Simon Philip Webster & Anor v ESMS Global Limited & Ors

Where the Companies Act 2006 confers an express private right on members of a private company to require circulation of written resolutions, the criminal sanction for default does not ordinarily exclude civil enforcement.

The court may grant declaratory and injunctive relief where the statutory right is sufficiently precise, is directed to a limited class, and direct enforcement causes no public inconvenience or conflict with the statutory policy. The statutory remedy must be construed as a whole. A criminal penalty directed against defaulting officers may protect the public interest without being the exclusive means of vindicating members’ private rights.

The claimants, who together held 47.6% of the shares in ESMS Global Ltd, requested circulation under sections 292 and 293 of the Companies Act 2006 of written resolutions proposing the appointment of an independent director. The company did not circulate them after opposition from the other shareholder-directors.

The defendants ultimately conceded that the company was obliged to circulate the resolutions, but maintained that the court had no jurisdiction to grant a declaration, injunction or ancillary order compelling compliance. The central issue was whether the statutory rights created by sections 292 and 293 were privately enforceable despite the criminal sanction for default.

1. Jurisdiction. The court had jurisdiction to grant the relief sought. The general principle that a statutory obligation enforced in a specified manner cannot be enforced otherwise was an aid to statutory construction, not an inflexible rule. The question depended on the language, purpose and context of the legislation.
2. Sections 292 and 293 created rights vested in a limited class of company members and exercisable against the company. Those rights formed part of the proprietary rights associated with membership. The statutory provisions therefore did more than impose a public duty which incidentally benefited members.
3. The criminal sanctions against officers did not impliedly exclude civil enforcement. They protected the public interest, were directed against officers rather than the company, and did not necessarily secure circulation of the resolutions. Section 295, which permitted an application to remove the obligation where the rights were abused, did not indicate that the court lacked power to require compliance.
4. The authorities concerning statutory remedies, including Doe v Bridges, Wolverhampton New Waterworks Co v Hawkesford, Cutler v Wandsworth Stadium Ltd, Lonrho Ltd v Shell Petroleum Co Ltd (No 2), R v Deputy Governor of Parkhurst Prison, ex parte Hague and X (Minors) v Bedfordshire CC, confirmed that the issue was one of statutory construction. The present provisions fell within the exception for legislation protecting a limited class and conferring private rights.
5. The claimants had satisfied the statutory requirements, had deposited a reasonably sufficient sum for circulation expenses, and the proposed resolutions were not defamatory, frivolous or vexatious. The court granted the declaration and an injunction under section 37(1) of the Senior Courts Act 1981. It also had jurisdiction to authorise Mr Webster to circulate the resolutions if the company failed to comply. The parties were invited to agree the form of order.

First-instance decision. No appellate history was stated in the judgment.