Sir Henry Royce Memorial Foundation v Hardy

The claimant applied under section 117 of the Companies Act 2006 for an order that the company refuse a request made under section 116 for inspection or a copy of the register of members. The court held that the defendant’s request was invalid and, in any event, was not made for a proper purpose. The judge exercised his discretion on costs: the claimant, as the successful party, was awarded costs against the defendant. Because the defendant’s conduct was found to be well out of the norm (excessive and intemperate correspondence, attempt to adduce large amounts of irrelevant material, and unsupported allegations of serious wrongdoing), the court ordered costs on the indemnity basis. The court declined a summary assessment of the whole claimed figure and directed a detailed assessment instead, but ordered a payment on account of 60% of the claimed costs to be paid within 14 days. Permission to appeal was refused.

This was a first instance hearing of a claim under section 117 of the Companies Act 2006 brought by the Sir Henry Royce Memorial Foundation seeking a court direction in relation to a request under section 116 for inspection or a copy of the members register. The defendant appeared in person and challenged the claimant on the validity of the notice and asserted various purported purposes for inspection, including alleged misconduct by directors.

Procedural posture: the claim was heard on 19 January 2021; a draft judgment was circulated and the final judgment handed down on 1 April 2021. Consequential matters (principally costs and permission to appeal) were dealt with on written submissions after circulation of the draft.

Issues framed:

• Whether the section 116 request was valid;
• Whether the request was made for a proper purpose;
• Who should bear costs and on what basis (standard or indemnity);
• Whether costs should be summarily assessed or subject to detailed assessment, and whether a payment on account should be ordered; and
• Whether permission to appeal should be granted.

Court’s reasoning and conclusions: The judge concluded that the request under section 116 was invalid and, additionally, that it was not made for a proper purpose. On costs, the general rule that the unsuccessful party pays applied. The judge treated section 117(3) as conferring an express power to make a non-party costs order but held it added nothing substantive to the ordinary costs regime. Applying authority on indemnity costs, the judge found that the defendant’s conduct took the case out of the norm: voluminous and disproportionate correspondence, use of intemperate and offensive language, attempts to adduce large amounts of irrelevant evidence, and unsupported allegations of criminality. The fact that third-party donations had been made to cover the claimant’s costs did not violate the indemnity principle and did not preclude a costs order in favour of the claimant. The judge refused a global summary assessment of the substantial costs claimed, ordered detailed assessment, but directed a payment on account equal to 60% of the claimed costs. Finally, permission to appeal was refused because the proposed grounds lacked a real prospect of success and there was no other compelling reason to hear an appeal.

The claimant succeeded: the court held the section 116 request was invalid and not made for a proper purpose, directed that the company need not comply, and ordered that the defendant pay the claimant’s costs. The judge ordered costs on the indemnity basis because the defendant’s conduct was well out of the norm, directed a detailed assessment of costs but ordered a payment on account of 60% of the claimed costs, and refused permission to appeal.