Randhawa & Anor v Turpin & Anor

The Duomatic principle may validate corporate acts informally approved or acquiesced in by the persons entitled to exercise the company’s voting rights. Shareholders may waive formal requirements in the articles, including quorum requirements, and may authorise a sole director to exercise the board’s powers. Where a registered shareholder or corporate member cannot vote because it has ceased to exist, the beneficial owner’s consent may be sufficient. Separately, estoppel, acquiescence and laches are assessed broadly by asking whether it would be unconscionable to permit a party to assert the right relied upon. A party cannot ordinarily reserve a point and deploy it later to obtain a second opportunity to challenge relief or orders made on an inconsistent basis.

The applicants were judgment creditors of Robert Williams and had acquired legal title to 75 per cent of the shares in BW Estates Ltd. The company had entered administration following an appointment made by its sole de jure director, David Williams, although the articles required two directors for a quorum.

In earlier proceedings, Judge Cooke had proceeded on the basis that the administrators were validly appointed and had directed assessment of their remuneration. The applicants subsequently sought a declaration that the appointment was invalid, relying on the inquorate board meeting. The central issues were whether shareholder acquiescence had varied or waived the articles under the Duomatic principle, and whether the applicants were barred by issue estoppel, abuse of process, estoppel, laches or acquiescence.

1. Application dismissed. The administrators’ appointment was valid and, in any event, the applicants were barred from obtaining the declaratory relief sought.
2. The articles required two directors for a board meeting, and a disqualified director could not count towards that quorum. However, the shareholders’ consistent conduct from 2009 onwards amounted to informal sanction of the sole director exercising the board’s powers. That conduct operated as an informal amendment to or variation of the articles.
3. Under the Duomatic principle, unanimous informal consent by the relevant voting members may bind the company and waive corporate formalities. The principle is flexible. The members need not identify the capacity in which they act, and consent may be given on separate occasions. A non-existent registered shareholder could not vote its shares. The consent of the 75 per cent shareholder was therefore sufficient; alternatively, the beneficial owner’s acquiescence and the conduct of those interested in the shares established the necessary consent.
4. The reasoning in Re Bailey, Hay & Co Limited [1971] 1 WLR 1357 supported treating deliberate abstention and subsequent conduct as acquiescence. The applicants’ predecessors as shareholders and creditors had brought about or accepted the relevant state of affairs, and the applicants could claim in no better position than those predecessors.
5. Following Re Loftus (Deceased) [2007] 1 WLR 191, the modern inquiry into estoppel, acquiescence and laches is broad: whether, in all the circumstances, it would be unconscionable to permit the assertion of the right. It would be unconscionable here, particularly after the applicants had pursued earlier proceedings on the footing that the appointments were valid and obtained directions and costs orders on that basis.
6. The attempt to raise the validity point in later proceedings also constituted, at minimum, an abuse of process and gave rise to serious issue-estoppel difficulties. The applicants were seeking a second opportunity to challenge the administration through a different route.

The judgment describes earlier proceedings before Judge Cooke concerning the administrators’ appointment and remuneration. The order following the March 2015 judgment was under appeal, while the earlier order of 21 May 2014 was not. No citation for either decision is stated.