Chong & Ors v Alexander

Articles of association are construed as contractual documents, read in their statutory and commercial context. Where articles provide that all members shall be directors, the provision may confer an entitlement to appointment rather than merely a qualification for office. A shareholder cannot transfer company shares contrary to the articles or without an effective transfer instrument. An agreement among original shareholders concerning the distribution of ground rents may bind them personally, but does not bind the company or successors without the necessary consent. The agreement does not extend to lease-extension premia where its written record refers only to ground rents. A quorum provision requiring two persons entitled to vote is not satisfied by one member attending together with proxies appointed by that same member.

The claim concerned disputes between long leaseholders of flats in Willow Court and the freehold company. The claimants sought orders concerning the transfer and registration of shares, appointment as company directors, and access to the register of members. The defendant counterclaimed for declarations concerning an alleged acquisition agreement, beneficial rights to ground rents and lease-extension premia, and the validity of resolutions passed at a company meeting.

The share-transfer and register issues had largely become costs disputes. The appointment issue was resolved during trial when the defendant accepted the construction of the articles advanced by the claimants. The court also determined the alleged acquisition agreement and whether the February 2014 meeting was quorate.

1. The court construed the articles in accordance with ordinary contractual principles. Article 6 required shares associated with a flat to pass to the new owner. Article 8 and Article 11 were to be read consistently with that purpose. The defendant therefore had no lawful basis to register the former flat 5 shares in her own name.

2. The stock transfer form relied on by the claimants related to one share rather than ten and had not been sent to the defendant or company at the material time. It could not support the pleaded mandatory order. The claimants also lacked standing to seek that relief on behalf of the absent transferee. The transfer-of-shares issue was therefore resolved without the claimed order.

3. Article 15 meant that, subject to the maximum of seven directors and any legal disqualification, all company members were entitled to be directors. It created an entitlement, not merely eligibility. The defendant accepted relief on that basis. Each side was ordered to bear its own costs of the appointment issue because the claim had been substantially and unnecessarily widened by defective pleading.

4. The original shareholders had agreed that the defendant should receive ground rents payable by non-participating leaseholders in return for her enhanced contribution to acquiring the freehold. That agreement operated as a personal obligation between its parties. It did not bind the company, successors, or incoming shareholders without the necessary consent. The company structure and the interests of third parties prevented the imposition of the claimed constructive trust over company property.

5. The claim to lease-extension premia failed. The contemporaneous written record referred only to ground rents, and the evidence did not establish a later agreement giving the defendant those premia. The counterclaim was therefore not granted in the form sought.

6. Regulation 40 of Table A required two persons attending the meeting, each being a member or a proxy for a member. One member could not create a quorum by attending personally while also appointing proxies in respect of other shares. The February 2014 meeting was consequently inquorate. The costs of the counterclaim were left for further submissions.

First-instance decision in the High Court (Chancery Division). The judgment records no appeal from an earlier decision.