England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR REGISTRAR BUCKLEY

		Royal Courts of Justice Strand, London, WC2A 2LL Wednesday 1st August, 2001

LORD JUSTICE MUMMERY:

1. This is the judgment of the court to which all members of the court have contributed.
2. The appeal is by Dr Michael Pelling against the decision of Mr Registrar Buckley on 5 April 2001. The Registrar dismissed Dr Pelling's application under section 356 (6) of the Companies Act 1985 (the 1985 Act) for an order against Families Need Fathers Limited (the Company), a company limited by guarantee and registered as a charity. Dr Pelling sought an order directing that a copy of part of the register of members be sent to Dr Pelling in accordance with a requirement made by him on the Company in a letter of 13 March 2001.
3. Under section 356 (3) "Any member of the company or other person may require a copy of the register, or of any part of it, on payment of such fee as may be prescribed; and the company shall cause any copy so required by a person to be sent to him within 10 days beginning with the day next following that on which the requirement is received by the company." By subsection (5), if the requirement is refused or a copy so required is not sent within the proper period, the company and every officer of it who is in default is liable in respect of each offence to a fine. Subsection (6) provides that "In the case of such refusal or default , the court may by order compel an immediate inspection of the register and index , or direct that the copies required be sent to the persons requiring them."
4. There is no transcript of the Registrar's judgment, but, according to a note approved by him, he gave these reasons for his decision:-

"I have a discretion under Section 356 (6) of the Companies Act 1985 whether or not to make an order requiring disclosure of the Register of Members.

Having read the evidence and submissions of the Trustee for Families Need Fathers Ltd, I consider this is a case in which it is not appropriate to require disclosure of the Register.

Accordingly I refuse the order sought by the claimant."

5. The Registrar granted permission to appeal.
6. On the appeal the court was supplied with written submissions by each side. It heard oral argument from Dr Pelling, who acts in person, and from Mr Colin Hale, the Vice Chairman of the Company and an elected Trustee on its National Council, who was granted permission by the court to represent the Company at the hearing. The court did not have the benefit of legal argument from counsel on the construction of the 1985 Act. Fortunately the Court of Appeal has at its disposal research resources in the form of the Judicial Assistants Scheme. This facility is particularly valuable in cases such as this where the parties have not supplied, or been able to supply, to the court all the legal materials necessary for the determination of the appeal. Research has revealed, first, that provisions based on those contained in section 356(6) of the 1985 Act have been enacted with local variations in various Commonwealth jurisdictions, such as Australia, New Zealand and Canada and, secondly, that a very similar question came before the Supreme Court of Victoria two years ago in the case of O'Brien v. Sporting Shooters Association of Australia [1999] 3VR 251. The wording of the equivalent statutory provision (section 1303 of the Australian Corporations Law) was in almost the same terms as section 356(6). The case concerned a company limited by guarantee, which was required by law to keep a register of members showing their names and addresses. Three members, who were candidates for election to the executive council of the association, sought a court order to enforce their statutory rights to obtain a copy of the register, so that they could canvass members of the association for their votes at the forthcoming annual meeting. One of the grounds relied on by the association for opposing the order was that it was concerned to protect the confidentiality of the identity of the members, who were for the most part people who possessed guns which they kept at home. The association also challenged the bona fides of the applicant members, contending that the order was not sought for their professed purpose. Byrne J concluded that he had a discretion to make an order. He also held that, on the facts of that particular case, he was satisfied that the applicants sought the information for a legitimate purpose and that there was no ground either to doubt their bona fides or to exercise his discretion adversely to them. We shall return to his ruling on the discretion issue later in this judgment. The court and the parties are indebted to the Judicial Assistant (Mr Richard Clegg) for his research.

Background Facts

7. The Company , described as "the Charity", is incorporated for the following objects:

"(i) For the relief of parents and their children and other close family members suffering from the consequences of divorce or separation by providing advice, assistance and other support and, in so doing, helping parents stay in touch with their children after divorce or separation;

(ii) To further the emotional development of children whose parents have divorced or separated by encouraging shared parenting arrangements which enable such children to have continuing and meaningful relationships with both their parents;

(iii) To conduct study and research into problems concerned with children who are deprived of the presence of a parent in their families, and into the problems concerned with establishing good relations between parents living apart from their children, and to publish the useful results of all such study and research in order to encourage appropriate changes in professional and public opinion;

(iv) To relieve poor parents by helping to obtain and promoting the provision of free legal advice, assistance and other free legal services which such parents would be unable to obtain by reason of their lack of means. "

8. Clause 7 of the Memorandum of Association provides that

" Every member of the Charity undertakes to contribute such amount as may be required (not exceeding £10) to the Charity's assets if it should be wound up while he or she is a member or within 1 year after he or she ceases to be a member, for payment of the Charity's debts and liabilities contracted before he or she ceases to be a member, and of the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves."

9. Article 2 of the Articles of Association provides that

" (1) The subscribers to the memorandum and such other persons or organisations as are admitted to membership in accordance with the rules made under Article 61 shall be members of the Charity. No person shall be admitted a member of the Charity unless his application for membership is approved by the trustees."

10. The articles provide for the holding of general meetings of which members are entitled to be given notice and at which they are entitled to attend and vote. Article 61 provides that

"(1) The trustees may from time to time make such rules or bye laws as they may deem necessary or expedient or convenient for the proper conduct and management of the Charity and for the purposes of prescribing classes of and conditions of membership, and in particular but without prejudice to the generality of the foregoing, they may by such rules or bye laws regulate:

(i) The admission and classification of members of the Charity (including the admission of organisations to membership) and the rights and privileges of such members, and the conditions of membership and the terms on which members may resign or have their membership terminated and the entrance fees, subscriptions and other fees or payments to be made by members…… "

11. It does not appear from the evidence or from what the court was told by Mr Hale that any rules or bye laws have been made under Article 61. The evidence does, however, indicate that there are about 3,000 members of the Company, yielding a subscription income, according to the accounts for the year ending 31 December 1999, of £58,455. It also appears that there are 12 Trustees and Directors of the Company.
12. Dr Pelling became a member of the Company in 1990. As a result of recent disagreements the Company purported to suspend him from membership as from 22 February 2001 and to terminate his membership with effect from 24 April 2001. Dr Pelling informed the court that he has instituted proceedings in the Chancery Division challenging the validity of the steps taken against him. On 16 July 2001 Hart J declared that the purported suspension and termination were unlawful and void. Dr Pelling, along with some other members of the Company, takes the view that the Company is not well served by the present directors. At about the beginning of March 2001 the "FNF Reform Group" came into being. Dr Pelling is the secretary of that group. Its aim is to replace the existing Board of Directors at the Annual General Meeting of the Company, which was originally to be held on Sunday 20 May 2001, but has now been postponed to Sunday 23 September 2001.
13. The nature of the present dispute between Dr Pelling and the Company is evident from the correspondence immediately preceding the issue of Dr Pelling's application under Section 356(6) on 26 March 2001. On 13 March Dr Pelling wrote to the company at its registered office making an application under Section 356(3) of the 1985 Act for, and requiring a copy of, that part of the register of Members consisting of the entries of persons who were both currently members as at 13 March 2001 and had been continuously members since 31 December 1999. He enclosed a cheque for £37.50 to cover the prescribed fee if the number of such entries did not exceed 2,100 and an additional cheque for £15, if the number was more than 2,100 but not more than 3,100. His letter set out the provisions of the subsection under which he made application.
14. Mr Hale replied on behalf of the Company on 23 March asserting that the members of the Charity were not registered as members of the Company, that the 1985 Act was not relevant to his request and that, as a long standing and experienced member, he, Dr Pelling, would readily understand that the membership list was confidential and that he was therefore unable to comply with the request. The two cheques were returned.

The Rival Submissions

15. Before this court Dr Pelling's initial stance was that the Registrar had no discretion to refuse an application for an order under section 356(6), whether made by a member or other person, in a case in which a company had refused or was in default of complying with a requirement made under section 356(3). He submitted that he had a clear and incontestable legal right to be supplied with what he required in his letter of 13 March ; that his reasons for making that requirement were irrelevant to his right to make and enforce it; that the Registrar had had no option but to make the order sought in his application; and that the Registrar had erred in law in holding that he had a discretion in the matter.
16. In support of these submissions Dr Pelling cited Davies –v- Gas Light and Coke Co [1909] 1 Ch 248, a decision of Warrington J on the construction of the Companies Clauses Consolidation Act 1845, which did not include a provision in the terms of section 356(6) or any equivalent provision. (That procedure for enforcing the right to inspection was not introduced until section 32 of the Companies Act 1862.) Under the 1845 Act only a member of the company could require a copy of the register and the enforcement of that right was by way of ordinary action and not under a specially prescribed statutory procedure .It was in that context that Warrington J granted mandamus against the company, holding that the member's right to inspect the register was incidental to his private right of property as a holder of shares in the company, that the court had "no title to inquire into the motives of the person who seeks to enforce that private right," and that the court had no option but to grant him relief enforcing the right. The decision was affirmed on appeal : [1909] 1 Ch 708.
17. Dr Pelling also contended that the court's jurisdiction under section 356(6) could not be discretionary because the preceding subsection made the refusal or default of the company a criminal offence. This feature of the statutory scheme, he submitted, underlined the mandatory quality of the court's jurisdiction.
18. Although Dr Pelling stated in his written argument that he was not going to argue that, if there was a discretion, it should have been exercised in his favour, he submitted at the hearing that, if he was wrong in his absolutist construction, the Registrar's exercise of his discretion was reviewable in this court, because he had erred in principle in failing to give effect to the unqualified legal right conferred on him by section 356(3).
19. On behalf of the Company Mr Hale challenged the contention that the Registrar had no discretion to refuse to make an order. He pointed to the use of "may " in section 356(6), in contrast to the use of "shall" in subsection (3) and other parts of section 356, indicating that Parliament was fully aware of the difference between a mandatory requirement and a discretionary power.
20. He argued that the Registrar was entitled, in all the circumstances, to refuse to exercise his discretion in Dr Pelling's favour. He focused on the factors highlighted in his evidence to the Registrar, as amplified in further documents submitted on the appeal. Mr Hale explained that since 1993 he had been responsible for the development and registration of the Company's database and the functioning of the London office of the Company. He emphasised that the members join the Company at a time of great personal stress, seeking the help of the confidential service offered by the Company to its members. It was implicit in the sensitive nature of the Company's work and the confidentiality of the service provided to the members that it would be obnoxious to them for their names and addresses to be available to other members or to the world at large on demand. He said that membership details had never been released before and, if ordered now, would cause serious difficulties in the work of the Company, putting the continuing existence of that work at risk. Dr Pelling did not challenge this evidence, save to inform the court of his reason for wanting the names and addresses of the members, to which we will refer in paragraph 22 (iii). He continued to insist on the unqualified proprietary nature of his legal right and the irrelevance of the discretionary factors relied on by Mr Hale. Echoing the words of Lord Coke he warned the court against substituting the crooked cord of discretion for the golden metwand of the law.
21. Mr Hale added that compliance with an order of the kind sought by Dr Pelling would involve a potential breach of provisions of the Data Protection Act 1984. He also contended that, if section 356(6) had the mandatory effect contended for Dr Pelling, that would be incompatible with the provisions of Article 8 of the European Convention on Human Rights and that, if the court accepted Dr Pelling's construction, it should make a declaration of incompatibility under section 4 of the Human Rights Act 1998. Mr Hale also raised for the first time on the appeal the possibility of an order granting to officers of the Company relief under section 727 of the 1985 Act in respect of any breach of duty by them. It was pointed out to him that this court only had jurisdiction to hear appeals and that it would be necessary for the officers of the Company to issue an application, supported by evidence, in the Companies Court.

Issues on the Appeal

22. In the light of the rival submissions, the following questions arise for decision on this appeal.

i) Did the Registrar have a discretion under section 356(6)? This is a question of the true construction of the provision.

ii) If the Registrar did have a discretion, is this court entitled to interfere with his refusal to exercise it? In limited circumstances the Court of Appeal is entitled to interfere with the exercise of a judicial discretion. It has to be shown that the lower court has erred in principle in the approach to the exercise of the discretion, or has left out of account a factor which should have been taken into account, or has taken into account a factor which ought not to have been taken into account, or that the decision is plainly wrong and could only have been the result of a failure to balance the relevant factors fairly in the scale. See AEI Rediffusion Music Ltd –v- PPL [1999] 1 WLR 1507 at 1523 B-C.

iii) If this court holds that the Registrar erred in refusing to exercise the discretion, should this court exercise it in Dr Pelling's favour and, if so, on what terms? During the course of the argument we raised the question whether the Company was willing to circulate to its members material which Dr Pelling wished to put before the members in relation to the forthcoming Annual General Meeting. In his submissions Dr Pelling stressed the importance of the right of free communication with members of the Company. Although he had argued that the reasons for his requirement were irrelevant, he explained in his evidence that he required the names and addresses of members so that he could communicate with them and canvass their votes in advance of the forthcoming Annual General Meeting. While Mr Hale indicated that there would be no problem in the Company giving such an undertaking, Dr Pelling responded that the undertaking would be unacceptable to him in view of his lack of trust in those at present responsible for the running of the Company.

Conclusion

23. We have reached the following conclusions.

i) On the true construction of Section 356(6) the Registrar had a discretion to refuse the order .In its ordinary and natural meaning the word "may" is apt to confer a discretion or power. It is true that there are certain situations where a discretionary power is conferred for the purpose of enforcing a right and is coupled with an obligation or duty to exercise a power, when required to do so, for the benefit of the person who has the right: see Julius v. Bishop of Oxford (1880) 5 App Cas 214 at 223 and 241. This is not such a case. The use of "may" in subsection (6) is in striking contrast to the mandatory force of "shall" in other parts of the same section, such as subsection (3). In the O'Brien case (supra) at p.255 Byrne J rejected the submission that the court had no discretion under the similarly worded provision in section 1303 of the Australian Corporations Law. It was submitted to him that the word "may" in that section was not permissive, but merely signified that the jurisdiction of the court to make an order did not arise unless there had been a refusal or contravention of the Corporations Law. He held that the drafting of the Law was such that " the word "may" means exactly that. It means that the court is empowered to make the order where a refusal in contravention of the Law has been established, as in the present case .Whether the power will be exercised must depend upon the proper discretionary considerations affecting the power in the light of the facts found by the court." We agree. For those reasons we reject the absolutist construction proposed by Dr Pelling.

ii) The statutory discretion must be exercised judicially in accordance with established legal principles and having regard only to relevant considerations. We agree with Dr Pelling that, as a general rule, the court will make a mandatory order to give effect to a legal right. But, as stated by Lord Evershed MR in Armstrong v. Sheppard & Short Ltd [1959] 2 QB at 396 "it is not a matter of unqualified right." There may be something special in the circumstances of the case which leads the court to refuse to make the usual order. The scope of the residual discretion to refuse such an order may be narrow, but Dr Pelling is, in our view, wrong in his assertion that it is non-existent. Indeed, we understood him to accept that there would be cases in which it would be pointless for the court to make an order where, for example, it was no longer necessary to make one, because the request had been complied with after the application was issued but before it was heard, or where the request was physically impossible to comply with because the register had been destroyed or lost. There are other circumstances in which the court is entitled to refuse to make any order or to make one in unqualified terms. It is common , for example, for a court to decline to exercise its discretion to make a mandatory or prohibitory order when the person against whom it is sought has offered to the other side or to the court an undertaking which meets the justice of the case.

iii) We also reject Dr Pelling's contention that the criminal penalties to which the company is exposed under section 356(5) deprive the court of discretion to refuse to make an order under subsection (6). It can certainly be said that the criminal penalties underscore the importance both of the right and of the obligation of the Company to give effect to it, but they do not expressly or impliedly deprive the court of the discretion clearly conferred by the use of the word "may". The line of exceptional cases in which the assistance of the civil courts is invoked in aid of the criminal law amply demonstrates that the civil courts retain a discretion as to whether or not it is an appropriate case for their intervention by making an order to enforce obedience to the criminal law.

iv) Having regard to specific exemption provisions in section 34 of the Data Protection Act 1984, we are satisfied that the making of an order would not contravene the provisions of the Act protecting personal data. Further the construction of section 356(6) so as to confer a discretion on the court would not involve any incompatibility with Article 8 of the European Convention on Human Rights.

v) In our judgment, it is possible to cater for both Dr Pelling's wish to gain access to the register for the professed purpose of legitimately communicating with the members and the proper and understandable concerns of Mr Hale about the detrimental effect of an unqualified order for disclosure of the names and addresses of the members, particularly on the charitable purposes for which the Company was established. A reconciliation can be achieved by attaching relevant and reasonable terms and conditions to the exercise of the discretion. As indicated in O'Brien at p.256, it is possible to provide a practical and fair solution either by making an order in favour of the applicant on terms as to the confidentiality and use of the information made available; or, as we suggested , and as was offered in the case of O'Brien at p. 255, by declining to make an order for inspection, on the Company giving a suitably worded undertaking to facilitate communication with members by acting as a post box for mail between the applicant and the members.

vi) The parties should be entitled to address the court further on this point before the final form of order is settled by the court.

Form of Order

24. On the handing down of the judgment the court invited submissions from the parties on the form of order which should be made in the light of the judgment, in particular paragraphs 20 and 23 (ii) and (v). Dr Pelling argued that the court should make an order in the terms of section 356(6) without imposing additional terms or accepting undertakings in lieu of such an order. He said that the court could not reasonably refuse to do as he asked. He repeated that he did not trust the Company's Council. He referred to his recent success against the Company in the Chancery Division. As to an undertaking by the Company in lieu of a mandatory order under section 356(6), he submitted that the Court could not accept an undertaking, unless it had power to make a corresponding injunction, which it did not have in this case. He also questioned the authority of Mr Hale to give an undertaking on behalf of the Company. Although he declined to give any undertakings himself in respect of the use of the register of members, he was willing to enter into contractual undertakings with the Company as set out in his written submissions, so that his use of the copy of the register was confined to the purpose of communicating with the members of the Company.
25. Mr Hale confirmed that he was willing to give undertakings on behalf of the Company along the lines referred to in paragraphs 22 (iii) and 23 (v) of this judgment and claimed that he had authority to give them on behalf of the Company. He was willing, if necessary, to obtain evidence of the requisite authority. He opposed the alternative form of order proposed by Dr Pelling and repeated his concerns, as set out in paragraph 20 of this judgment, about the effect of making copies of the register of members available. When he made his oral submissions Dr Pelling accepted the validity of those concerns, but disputed their impact on his right to an unqualified order.
26. In the light of the undertakings offered by Mr Hale on behalf of the Company and his personal undertakings we dismiss the appeal against the refusal of the Registrar to make an order under section 356(6). It is inappropriate to make such an order when there is available a satisfactory means of meeting the Company's valid concerns about the effect of the order on their members and their charitable activities, and of providing Dr Pelling with the desired opportunity of communicating with the other members of the Company ahead of the forthcoming Annual General Meeting.