Oxford Legal Group Ltd v Sibbasbridge Services Plc & Anor

A director’s right to inspect a company’s books and accounting records arises at common law from the office of director. It exists to enable the director to discharge duties to the company and is exercised for the company’s benefit. The court will ordinarily assume that purpose, but may refuse relief where there is clear or substantial evidence that inspection is sought to injure the company or for an improper purpose. Section 222 of the Companies Act 1985 does not itself create a civil right enforceable by court order. A claim pleaded by reference to that section may nevertheless proceed where its facts disclose the common-law right. In a dispute involving overlapping parties and issues, inspection proceedings may properly be transferred to the Companies Court and heard with related proceedings.

The claimant, a corporate director of Sibbasbridge Services Plc, sought summary judgment for an order permitting inspection of the company’s accounting records. It relied on section 222 of the Companies Act 1985 and the common-law right of a director to inspect company books.

The defendants alleged that the claimant was acting as the nominee and instrument of another participant in ongoing Companies Court proceedings concerning the company’s ownership, management and alleged financial impropriety. They sought strike-out, transfer or a stay. The central issues were whether the claimant had an enforceable right to inspection, whether its purpose was improper, and how the proceedings should be managed alongside the petition.

1. The application for summary judgment was refused. The claim was transferred to the Companies Court to be heard together with the related petition.

2. Following Conway v Petronius Clothing Co [1978] 1 WLR 72, the right of a director to inspect the company’s books is a common-law right arising from the office of director. Its purpose is to enable the director to perform duties owed to the company and to benefit the company. It is personal only in the sense that the director may invoke it to discharge personal and statutory obligations.

3. The court will generally assume that a director seeks inspection for the company’s benefit and will not ordinarily require reasons. The court may nevertheless refuse to assist where the evidence clearly or substantially shows that the right is being used to injure the company or for an improper purpose. The question is fact-sensitive.

4. Section 222 of the Companies Act 1985 imposes obligations concerning the keeping and inspection of accounting records but does not confer a civil right enforceable by court process. The claimant’s reference to that section was therefore formally deficient, but its pleaded facts sufficiently disclosed a claim based on the common-law right.

5. The documents sought extended beyond accounting records, but the defendants understood the categories requested. That defect was also formal and did not justify disposing of the applications.

6. The evidence raised a serious and substantial case that the claimant’s real purpose was to obtain material assisting the other participant in the petition, rather than to discharge its duties to the company. Relevant documents had already been sought in the petition, and the same allegations of impropriety appeared in both proceedings. Summary judgment was therefore inappropriate.

7. Strike-out was also inappropriate because further evidence might be required and could require cross-examination. Given the common parties and issues, transfer to the Companies Court was the appropriate case-management order.

This was a first-instance decision of the High Court (Chancery Division). The judgment does not state any appellate history for the present claim.