keep Mrs Pinfield in the dark. What Mr Eagles now revealed to Mr Foster was that £360,000 was to be raised by Yvonne on the security of her house in Maidenhead and lent to Mr Eagles. The house was said to be worth £700,000 and to be subject to an existing charge in favour of Bank of Scotland of £235,000. That bank was apparently willing to lend 85% of valuation (£595,000) thus making available £360,000 for the venture. A balance was to be found from cash within Mr Eagles' pension scheme. There was no family trust. Mrs Pinfield (described at the meeting as a "wealthy woman with a major house, cash and land..") would, if necessary, lend up to £100,000 to the companies to "top up funding/initial cash flow etc." Mrs Pinfield was to be a working director at a salary of £15,000. There was discussion about setting up a nominee company to hold the shares in the new companies on behalf of Mr Eagles as the "true owner", the loans from Yvonne and the pension scheme being made to that nominee company. Mr Eagles emphasised that neither Yvonne nor Mrs Pinfield should play a role in the affairs of that nominee company.

11.

How Mr Eagles and Yvonne were proposing to, and at some point did, persuade the Bank of Scotland to advance the required sum must be left to the imagination. Yvonne had no income although she was at this stage contemplating a marriage (which took place in the September 2002) with the second defendant Mr Bourne. She could not meet the mortgage payments in respect of the existing mortgage and was faced with the prospect of having to sell the family home. Mr Eagles had no income and was faced with massive debts. It seems highly unlikely that Bank of Scotland was told the whole truth. Had there been disclosure in this action much illuminating material on this and other areas in the case might have emerged. One document which did, however, emerge was an agreement between Yvonne and Mr Eagles, apparently dated as early as 2nd April 2002, which contemplated Yvonne re-mortgaging her house (Tudor Lodge) so as to release £400,000

"in good faith to enable Mr Paul Eagles to create and invest in a new "Care Home" venture and company, on behalf of and for the benefit of the Eagles + Bruce-Eagles "family" [i.e. Mr Eagles Yvonne and their two children Poppy and Thomas]."

Under that document Mr Eagles agreed to pay the interest charges in respect of the mortgage, not to take salary or dividends out of the venture without the agreement of the family, and"

"to act purely as the family's manager (agent) to oversee and protect the family's investment. However, the beneficial ownership of the shares, to rest with [Yvonne], in trust for the "family" for the life of this agreement."

On sale of the shares profit was to be split three ways between Yvonne Mr Eagles and the children. At the end of 5 years, or earlier if the family so decided, the £400,000 was to be returned to Yvonne and any increase in the value of the property to be split equally between Yvonne and Mr Eagles.

12.

The document was apparently drafted by Mr Bourne. Whether it was in place as at 2nd April 2002 as it purports to have been is doubtful: the ability to raise as much as £400,000 by re-mortgage seems only to have been realised at a later date, and Mr Eagles in other respects showed himself to be no stranger to the back-dating of documents. I do not think, however, that it very much matters when the document was executed. It represented the agreement reached between the parties to it at the date on which the two homes were eventually purchased (in January 2003).

13.

By December 2002 contracts appear to have been exchanged for the purchase of the two homes and completion was scheduled for the first home in early January 2003 and the second in early February. By that time all three companies had been incorporated, Mr Eagles in each case being the sole director. The plan was that at completion Mrs Pinfield who was to be the "responsible person" for regulatory purposes would be appointed to be a director. Mr Eagles had asked Mr Nick Pinfield (an associate of Mr Foster and also Mrs Pinfield's son-in-law) to become company secretary. A meeting was held between Mr Foster, Mr Pinfield, Mr Eagles and Mrs Pinfield on 3rd December 2002 to explain the company structure to Mr Pinfield. At the meeting Mr Foster expressed concern at Mr Eagles continuing to show as a director, given his personal position. What was then explained was that WG1 and WG2 were to be wholly owned subsidiaries of WG with Mr Eagles mother (Mrs Brennan) registered as the sole shareholder of WG. Mrs Brennan was said to have executed a stock transfer form "in the event of anything happening to her". Mr Foster's note of the meeting does not reveal in whose favour that transfer was, but does record that he advised that Mr Eagles obtain an enduring power of attorney from her to protect his position and that the transfer should be deposited at "the Bank". The note also recorded Mrs Pinfield as having said that she had prepared a cash flow forecast which needed to be amended to show £36,000 of interest payments to Mrs Brennan. She appears therefore to have held the belief at this stage that a capital sum representing this interest payment (whether it was the £400,000 or the £360,000 is not clear) was coming from Mrs Brennan by way of loan, the loan in question presumably being to WG as holding company of the two subsidiaries.

14.

Consistently with part of the plan discussed at that meeting Mrs Pinfield was appointed to be a director of all three companies on 7th January 2003 and Mr Eagles resigned as director (or, more accurately, forms recording those events were sent to Companies House). So far as the shareholding was concerned, however, nothing was done. The sole issued share in each of the companies remained in the name of Mr Dwyer.

15.

In that corporate state of affairs the purchases of the two homes were completed at the end of January 2003. Mrs Pinfield was thereafter the "responsible person" for regulatory purposes. Her case is that nothing was done at this stage about the issue of shares, or to record for whom Mr Dwyer held his shareholding, because of the delicate position in which Mr Eagles stood vis-à-vis his creditors. Mr Foster was told to do nothing further in relation to the company structure (and found his firm in a fee dispute with Mr Eagles).

16.

This period did in fact coincide with a gathering storm cloud so far as Mr Eagles' position was concerned. One of his creditors under the personal guarantees (KCB Bank) served a statutory demand. Mr Eagles sought unsuccessfully to set it aside but in October 2003 had to concede defeat and faced bankruptcy.

17.

In the meantime Mrs Pinfield was running the homes. For the first 6 months she drew no salary but enjoyed the benefit of a company car and expenses. Thereafter, with Mr Eagles' agreement, she drew a salary at the rate of £20,000 pa. This replaced the modest income she had hitherto enjoyed from a flower-arranging business run by her from her home, and which her new responsibilities caused her to give up. At some point a Mr John Alsopp (by profession a nurse) became the manager of one of the two homes (the Clevedon one) and, by October 2003, Mr Alsopp had (according to documents filed at Companies House) become company secretary of all three companies.

18.

In August 2003 Mr Alsopp made a "regulation 37" report to the regulator (NCSC Bristol office) recording a complaint made by various employees of "inappropriate" remarks of a racially discriminatory and/or sexual nature having been made by Mr Eagles on a visit to the home, and that he had (after discussion with Mrs Pinfield) recommended to Mrs Pinfield (described in the report as "the owner") that she "inform partner not to visit the home again." The NCSC appear to have approved this action. Mrs Pinfield appears, however, to have played this event close to her chest. Mr Eagles told me (and this part of his evidence I felt able to accept) that he did not hear of this until February of the following year.

19.

Following his defeat in the statutory demand proceedings Mr Eagles set about proposing an individual voluntary arrangement. His proposal dated 3rd December 2003 asserted that he had no assets and liabilities of some £7.2m. Of that figure £1.5m was attributable to liabilities under personal guarantees, some £180,000 represented debts to banks, and a figure of £5.4m was said to be owed to a former business partner in respect of a venture from which he had retired in 1988. That last creditor, who remains a personal friend of Mr Eagles, represented just over 75% of the total liabilities and was thus in a position to vote through the arrangement (which involved the introduction of third party funds of £37,400 apparently from a former wife of Mr Eagles). The proposal contained a number of plain untruths: it concealed the fact that, on the case now put before the court, he had an interest in the care home venture; it concealed his liabilities under the Tudor Lodge mortgage and his interest in the equity of Tudor Lodge under the April 2002 agreement; it pretended that he was living in a rented flat in Bristol (when the address given was simply an accommodation address); it described the relationship with Mrs Pinfield as having finished; and it asserted that his mother was supporting him by making payments of £500 per month, whereas the payments under the Tudor Lodge mortgage were running at over £2000 a month and (according to his evidence to me) were being paid by his mother. The arrangement went through and by early February 2004 Mr Eagles was free of all the debts covered by it.

20.

The question of the true ownership of the companies now began to come to a head. This appears to have been prompted in the first place by a meeting at Park Farm on 17th February 2004 between Mrs Pinfield Mr Eagles and a representative or representatives of Natwest Bank. The bank wanted to know who were the shareholders and directors of the three companies, and why Mr Eagles had resigned as director prior to the completion of the purchases. At this meeting Mrs Pinfield revealed for the first time that Mr Eagles had been "banned" from one of the homes. The bank wrote on the following day summarising a number of requests for information. That letter also reveals that the bank had also been told that the businesses had generated enough cash over the past 12 months "to fully repay your unsecured debt", although it is unclear to what this refers.

21.

Mr Eagles was shattered to discover that he had been "banned" and that Mrs Pinfield had known about this since the previous summer. In cross-examination it was put to him that, on some unspecified occasion, he had given her a black eye. The allegation was supported by a vivid photograph, and defended on the basis that Mrs Pinfield had inflicted a knife wound on him which had required stitches. I do not think that this episode can be dated to the period of their relationship which I am now recounting. The parties at this stage were dealing with their actual and potential differences rather by sly manoeuvring behind each other's backs than by physical or other confrontation (although they were still living together as a couple). Mr Eagles perceived the "banning" order to have been orchestrated by Mrs Pinfield in just such a sly manner. He determined to find a way of replacing her as "responsible person", and to that end placed advertisements in the trade press. Mrs Pinfield discovered this, and discovered also that Mr Eagles was trying to make contact with Mr Dwyer. This alarmed her. She perceived that she was about to be removed as a director.

22.

Mrs Pinfield took legal advice from her solicitor Mr Gisby. The advice she received was that she could use her powers as sole director to allot shares to herself. With Mr Gisby's assistance she then, on 23rd March 2004, implemented that advice by allotting to herself 50 £1.00 shares in each of the companies fully paid. Article 4(b) of the Articles in each case apparently provided the directors with a power to allot shares during the first 5 years after incorporation without a shareholders' resolution. I heard no argument that the allotment was not ostensibly within those powers.

23.

Mrs Pinfield had remonstrated with Mr Eagles over the advertisement for a new director, but did not immediately reveal to him the step which she had taken to block her removal. To pacify her Mr Eagles arranged a meeting with a solicitor (Thomas Guise) in Worcester, the purpose of which was to provide her with a director's service contract. At the meeting (on 5th April 2004) Mrs Pinfield revealed (with, according to Mr Eagles, a "big smile") that she now owned a majority of the votes in each of the companies so that a service contract was unnecessary. This was another bombshell for Mr Eagles to absorb. The meeting, it need hardly be said, bore no fruit. Two days later Mr Gisby wrote to Mr Guise explaining the background to the allotment in more detail, advising that Mrs Pinfield could not object to allotting the remaining 49 shares to Mr Eagles, recording that the emotional relationship between their respective clients was now over, and inviting proposals for a resolution of the deadlock. Mr Guise did not reply to the letter.

24.

Mr Eagles then appears to have negotiated a deal with Mrs Pinfield under which she would buy out Mr Eagles' interest in WG1 and WG2 producing funds which he could then use to buy three new homes, to be operated by Mrs Pinfield and Mr Allsopp on a profit-sharing basis. This was discussed at a meeting at an hotel in Clevedon between the two of them and Mr Allsopp on 14th April. At that meeting Mr Eagles asked to be appointed a director of all three companies, but this was resisted by Mrs Pinfield and Mr Allsopp on the ground that there was no need for him to be a director of WG1 or WG2 if those companies were to be sold to Mrs Pinfield. They could see, however, no good reason to oppose his appointment as director of WG, and Mrs Pinfield accordingly signed a form 288A recording that appointment. Mr Allsopp's note of the meeting says that the form had already been dated with a date earlier than the date of the meeting, although Mrs Pinfield told me in evidence that the date was blank on the form she signed. I have no reason to doubt Mr Allsopp's contemporary note on this point. The date on the form was 1st March 2004. It seems to have been received at Companies House on 17th April. Mr Allsopp's note also records him as having pressed Mr Eagles to say who owned the companies, and as having received the reply that "the bulk of the money was his mothers, his Trust Fund, and that he and Mrs Pinfield were equal partners".

25.

Mr Eagles wrote to the regulator (now the Commission of Social Care Inspectorate) on 19th April 2004 asserting that

"The Money for the company came through Bower and Bailey Solicitors in Oxford and was contributed by my mother and pension trust..

The company [WG] has two subsidiaries [WG1] and [WG2]. These have Joyce Pinfield and John Allsopp as Director and Company Secretary. [WG] has, as well as stated, myself as company director.

My role in this company and further acquisitions is as advisor for the investor, my mother…."

26.

Mr Eagles next embarked on the manoeuvres which precipitated this action. With Mr Dwyer's co-operation he completed a number of forms, each dated 6th February 2004, and filed them with Companies House (which received them on 11th May). These purported to record the following events as having happened on 6th February 2004

i)

the appointment of Mr Dwyer as secretary of each of the companies;

ii)

increases in the share capital of each of the companies by £900;

iii)

EGMs having been held at which resolutions to increase the share capital of each company from £100 to £1000;

iv)

the allotment to Mr Eagles of 949 shares in each of the companies;

v)

changes in the registered office of each of the companies to Tudor Lodge;

vi)

the appointment of Mr Eagles as a director of WG1 and WG2.

27.

On 22nd May Companies House received further notices purporting to show Mr Bourne as having been appointed a director of all three companies as at 24th May. On discovering these matters Mrs Pinfield (who by now had discovered the true source of the funding, a bank statement having "fallen out" of Mr Eagles' suitcase in her kitchen) retaliated by filing forms changing the registered office back to her address, and notices of Mr Eagles' resignation as director.

28.

Mr Bourne then on 16th June wrote to Mrs Pinfield and to Mr Allsopp, introducing himself as a director of each of the companies and as having a majority shareholding, proposing a meeting, and, a further surreal touch, signing himself as "Past Mayor of the London Borough of Lambeth 1999-2000".

29.

At about the same time further documents were filed at Companies house purporting to record resolutions dated 6th February 2004 of each of the companies to change their memorandums and articles.

30.

The claim as brought by Mrs Pinfield essentially confined itself to seeking declaratory relief as to the invalidity of the steps recorded as having happened on 6th February 2004, as to the invalidity of the appointment of Mr Eagles as a director of WG on 1st March 2004, and the invalidity of his appointment as a director of all three companies on 24th May 2004. She sought orders which would restore the position to what she claimed that it should be, namely that she alone was the director of each of the companies, that each of the companies had an issued share capital of £51 held as to 50 shares by herself and 1 by Mr Dwyer, alternatively that the remaining 49 shares should be issued and that thereafter the shares should be held 50:50 between herself and Mr Eagles. The essence of the defence to these claims was that Mrs Pinfield had no locus to bring the claim since she had never been a shareholder in any of the companies, and to the extent that she had allotted shares to herself she had done so in breach of duty as a director. The claim was brought by a Part 8 Claim form. The matter came before District Judge Bird on 22nd January 2005, when Mr Eagles' counsel was expecting that the proceedings would be directed to continue as if begun by Part 7 Claim, and that he would be given leave to file a defence and Part 20 claim. The District Judge was, however, persuaded by Mrs Pinfield's solicitor that "the basic question is whether the Claimant is entitled to 50% of the business. Her case is that she is, the defendants' case is that she is not. There are numerous subsidiary issues, particularly about the validity of certain documents at Companies House." He was also told that there was urgency to have the basic question decided because of pressure from the regulator and the banks and that there was no need for any disclosure beyond the documents already produced by the parties in the course of the Part 8 evidence. He gave permission for a defence and part 20 claim to be filed, but directed that the Part 20 claim need not be pleaded to. This trial is the upshot.

31.

The somewhat unfortunate result is that the parties' rival contentions as to the true beneficial ownership of the share capital of each of the companies (disregarding the shenanigans in 2004) have never been subjected to the disciplines of a formal pleading. There are also several areas where a disclosure process might well have turned up documents which would have thrown light on the question I now have to determine (and would have prevented the parties in evidence from having asserted the existence of such documentation: Mr Eagles, for example, said that there were letters from the Bank of Scotland which showed that, although he was a party to the mortgage account, Yvonne alone was regarded as liable in respect of it. He also referred to a hospital report in relation to the alleged stabbing incident). It was also unfortunate for Mr Jefferies, who appeared for Mrs Pinfield, that he seems not to have been told by his solicitors that the trial was intended to be focussed on the underlying issue rather than on the technical company law issues to which the Part 8 Claim had been confined. The skeleton arguments initially exchanged by counsel prior to the trial were therefore addressed to quite different issues.

32.

Mrs Pinfield's case on the underlying issue was that it had been agreed between her and Mr Eagles at the outset that they were embarking on the venture as equal partners. Her primary case was, therefore, based on an express contract. Her alternative case, necessary if the express contract was for one reason or another not made out, was that she was entitled to an interest in the companies under a constructive trust and/or on the basis of a proprietary estoppel in accordance with the principles expounded in Chadwick LJ's recent (and illuminating) judgment in Oxley v Hiscock [2004] EWCA Civ 546. Had her case been pleaded out I cannot help but think that other lines of attack might have been mounted and other causes of action pleaded: in particular there seems to me to be no doubt that Mrs Pinfield was the victim of a sustained campaign of deception by Mr Eagles, having been inveigled by him into giving up her own independent business and having thrown herself into the venture of running a business with Mr Eagles on the false representation that the new business was being financed by loans from Mr Eagles' mother whereas in fact it was being financed by money provided by his ex-"wife" whom she hated and who was herself being promised a controlling equity interest by Mr Eagles.

33.

At one point in her written evidence Mrs Pinfield suggested that the essence of the agreement between herself and Mr Eagles was that they were to contribute equally, her contribution consisting of her agreement to work in the business and to contribute £175,000 and his consisting of the procuring of a loan to the companies of the £450,000 or so required. However, this places too much emphasis on the shape which the financing arrangements took at one particular point in the progress of the proposals, namely June 2002. Her real case is, however, that there was, from the outset an agreement that they would go into the venture as equal partners, the understanding being that they would raise what they could from commercial finance, that Mr Eagles would raise the balance, that she would if necessary put in up to £175,000, and that she would work in the business as the "responsible person".

34.

Up to August 2002 the actions taken by the couple together were consistent with such a shared understanding. They jointly explored what houses were for sale and, having identified them, jointly explored the available sources of commercial finance. The facility negotiated with NatWest initially required both to act as guarantors (see paragraph 7 above). They were already 50:50 shareholders in Adencourt Ltd, although that company appears to have been a mere shell, albeit used as a conduit for money extracted from Mr Eagles' pension scheme, and used to pay (and therefore re-claim VAT on) professional fees incurred.

35.

All these features corroborate Mrs Pinfield's version of the agreement. Mr Eagles' maintained, however, that she had never been told by him that she was to be an equal shareholder in the business to be acquired, that the incentive for her to be involved was to gain experience in a sector in which she might invest on her account in the future, and that, in any case, he saw no long term future in their relationship and therefore would never have encouraged her to believe that she was to have any equity interest. Mr Eagles conceded in cross-examination that he had never expressly told her that she was not going to have an interest, but asserted that he had never told her that she was going to have one. Mr Eagles was not an impressive witness. He is plainly not an honest man. He admits to having deceived Mrs Pinfield over the source of the funding of the balance of the purchase price; and there are the several untruths already referred to in his proposal for an IVA. Nevertheless, I think it unlikely, at least after April 2002, that he would have said anything to her to encourage a belief that she was going to be entitled to a direct shareholding. The very deception on which he was engaged required him to hold the shares and to do so as agent or manager for "the family".

36.

Furthermore, I do not think that Mrs Pinfield believed by December 2002 that any shares in the company were going to be issued directly to her. The picture presented to her in August 2002 had been that the shares would be held "via a family trust," and in December 2002 that the shares were to be held by Mr Eagles' mother who had executed a precautionary share transfer in blank (which would be held by Mr Eagles). At one point in her evidence Mrs Pinfield said that the suggestion had been made that she herself should be the nominee shareholder with an undated signed transfer. If she had ever been intended to be a direct shareholder on her own account, there was no reason for her not to be made one. The only factor inhibiting the issue of shares was the need to hide Mr Eagles' shareholding from his creditors. This suggests at the very least that the size of any beneficial interest she was to have cannot have been the subject of an express agreement by the time the homes were actually purchased in January 2003.

37.

I do not therefore accept Mrs Pinfield's case that there was at that date a still operative agreement between them that the companies would be owned in equal shares. I accept, however, that she held the genuine belief that she was to be entitled to some interest in the fortunes of the companies beyond merely acting as a salaried working director for as long as Mr Eagles, or whoever was his proxy as the registered shareholder, chose to allow her to remain as such, and I accept that Mr Eagles had said nothing to discourage that belief but that, knowing that she held it, had encouraged her to throw herself into the business (giving up in the process her own modest business).

38.

On those findings, it is possible on the principles expounded in Oxley v. Hiscock, to infer an agreement giving rise to a constructive trust in Mrs Pinfield's favour or to hold that an equity has arisen in her favour under the principles of proprietary estoppel. It was not suggested by Mr Heap on behalf of Mr Eagles that, given appropriate findings of fact, those principles were not potentially applicable because the case involved a joint commercial enterprise rather than the purchase of a residence for joint use.

39.

The question then is how the equity should be satisfied, or, to adopt and adapt Chadwick LJ's language in paragraph 73 of Oxley v. Hiscock:

"What would be a fair share for each party having regard to the whole course of dealing between them in relation to the [companies]?"

My answer to that question is arrived at by looking at the contributions made by each of them to the initial financing. I think they should be treated as having contributed equally to the procurement of the commercial finance (£1,436,000). The balance of approximately £415,000 was procured by the efforts of Mr Eagles alone. On that basis Mr Eagles can be treated as having contributed 61% and Mrs Pinfield 39%. Those are the proportions in which I would declare that the parties are respectively entitled to share in the net equity of the companies.

40.

That approach assumes that the monies advanced by Yvonne are a liability of the companies rather than a liability of Mr Eagles personally. I do not know how, if at all, this is currently reflected in the accounts (if there are any) of any of the companies, and (if so reflected) of which company.

41.

I should also add that, so far as the corporate structure is concerned, it appears to have been the common intention that the shares in WG1 and WG2 should each have been held by WG, so that the real battle has been over how the share capital in WG should be shared. This may not now matter.

42.

Finally I should deal shortly with the particular issues raised by the Part 8 claim, and with the question of the validity of the allotment of 50 shares to Mrs Pinfield. So far as the former is concerned, Mr Heap did not actively seek to defend the validity of any of the steps recorded in paragraphs 26, 27, 28 and 29 of this judgment. Mr Bourne chose not to make any representations to the court. Mrs Pinfield is entitled to the relief sought in respect of those matters. I am not, however, satisfied that she is entitled to a declaration that Mr Eagles' appointment as a director of WG at the meeting held on 14th April 2004 was invalid. At that date the issued share capital of the company was held as to 50 shares by her and as to 1 share by Mr Dwyer as nominee for Mr Eagles. The intention of all those present at the meeting was that Mr Eagles should be appointed as a director of WG. That appointment could not be back-dated but was otherwise valid.

43.

So far as concerns Mrs Pinfield's allotments to herself of 50 shares, I have no doubt that these should be set aside. They were made for a purpose foreign to the interests of the companies, without the consent of the only registered shareholder, and were not authorised by any contract or agreement she had with Mr Eagles.

Pinfield v Eagles & Anor

[2005] EWHC 577 (Ch)

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