High Court rectifies company register from scratch in Palmer v P1 Pit Stop dispute

The High Court has ordered the rectification of P1 Pit Stop Limited's register of members under section 125 of the Companies Act 2006, in a judgement that clarifies the court's power to construct a register from scratch where a company has never maintained one at all.

Deputy Insolvency and Companies Court Judge Parfitt heard the claim brought by John Palmer and Magna Secretaries Limited against the company, its director Howard Forland, his wife Elaina Forland, and his stepson Myles Beerman. The dispute centred on which parties were entitled to be registered as shareholders, following years of inconsistent and mathematically erroneous filings at Companies House.

Two preliminary jurisdictional questions arose before the substantive dispute could be resolved. The first was whether section 125 permits a court to create a register where one has never existed, rather than merely correcting an existing document. Relying on Vinelott J's decision in Re Data Express Ltd, where the court approved a replacement register after the original had been destroyed, the judge held that no meaningful distinction exists between recreating a destroyed register and creating one from scratch, and that the statutory power extends to both scenarios.

The second concerned the court's ability to resolve disputed questions of fact within rectification proceedings. Judge Parfitt navigated a line of authority beginning with the Court of Appeal's more flexible approach in Re Hoicrest Ltd, through the Privy Council's narrower reading in Nilon Limited v Royal Westminster Investments, to the Privy Council's later confirmation in Chen v Ng that active case management could still resolve the underlying dispute where all relevant parties had joined the litigation. Hoicrest remained binding authority, the judge noted, whatever the persuasive force of the contrary Privy Council view.

Turning to the facts, the judgement traced a chaotic history of Companies House filings containing conflicting share capital figures, mathematical errors, and unexplained shareholder movements since the company's incorporation in 2014. The parties agreed that, as of November 2015, Palmer and Forland each held 250 shares following the departure of an original third shareholder, Russell Marmon.

The central dispute concerned Magna Secretaries Limited, which was recorded as holding 500 shares from 2016 onwards. Palmer claimed Magna held these shares on trust for him alone, giving him effective control of the company. The judge rejected this, finding no contemporaneous documentary evidence supported the trust claim, and that contemporaneous emails from Palmer himself, including messages sent in May 2020, described the company as held equally between him and Forland. The judge ultimately concluded that no valid allotment of shares to Magna had ever occurred, as the shares had been earmarked for prospective investors who never provided their promised funding.

The judgement also examined transfers recorded in a 2018 confirmation statement, which Forland said reduced Palmer's holding to protect his identity from banking disclosure requirements, with the surplus held on trust for Palmer. The judge found no valid instrument of transfer existed and that legal title to Palmer's original shares had never passed.

Declining to make findings on the wider falling out between the parties, including a disputed property transaction referred to in the judgement as the "Gainsborough transaction", the judge held that no mechanism in company law permitted the expropriation of a shareholder's stock for alleged wrongdoing. The register was ordered rectified to restore equal 250-share holdings between Palmer and Forland, with Elaina Forland retaining her 50 shares, and consequential matters, including costs, to be determined following further written submissions.