Houldsworth Village Management Co Ltd v Barton

This appeal concerns the right under section 116 of the Companies Act 2006 to inspect the current register of members and the scope of the court's power under section 117 to refuse inspection where the request is not for a "proper purpose". The Court of Appeal held that a member’s stated intention to contact fellow members to obtain support for a general meeting to remove directors and replace the managing agent was, on the facts, a proper purpose. The court rejected a narrow test that would confine "corporate governance" to administrative matters and exclude matters that relate to the company's objects where the company's object is the management of a building. The claimant management company did not discharge the burden of proving an improper purpose and the appeal was dismissed.

Background and parties:

• The respondent, Mr Barton, is a leaseholder and member of Houldsworth, the leaseholder-owned management company for Victoria Mill. Houldsworth manages the building by means of a managing agent appointed by its board.
• On 3 May 2019 Mr Barton requested, under section 116 Companies Act 2006, inspection of the current register of members, stating that he wished to contact fellow members to seek a general meeting and propose resolutions to remove and replace the existing directors and the managing agent.

Procedural posture and relief sought:

• Houldsworth applied under section 117 for a court direction that it need not comply with the request on the ground that the stated purpose was not a proper purpose. HHJ Hodge QC accepted an undertaking from Mr Barton limiting his use of the register to the stated purpose but directed Houldsworth to comply with the request immediately; execution of that direction was stayed to enable an appeal to the Court of Appeal. Permission to appeal to the Court of Appeal was granted by Newey LJ.

Issues framed:

1. Whether the stated purpose of contacting members to requisition a general meeting for the removal of directors and the replacement of the managing agent was a "proper purpose" within the meaning of section 117.
2. Whether there is a principled distinction such that matters concerned with enforcement of lease covenants or managing-agent appointments fall outside "corporate governance" and therefore cannot be proper subjects for inspection under section 116.
3. Whether evidence of the applicant’s past conduct established an ulterior improper purpose (this ground was not pursued on appeal).

Court's reasoning and decision:

• The court reviewed the authorities on the proper-purpose test, including In re Burry & Knight Ltd and Burberry Group plc v Fox-Davies, and reiterated that the inquiry is fact-sensitive, objective, and that the burden is on the company to prove on the balance of probabilities that the request is improper.
• The Court of Appeal rejected the submission that appointment or removal of managing agents necessarily lies outside corporate governance in the context of a management company whose constitution has as its primary object the management and administration of the building. Where the company's objects centrally concern management of the premises, the appointment and removal of managing agents are matters concerning the affairs of the company which are legitimately raised at a general meeting.
• The court concluded that the judge had been entitled to find that Mr Barton’s stated purpose was proper and that Houldsworth had not discharged its burden to show an improper ulterior purpose. The appeal was dismissed.

Wider implications:

• The judgment emphasises a pragmatic, fact-specific approach to the proper-purpose test and warns against a rigid compartmentalisation between leaseholder remedies and company governance where the company’s objects overlap with the management of the property.

Appeal dismissed. The Court of Appeal upheld the judge's conclusion that the respondent's stated purpose — to contact fellow members to seek support for a general meeting to remove directors and replace the managing agent — was a proper purpose under section 117 of the Companies Act 2006. The court rejected a narrow division between leaseholder rights and corporate governance where the company's objects are management of the building and held that the company had not discharged the burden of proving an improper purpose.

First instance: Companies Court (ChD), HHJ Hodge QC, [2019] EWHC 3590 (Ch) — judge directed the company to comply with the section 116 request but granted a stay to permit appeal. Permission to appeal to the Court of Appeal was granted by Newey LJ on 17 February 2020. Appeal heard in the Court of Appeal resulting in judgment [2020] EWCA Civ 980 (this judgment). Pandongate decision (HHJ Kramer) and the refusal of permission to appeal in that case by Rose LJ were considered in the reasoning of the court.