Houldsworth Village Management Company Ltd v Barton

Under sections 116 and 117 of the Companies Act 2006, a member’s purpose in seeking the register of members is assessed objectively on the evidence. The company bears the burden of proving that the purpose is improper. The court should exercise the power to deny access sparingly, and should not refuse access merely because the information may be of limited value or because the request concerns the member’s own interests.

For a leasehold management company, contacting members to seek a general meeting and resolutions to remove or replace directors and the managing agent may constitute a proper purpose. Access may be refused or controlled by appropriate terms or an undertaking concerning use of the information.

The claimant was a lessee-owned management company for a residential apartment complex. The defendant, a member by virtue of his leasehold ownership, requested inspection of the company’s register of members under section 116 of the Companies Act 2006. He stated that he wished to contact fellow members to seek a general meeting and propose resolutions to remove and replace the directors and managing agent.

The company applied under section 117 for a declaration that the purpose was improper. It relied in part on an earlier decision concerning the defendant’s similar request in another management-company dispute. The central issues were whether the stated purpose was proper and whether the evidence established an ulterior purpose of harassment or disruption.

1. Application dismissed. The claimant had not discharged the burden under section 117 of proving on the balance of probabilities that the defendant’s request was for an improper purpose. The company was required to comply immediately under section 117(5) of the Companies Act 2006.
2. The court applied the principles identified in Re Burry and Knight Ltd v Knight [2014] EWCA Civ 604. The purpose must first be identified, normally from the request but having regard to all the evidence. Its propriety is then assessed objectively. The company bears the burden of proof. The court should not make a no-access order where it remains in doubt.
3. The statutory scheme reflects a strong presumption in favour of shareholder democracy, corporate transparency and good governance. A member is ordinarily entitled to assess whether communication with fellow members will be valuable. The court should therefore exercise its power to prevent access sparingly and with circumspection.
4. In the circumstances of a company whose business was the management of a block of flats, it was a proper purpose to contact members with a view to seeking a general meeting and resolutions to remove and replace the directors and managing agent. A change in the board could properly be intended to enable the reconstituted board to review the managing agent’s appointment and terms.
5. The distinction between membership rights and leaseholder rights discussed in Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371 did not govern this case. That decision concerned different provisions and a different context. It did not disqualify a leaseholder-member from exercising statutory membership rights where the purpose was proper.
6. The earlier decision in Pandongate House Management Company Ltd v Barton was of little assistance because the evidence, stated purpose and explanations differed. The court had to decide the present case on the evidence before it.
7. Following the approach in Re Burry and Knight Ltd v Knight, the court accepted an undertaking that the register would be used only to contact members for the stated purpose. That undertaking reinforced the conclusion that the request was genuine and provided an appropriate safeguard.