Burry & Knight Ltd v Knight

The appeal concerned the operation of the Companies Act 2006 no‑access provision (section 117(3)) which permits a court to direct a company not to comply with a request for inspection or a copy of its register of members if the court is satisfied the request is not made for a "proper purpose". The Registrar found that the appellant member had mixed purposes: a proper purpose (raising the share valuation question) and improper purposes (resurrecting stale allegations about directors and harassing fellow shareholders). The Registrar made a no‑access order on terms that the companies circulate a limited letter from the appellant to shareholders and also ordered indemnity costs against the appellant.

The Court of Appeal held that: (1) a "proper purpose" should be given its ordinary meaning and, in the case of members, will generally relate to their interests as members and/or the exercise of shareholder rights; (2) where multiple purposes exist one improper purpose will defeat the request unless the court is satisfied the improper purpose is de minimis; (3) it remains open to the court to make an order on terms (a Pelling‑type order) enabling a company to act as postbox or to circulate a limited communication so as to permit the proper purpose while preventing misuse of member details; and (4) the Registrar was entitled to find on the documentary material that, apart from the valuation question, the appellant's aims were improper because the allegations were stale, unsubstantiated and pursued intermittently over many years, indicating a purpose to harass. However the Court allowed the appeal in relation to indemnity costs: the appellant's conduct after withdrawing his request did not reach the high threshold of unreasonableness required for an award of costs on an indemnity basis.

This was an appeal from an order of Mr Registrar Baister (Companies Court, Chancery Division) in proceedings where a shareholder (Dr Martin Knight) sought copies of the registers of members of two family companies. The companies applied under section 117(3) of the Companies Act 2006 for directions relieving them from the obligation to comply on the ground that the requests were not made for a proper purpose.

Background and parties:

• The respondents are two family companies (Burry & Knight Ltd and Hoburne) whose shareholdings are held by two families. The appellant is a minority shareholder and a former director who had, over many years, made allegations about historic directors' remuneration and alleged undeclared benefits in kind.
• The appellant made a written request under section 116 identifying multiple purposes: to study current shareholdings, to write to shareholders about past conduct of directors, and to raise concerns about the companies' articles as to share valuation on transfer.

Procedural posture and relief sought: The companies applied to the court under section 117 for an order that they need not comply with the requests. The Registrar directed non‑compliance on terms that the companies would consider and, if appropriate, circulate a narrowly drafted letter from the appellant about the share valuation issue; the Registrar also ordered that the companies need not comply with similar future requests by the appellant and awarded the companies' costs on an indemnity basis. The appellant appealed.

Issues framed:

1. What is the correct approach to "proper purpose" under section 117(3)?
2. How should the court treat multiple purposes, some proper and some improper?
3. Whether a court may make an order on terms (a Pelling‑type order) to allow communication for a proper purpose while preventing misuse of the register?
4. Whether indemnity costs were appropriately awarded.

Court’s reasoning and conclusions:

• The court explained the statutory context: sections 113–120 CA 2006 and the policy aim of protecting shareholders from misuse of register information while preserving corporate transparency. The onus on a company seeking relief under section 117(3) is to satisfy the court on the balance of probabilities that the request is not for a proper purpose.
• "Proper purpose" carries its ordinary meaning and should generally relate to the interests of the person as a member or the exercise of shareholder rights. The court should act sparingly where members seek access to contact other shareholders, because of the importance of shareholder democracy.
• Where multiple purposes exist, one improper purpose (unless de minimis) will require a no‑access direction. The court retained the ability to make conditional orders that enable the proper purpose to be achieved while preventing misuse of the register. The Pelling solution — company acting as postbox or circulating a vetted communication — remains available under the 2006 Act.
• Applying those principles to the documents, the Registrar was entitled to conclude (and the Court of Appeal agreed) that, except for the share valuation issue, the appellant's stated purposes were tainted: the allegations were stale, unsubstantiated in the available material, pursued intermittently over many years, and the appellant had offered no fresh evidence. The Registrar therefore properly directed non‑compliance subject to undertakings enabling the valuation point to be communicated.
• On costs, the Court of Appeal held indemnity costs require conduct that is unreasonable to a high degree. Given the manner in which the parties dealt with settlement and the appellant's attempt to withdraw the request, the Registrar erred in awarding indemnity costs. The appeal was therefore allowed in part: the no‑access order on terms was upheld but the indemnity costs order was set aside.

Wider context: This was the Court of Appeal’s first detailed consideration of section 117(3) CA 2006. The judgment emphasises the balance between protecting shareholder privacy from improper use and maintaining shareholder democracy, confirms the evidential onus on companies, and preserves the utility of Pelling‑type orders as a practical mechanism to reconcile mixed purposes.

Appeal allowed in part. The Court upheld the Registrar’s no‑access order under section 117(3) CA 2006 (subject to undertakings permitting the companies to circulate a limited letter on the share valuation issue and to refuse similar improper requests under section 117(4)) because, on the documentary material and on the balance of probabilities, the appellant’s purposes (other than the valuation point) were improper or aimed at harassing fellow shareholders. The Court allowed the appeal against the award of indemnity costs because the appellant’s post‑withdrawal conduct did not meet the high threshold for indemnity costs.

Appeal from the High Court of Justice, Chancery Division, Companies Court (Mr Registrar Baister) CH20130184; judgment appealed to the Court of Appeal (Civil Division), neutral citation [2014] EWCA Civ 604.