Houldsworth Village Management Company Ltd v Barton

The claim concerned a request under section 116 of the Companies Act 2006 to inspect the register of members of a lessee-owned management company for a block of flats. The court applied the established "proper purpose" test as explained in Re Burry & Knight Ltd v Knight and related authorities and held that the company bears the burden of proving, on the balance of probabilities, that the request is for an improper purpose.

On the facts the defendant's stated purpose — to contact fellow members to seek a general meeting and propose resolutions to remove and replace the board of directors and the managing agent — was, on its face, a proper purpose. The claimant did not discharge the burden of showing an ulterior improper purpose. The court accepted an undertaking limiting use of the register to the stated purpose and dismissed the claimant's application, directing compliance under section 117(5).

Background and parties: The claimant is a lessee-owned management company responsible for managing Victoria Mill, a development of 180 flats. The defendant is the registered leaseholder of apartment 93 and thus a member of the claimant company. On 3 May 2019 the defendant requested to inspect the company's register of members under section 116 Companies Act 2006 stating that the purpose was to contact fellow members to seek a general meeting and propose resolutions to remove and replace the directors and the managing agent.

Nature of the claim/application: The claimant applied under section 117 seeking a declaration that the defendant did not have a proper purpose for the inspection and that the request should be refused.

Procedural posture and evidence: The claim was a Part 8 claim heard on written evidence only. The claimant relied on witness statements including evidence of prior conduct of the defendant and relied on an earlier judgment in a different case (Pandongate) in which the defendant's motives had been disbelieved. The defendant filed evidence explaining his conduct and advanced the stated purpose in his request.

Issues framed by the court: (i) What is the proper purpose of the request? (ii) Has the claimant discharged the burden of proving on the balance of probabilities that the request is improper? (iii) Whether, on these facts, seeking to contact members to effect change of directors or managing agents is within the scope of a proper purpose.

Court's legal framework and reasoning: The court applied the guidance in Re Burry & Knight Ltd v Knight and Burberry Group plc v Fox-Davies concerning the meaning and application of "proper purpose" under sections 116 and 117, noting the strong statutory presumption favouring shareholder access and that the company must satisfy the court that the request is improper. The judge emphasised that the court should exercise the discretion to deny access sparingly and not substitute its commercial judgment for that of shareholders.

On the facts the court found that, given the company's objects (which include acquiring, holding and managing the property) and the constitutional arrangements vesting appointment of managing agents in the board, it was a proper purpose for a member to seek to inspect the register to convene a general meeting with a view to changing the board so the reconstituted board could review the appointment or terms of the managing agent. The claimant's attempt to rely on prior adverse findings against the defendant in a different case was distinguishable because the evidence and explanations in the present case differed and there had been no cross-examination. The claimant failed to show an ulterior purpose of harassment or disruption. An undertaking by the defendant limiting use of the register to the stated purpose was accepted.

Result: The claimant's application was dismissed and, pursuant to section 117(5) Companies Act 2006, the company was required to comply with the defendant's request immediately.

The claimant's application under section 117 was dismissed. The court held that the defendant had a proper purpose — to contact members to seek a general meeting and propose resolutions to remove and replace the directors and the managing agent — and that the claimant had not discharged the burden of proving on the balance of probabilities that the request was improper. An undertaking limiting use of the register was accepted and the claimant must comply under section 117(5).