Schofield v Schofield

The Court of Appeal considered whether a meeting held on 2 October 2009 could be treated as an effective general meeting of Avenue Road Developments Limited despite the absence of the 14 days' notice required by the Companies Act 2006. The appellant relied on the Duomatic principle (Re Duomatic Ltd) and related authorities to argue that the other shareholder's presence and conduct at the meeting amounted to agreement or acquiescence to shorter notice.

The court held that the appellant failed to show the necessary objective, unqualified agreement by the remaining shareholder. The attendance of the shareholder was conditional and in the context of competing evidence (including a letter from a Reggiesco director/secretary and correspondence from the company's secretary) which raised the validity of the meeting and the appellant's authority to act for the majority shareholder. The Duomatic principle requires objectively ascertainable assent by all those entitled to vote; mere presence or conditional participation did not suffice. The appeal was dismissed.

This was an appeal from an order of Mr Recorder Chandler dismissing the appellant's claim for declarations that he was the sole director of Avenue Road Developments Limited and that his son, Lee, had been removed as director. The proceedings concerned a meeting of 2 October 2009 held at the appellant's solicitors' offices which the appellant said was an extraordinary general meeting convened on behalf of Reggiesco Ltd (the 99.9 per cent shareholder) that validly removed Lee and appointed the appellant as director despite not having the 14 days' statutory notice.

Parties and procedural posture:

• The appellant: Neil David Schofield; he claimed to act for Reggiesco Ltd at the meeting.
• Respondents: Lee Neil Schofield (son), Avenue Road Development Limited and the administrator of Avenue Road Development Ltd.
• First instance: Norwich County Court (Mr Recorder Chandler) dismissed the claim on 8 February 2010. The appellant appealed to the Court of Appeal and permission was given on a single ground relating to application of the Duomatic principle and acquiescence.

Issues:

• Whether the 2 October meeting was validly convened despite non-compliance with the 14 day notice requirement under the Companies Act 2006 (notably sections 305 and 307) by reason of the shareholder's agreement or acquiescence (the Duomatic principle).
• Whether the conduct of Lee at the meeting objectively amounted to assent to treat the meeting and its resolutions as valid.

Reasoning and subsidiary findings:

• The court restated the Duomatic principle and authorities (including Re Duomatic Ltd, Re Home Treat Ltd, Monecor, Re Express Engineering Works Ltd and Rolfe v Rolfe) and emphasised that the principle requires unqualified, objectively ascertainable assent by all who are entitled to attend and vote.
• The court examined the factual background, including correspondence indicating that the appellant might not have authority to act for Reggiesco (a letter from Ms Garry) and a letter from the company secretary (Firefox) asserting inadequate notice and support for Lee. Those documents were placed before the meeting and formed part of the context in which Lee participated.
• Lee's conduct at the meeting — proposing adjournment, voting and later pressing questions based on the correspondence — was found to be conditional and intended to preserve objections to the meeting. His participation did not objectively amount to acquiescence or unqualified consent to treat the meeting as valid.
• The Court of Appeal concluded that the appellant had not established the necessary objective agreement under the Duomatic principle and that the Recorder was entitled to find the meeting had not been properly convened; accordingly the resolutions were ineffective.

Relief sought: declarations of sole directorship and removal of Lee as director, and an injunction ancillary to the declaration. The court dismissed the appeal and the declarations and injunction were not granted.

The court briefly noted the evidential context (a recording and its transcription admitted on appeal) and the limited scope of permission to appeal.

Appeal dismissed. The Court of Appeal held that the appellant had not established the objective, unqualified agreement or acquiescence by the other shareholder required by the Duomatic principle or by CA 2006 to treat a meeting convened without the requisite notice as valid. The other shareholder's attendance and votes were conditional and aimed at preserving objections; there was therefore no effective removal or appointment of directors.

Appeal from Norwich County Court (Mr Recorder Chandler) where the claimant's claim was dismissed on 8 February 2010 and the claimant ordered to pay 80% of the defendant's costs; permission to appeal to the Court of Appeal was granted and the Court of Appeal dismissed the appeal in the judgment reported [2011] EWCA Civ 154.