Cadbury Schweppes Plc & Anor v Halifax Share Dealing Ltd & Anor [2006] EWHC 1184 (Ch) (23 May 2006)

Cadbury Schweppes Plc & Anor v Halifax Share Dealing Ltd & Anor [2006] EWHC 1184 (Ch) (23 May 2006)

The stockbrokers are entitled to rely on the estoppel arising from the companies' own share certificates issued to fraudsters, which the stockbrokers relied upon to their detriment. The estoppel precludes the companies from asserting the falsity of their certificates in seeking indemnity from the stockbrokers. The implied indemnity is not defeated in principle, but in these circumstances, the estoppel operates as a defence, preventing recovery by the companies against the stockbrokers for the costs of reinstatement and lost dividends.

Citation
[2006] EWHC 1184 (Ch)
Parties
Claimant: Cadbury Schweppes plc; Claimant: Unilever plc; Defendant and Part 20 Claimant: Halifax Share Dealing Ltd; Part 20 Defendant: Lloyds TSB Bank plc
Jurisdiction
England and Wales
Judgment Date
23 May 2006
Procedural Posture
Commercial Chancery / Trial on Agreed Facts and Application for Strike Out/summary Judgment
Outcome
Claim dismissed against Halifax Share Dealing Ltd; Part 20 claim struck out; summary judgment granted for Lloyds TSB Bank plc.
Legal Topics
Implied Indemnity, Estoppel by Representation, Share Certificates, Fraudulent Transfers, Shareholder Reinstatement
Company Law Commercial Law Equity Implied Indemnity Estoppel by Representation Share Certificates Fraudulent Transfers Shareholder Reinstatement

Case Brief

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Parties

Cadbury Schweppes plc

Claimant

Unilever plc

Claimant

Halifax Share Dealing Ltd

Defendant and Part 20 Claimant

Lloyds TSB Bank plc

Part 20 Defendant

Procedural Posture

Commercial Chancery / Trial on Agreed Facts and Application for Strike Out/summary Judgment

Legal Issues

  1. 1 Whether stockbrokers are obliged to indemnify companies for losses caused by fraudulent share transfers
  2. 2 Whether companies are estopped from denying the truth of their own share certificates issued to fraudsters
  3. 3 Interaction between implied indemnity and estoppel in share transfer fraud cases

Ratio Decidendi

The stockbrokers are entitled to rely on the estoppel arising from the companies' own share certificates issued to fraudsters, which the stockbrokers relied upon to their detriment. The estoppel precludes the companies from asserting the falsity of their certificates in seeking indemnity from the stockbrokers. The implied indemnity is not defeated in principle, but in these circumstances, the estoppel operates as a defence, preventing recovery by the companies against the stockbrokers for the costs of reinstatement and lost dividends.

Court Disposition

Claim dismissed against Halifax Share Dealing Ltd; Part 20 claim struck out; summary judgment granted for Lloyds TSB Bank plc.

Orders

  • The companies' claim for indemnity against Halifax Share Dealing Ltd is dismissed.
  • The Part 20 claim by Halifax Share Dealing Ltd against Lloyds TSB Bank plc is struck out.