Dear Matt,

 

I agree with Neil, especially his last point  – I don’t think this is primarily a case about property but about obligations. The issue arises from the original agreement / decision to issue shares of a different type, and either (in fact) the shares that were issued were of the correct type or they were not.

 

If they were not, the individual has the wrong shares and the question is whether she can enforce  the contractual (or company law) obligation to issue the correct shares – this may well be barred by limitation but depends on the nature and detail of the obligation, and possible arguments on mistake etc.

 

If the correct ‘A’ shares were issued, or are treated as having been issued based on the obligation to do so (eg the company is estopped or the obligation is still capable of specific performance), the share certificates are irrelevant as they are liable to be corrected, the individual is a shareholder of ‘A’ shares and can exercise the rights as such even if they have not done so previously. They are entitled to call for ‘A’ share certificates to regularise the position. I also agree that waiver is limited here is she has only just realised the true position. She may or may not have a claim for failure to have these shares previously but she is entitled now to have the correct position recognised and applied for the future.

 

In any case, her claim is in substance about the obligations of the company, breach of contract, maybe breach of fiduciary duty in a strong case, any negligence or misrepresentation, etc. I agree with Neil that there could be conversion of the physical share certificates but it is not those that have caused the problem (different if eg someone steals them and uses them to impersonate her) but the mistake made by the company officers in the rights which the shareholder should have had and been able to exercise.

 

Hope that assists

 

Best

David

 

 

 

David Hoffman

Barrister at law, MA, BCL, FCIArb

CEDR accredited mediator

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18 St John Street Chambers Manchester M3 4EA DX: 728854 MANCHESTER 4

www.18sjs.com   Tel: 0161 278 1800 Fax: 0161 278 8220

 

 

 

 

 

 

 

Dear Matt;

As Bill’s most recent says, your question raises the question of whether there can be conversion of intangibles. I am guessing share certificates might be treated like cheques and be regarded as having the face value of the underlying rights, and hence subject to a conversion action. But your example does not as I read it involve any dealing with the paper share certificates? The “right to vote” attached to a share seems to be an example of an intangible item of personal property, and certainly under current Australian law (and as I recall in the UK following OBG v Allen) there cannot be a conversion action in relation to intangibles. So at that point one needs to ask, what limitation period applies to such intangible personal property? To be more precise, if someone denies you a right to vote which you should be able to exercise, what cause of action do you have? Is it a simple claim for specific performance of a contract? In which case it seems that a 6 year limitation period based on the contract action should apply.

But others may know more about shares than I do!

Regards

Neil

 

 

 

 

Hi Matt,

 

I have always understood AP to be a combination of two distinct rules:

 

1. The squatter acquires a relative title to the land by taking possession, and this happens immediately (i.e. not after 10/12 years);
2. If sufficient time passes, then the ‘paper owner’s’ title is destroyed, leaving the squatter’s title as the ‘best’ title.

 

I’m not sure how this could be translated to shares. In your example you would have to say that the person who mistakenly believed that they had the A shares had acquired a ‘relative title’ to them when they took possession of the shares. Can you have relative titles to shares? I’m not aware of any case that says you can, but I may be wrong.

 

Best

Simon

 

 

 

Dear Colleagues:

 

I hope you don’t mind this request for a bit of research help.

 

I`m in the midst of a piece on adverse possession, and one area that I`m beginning to explore is the question of whether one can have adverse possession of intangibles --- specifically the right to vote as a shareholder.

 

I`ve stumbled across a situation where a shareholder turned in shares of stock to the company in accordance with a reorganisation.  She was to get “A” shares, which has a right to vote.  Instead, the company issued her a certificate that said she had “B” shares, which were non-voting.   Another party had been given a certificate showing more A shares than he was entitled.  There was some confusion as to how shares were to be allocated. 

 

So, for more than 20 years, she showed up at shareholder meetings and did not vote.  She was repeatedly told she was a “B Shareholder”.  She accepted that.  As a result, someone else essentially voted her shares.

 

I know there is some controversy over whether copyright can be subject to adverse possession, but my question is whether a shareholder’s voting rights can be as well.  I take the position that

 

1. She is an A shareholder regardless of the certificate issued to her, as ownership of shares is different than ownership of a certificate. 
2. Assuming that is the case, then it seems the question is whether she can be divested of the rights of ownership simply because she did not exercise them.
3. I am skeptical of a waiver argument, if waiver is defined as the relinquishment of a known right.  She relied on the company, which had a duty to give her accurate information and it failed.  How can she waive a right which she is constantly told she does not have?
4. So, I think the claim has to be that somehow the voting rights can adversely possessed. 
5. If that is true, then the issue must be one of notice and hostility.  Is there a hostile use when the owner is being told that she does not, in fact, have ownership?

 

Oh, and by the way, the guy voting her shares was the president of the company.

 

Any ideas or suggestions would be greatly appreciated.

 

Best

Matt Harrington