Houldsworth Village Management Company Ltd v Barton

Under sections 116 and 117 of the Companies Act 2006, a request to inspect a register of members is for a proper purpose where a member seeks, in good faith, to communicate with fellow members about how the company is run or to obtain support for a general meeting. The inquiry is objective and fact-sensitive. A member’s purpose is not improper merely because it also concerns rights held in another capacity, such as leaseholder rights, or because another legal route is available. In a management company whose object is to manage a building, the appointment or removal of managing agents may concern the company’s affairs and corporate governance. No-access orders should be made sparingly, and only where the company proves on the balance of probabilities that the purpose is improper.

The appellant was a leaseholder-owned management company for an apartment complex. The respondent, a member and long leaseholder, requested inspection of the register of members so that he could seek a general meeting to remove the directors and managing agent.

The company applied under section 117 of the Companies Act 2006 for a direction that it need not comply. HHJ Hodge QC dismissed the application and directed compliance: [2019] EWHC 3590 (Ch). The appeal concerned whether the respondent’s purpose was improper because it related partly to his rights as leaseholder rather than solely to corporate governance.

Appeal dismissed. Lord Justice Floyd delivered the judgment, with which Lady Justice Asplin and Lord Justice Coulson agreed.

1. The proper-purpose inquiry under sections 116 and 117 of the Companies Act 2006 is objective and depends on the evidence and the particular facts and circumstances. The court identifies the purpose, normally from the request but not exclusively from it, and decides whether it is proper. The company bears the burden of proving impropriety. The approach in In re Burry & Knight Ltd and Burberry Group plc v Fox-Davies did not impose a rigid requirement that a member must act only in the capacity of member.
2. A member who seeks to communicate with fellow members in good faith to challenge the way the company is being run, or to obtain support for requisitioning a general meeting, will normally have a proper purpose. The discretion to make a no-access order should be exercised sparingly because preventing communication may weaken corporate governance.
3. The rights of a leaseholder and the rights of a company member are legally distinct, as explained in Morshead Mansions Ltd v Di Marco [2008] EWCA Civ 1371. They are not mutually exclusive. A person may choose which available right to exercise to achieve a legitimate objective, absent abuse.
4. For a management company whose relevant constitutional purpose is the management of a building, a complaint about the appointment of managing agents concerns the company’s objects and the way it is run. It therefore falls within the overlap between leaseholder rights and shareholder rights. Seeking support for a general meeting at which managing agents could be removed was a proper purpose, even if another remedy existed under the lease or landlord and tenant legislation.
5. HHJ Kramer’s reasoning in Pandongate House Management Co Ltd v Barton [2019] L & TR 23, treating the member’s capacity as determinative, was erroneous. The outcome in that case was nevertheless supported by a separate finding that the request was intended to disrupt or harass.

The first-instance order requiring immediate compliance was upheld.

1. Court of Appeal (Civil Division) dismissed the appeal and upheld the order requiring immediate compliance.
2. High Court of Justice, Business and Property Courts in Manchester, Companies Court (ChD) dismissed the company’s section 117 application and directed compliance: [2019] EWHC 3590 (Ch).