Kaye v Oxford House (Wimbledon) Management Co Ltd

The court held that once a directors' requisitioned general meeting under sections 301–306 of the Companies Act 2006 has been duly called, the directors have no continuing power under section 303(5) to prevent properly notified resolutions being put to the members at that meeting. A chairman does not have a unilateral power to close or dissolve a duly convened meeting so as to prevent the members voting on business for which the meeting was called; doing so is outside the chairman's authority unless the meeting itself consents or the chairman properly adjourns with the meeting's consent or under a narrow common‑law power to secure fair voting. The judge distinguished and rejected reliance on an Australian authority (Corpique) and held that the chairman's reliance on an opinion limited to whether requisitioned resolutions might be "vexatious" under section 303(5) did not justify shutting down the meeting. The court further held that non‑compliance with Regulation 76(b) of Table A (notice/consent requirements for new director nominations) had been waived by the members' longstanding practice (Duomatic principle), so the appointments made at the continued meeting on 1 June 2019 were effective.

Background and parties: The company is the freehold management company for a block of 18 flats. Two shareholders (the Claimants) challenged events at a general meeting triggered by shareholders' requisition to remove and appoint directors. The dispute arose following litigation between the company and a director (Mr Drake) about a patio (the "Patio Litigation"). The claim was a Part 8 claim seeking declarations and orders under the Companies Act 2006 concerning the validity of the general meeting of 1 June 2019, the removal of certain directors (the 2nd to 4th Defendants) and the appointment of others.

Relief sought (i): declarations that the removals and appointments effected following the continued meeting on 1 June 2019 were valid and consequential orders (the Claimants also sought, in the alternative, an order under section 306 CA 2006 to call a meeting if no valid board existed).

Issues framed by the court (ii):

• whether directors retain any power after calling a requisitioned meeting under section 303(5) to prevent proposed resolutions being put at that meeting;
• whether the chairman lawfully closed the meeting so as to prevent the members voting;
• whether advice from counsel that certain resolutions might be "vexatious" under section 303(5) justified the chairman's conduct;
• whether non‑compliance with Regulation 76(b) of Table A invalidated the appointments, and if so whether the Duomatic principle cured that defect;
• whether the purported discontinuance in the Patio Litigation signed by a party claiming to act for the company was effective pending resolution of who were the valid directors.

Court's reasoning (iii): The judge explained that section 303(5) is a limited pre‑meeting safeguard allowing directors not to call a meeting if a proposed resolution is ineffective, defamatory or frivolous/vexatious, but once the meeting has been duly called the decision whether to put properly convened resolutions rests with the members. The chairman's proper functions are to preserve order and ascertain the sense of the meeting; he has no power to dissolve or close a meeting improperly. Authorities such as National Bank v Sykes and Arcus v Castle were treated as supporting the proposition that members may continue a meeting and appoint a new chairman if a chairman wrongly attempts to stop it. The Australian decision Corpique was considered inconsistent with English authorities and rejected. The written counsel opinion relied on by Mr Drake addressed only whether resolutions might be "vexatious" under section 303(5) and was based on limited and potentially misleading instructions; it did not provide a lawful basis for truncating the meeting. The court also held that Regulation 76(b) (Table A) had not been complied with historically but that the membership had effectively waived strict compliance so that the Duomatic principle validated the appointments. Because of those conclusions the court declared that the 2nd–4th Defendants were removed and six named persons were validly appointed as directors.

Subsidiary findings: the judge observed that Mr Drake's conduct was at least neglectful in failing to disclose material facts when obtaining counsel's opinion and that even if counsel advice had been erroneous it would not necessarily validate the chairman closing a meeting; he also commented that the meaning of "vexatious" in s.303(5) must be construed from the company's standpoint and is a narrow exception.

At first instance the court held that the 2nd to 4th Defendants were validly removed at the continued meeting on 1 June 2019 and that the six persons voted in at that meeting (Mr Cochrane, Mrs Corscadden, Ms Davasaz, Mr Kaye, Mr Pickering and Mr Shephard) were validly appointed as directors. The rationale was that once a requisitioned meeting has been duly called under sections 301–304 Companies Act 2006, the directors have no continuing power to prevent properly notified resolutions being put; the chairman acted beyond his authority in purporting to close the meeting; the counsel opinion relied on did not justify that conduct; and any procedural defect under Regulation 76(b) was cured by members' prior acquiescence (Duomatic principle). Declarations to that effect were to be made.