Houldsworth Village Management Co Ltd v Barton [2020] EWCA Civ 980

Mr Barton, a leaseholder and member of a management company, requested to inspect the register of members to contact fellow members about removing directors and the managing agent. The company sought a direction not to comply. The Court of Appeal held the request was for a proper purpose, as challenging management fell within both his shareholder and leaseholder rights.

Facts

Mr Barton owned a long lease of an apartment in Victoria Mill, Reddish, Stockport, and was a member of Houldsworth Village Management Company Limited, the leaseholder-owned management company. On 3 May 2019, Mr Barton made a request under section 116 of the Companies Act 2006 to inspect the register of members, stating his purpose was to contact fellow members to seek a general meeting to remove the current directors and managing agent.

Houldsworth applied to the court under section 117 for a direction that it need not comply, arguing the request was not made for a ‘proper purpose’. The company contended that Mr Barton’s concerns related to his capacity as a leaseholder rather than as a member, and that matters concerning the managing agent were lease-related rather than corporate governance matters.

Issues

Primary Issue

Whether Mr Barton’s stated purpose of contacting members to remove directors and the managing agent constituted a ‘proper purpose’ under section 117 of the Companies Act 2006.

Secondary Issue

Whether there should be a distinction between a member’s rights as shareholder and rights as leaseholder when determining proper purpose for register inspection.

Judgment

The Court of Appeal dismissed the appeal, upholding HHJ Hodge QC’s decision that Houldsworth must comply with Mr Barton’s request.

Lord Justice Floyd, delivering the leading judgment, rejected the argument that corporate governance should be given a narrow meaning in the context of management companies:

“a shareholder who is seeking to communicate with other shareholders in order to make a challenge in good faith to the way the company is being run, should normally be regarded as having a proper purpose.”

The Court found it impossible to draw a sharp dividing line between lease covenants and company affairs:

“Houldsworth’s sole relevant purpose under its constitution was the management of Victoria Mill. So, a complaint which relates to the appointment of agents to carry out the day-to-day management of Victoria Mill is central to the objects of the company and to the way in which the company is run.”

Floyd LJ noted that when asked whether a general meeting could properly pass a resolution for removal of managing agents, counsel for Houldsworth accepted it could. Therefore:

“it seems to me to be difficult if not impossible to suggest that Mr Barton has an improper purpose in seeking to obtain support for such a meeting at which such a resolution could be passed, whatever his rights may be under the terms of his lease or under the landlord and tenant legislation.”

Implications

This judgment clarifies the scope of ‘proper purpose’ under section 117 of the Companies Act 2006, particularly for management companies. Key implications include:

• The fact that two sets of rights (shareholder and leaseholder) are distinct does not mean their content is mutually exclusive
• Members may choose which capacity to exercise their rights, and having alternative remedies does not render one route improper
• Corporate governance in management companies encompasses monitoring directors’ activities and the way the company fulfils its constitutional objects
• The Court criticised the narrower approach taken in Pandongate House Management Co Ltd v Barton, finding that Judge Kramer had erroneously treated a rigid ‘member as member’ requirement

The decision reinforces shareholder democracy principles, confirming that requests to requisition meetings challenging management decisions will generally be for proper purposes absent unusual circumstances.

Verdict: Appeal dismissed. The Court of Appeal upheld the order directing Houldsworth Village Management Company Limited to comply immediately with Mr Barton’s request to inspect the register of members under section 117(5) of the Companies Act 2006.

Source: Houldsworth Village Management Co Ltd v Barton [2020] EWCA Civ 980