Schofield v Schofield & Ors

Under the Duomatic principle, corporate formalities may be dispensed with only where every shareholder entitled to attend and vote gives unqualified assent to the matter. Assent may be express or implied, contemporaneous or subsequent, but it must be objectively discernible. Attendance, voting or silence does not establish assent where the shareholder maintains an objection to the validity of the meeting or participates only conditionally. Equivocal later conduct cannot validate an improperly convened meeting. Accordingly, a purported meeting held without the required notice is ineffective unless unanimous assent to treat it as valid is objectively proved.

The appellant claimed declarations that he was the sole director of Avenue Road Developments Ltd and that his son, Lee Schofield, had been removed as a director. He asserted that a meeting on 2 October 2009 was an effective extraordinary general meeting, notwithstanding short notice, because both shareholders had assented under the Duomatic principle.

Mr Recorder Chandler in the Norwich County Court dismissed the claim on 8 February 2010. He held that the meeting had not been properly convened and that Lee had not agreed to shorter notice. The appeal concerned whether Lee’s attendance, votes and later conduct amounted to assent sufficient to validate the meeting despite the notice requirements of the Companies Act 2006.

1. Appeal dismissed. Etherton LJ, with whom Thomas and Maurice Kay LJJ agreed, held that the meeting of 2 October 2009 did not validly remove Lee as director or appoint the appellant in his place.

2. The authorities on the Duomatic principle, including Re Duomatic Ltd [1969] 2 Ch 365, establish that all shareholders entitled to attend and vote must agree to treat the relevant matter as valid and effective. The agreement may be express or inferred from conduct, and may arise at the time or later. It must, however, be objectively established and unqualified. A shareholder’s unexpressed state of mind is insufficient.

3. Lee had never given unqualified assent. He attended while maintaining objections both to the appellant’s authority to act for the majority shareholder and to the lack of notice. He presented documents raising those objections, sought answers to them, and participated only on the basis that, if the meeting were valid despite his objections, he would vote. His proposal to adjourn and his votes on the resolutions did not amount to agreement that the meeting was valid.

4. The appellant’s reliance on the later AGM minutes also failed. They referred to a disputed appointment on the date forms were sent to Companies House, not an acceptance of the 2 October resolutions. They expressly made the position dependent on legal enquiries into the appellant’s authority. The required unanimous assent was therefore absent, and the claim for declaratory and injunctive relief remained dismissed.

• Court of Appeal (Civil Division) The appeal was dismissed in [2011] EWCA Civ 154.

• Norwich County Court On 8 February 2010, Mr Recorder Chandler dismissed the appellant’s claim for declarations concerning the company’s directorship and ordered him to pay 80 per cent of Lee Schofield’s costs.