ON APPEAL FROM NORWICH COUNTY COURT
MR RECORDER CHANDLER
Strand, London, WC2A 2LL
B e f o r e :
VICE PRESIDENT OF THE COURT OF APPEAL
LORD JUSTICE THOMAS
LORD JUSTICE ETHERTON
| NEIL DAVID SCHOFIELD
|- and -
|(1) LEE NEIL SCHOFIELD
(2) AVENUE ROAD DEVELOPMENT LIMITED
(3)ADMINISTRATOR FOR AVENUE ROAD DEVELOPMENT LTD
WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Lee Schofield represented himself
Mark Watson-Gandy (instructed by Harrison Clark) for the Administrator of Avenue Road Developments Limited
Hearing dates : 26th January 2011
Crown Copyright ©
LORD JUSTICE ETHERTON :
"Mr Neil David Schofield has appointed himself director on the 5th October but his appointment and his authority is in dispute as he is not an official of the company and has not proof to be a shareholder of Reggiesco Limited. It was decided that Neil David Schofield will remain appointed director until all legal enquiries on his authority have been conducted and the dispute can be resolved."
"11. … Section 307 of the current Companies Act provides that 14 days notice of a general meeting needs to be given, unless shorter notice is agreed by the majority of those entitled to attend the meeting and vote, and that must mean that in the case of there being only two shareholders, there can only be a shorter notice of any extraordinary general meeting, or a general meeting, if they both agree and that makes perfect commonsense, if I may say so, because it does mean that it prevents in the case of there being only two shareholders, one shareholder being able to ride completely roughshod over the other by calling meetings at short notice and thus disadvantaging the other person concerned.
12. It is, therefore, argued on behalf of, well by, effectively, by Mr Lee Schofield, that the meeting was not validly convened because he never agreed to shorter notice and the alternative argument canvassed on the other side is well, what was he doing there if he did not agree that there was to be a meeting at shorter notice. Well, the answer to that is that it was an informal meeting to talk about the resolution that was to be proposed at a later meeting, on the 8th October, when the resolution for removal was listed as an agenda item on the notice of the annual general meeting.
13. It is plain to me that he must at least have been aware at the meeting that it was what it is purported to be by his father because he is reported to have proposed the motion that the meeting be adjourned, upon which I have said he was outvoted. Now, that does not necessarily mean that he had accepted the meeting was properly convened. It certainly might mean that he was trying to prevent the meeting from arriving at any decision at all until, to put it in simple terms, he had had an opportunity to consider his position, but then he was outvoted on the other substantive motions; that does not mean that he accepts that the meeting was properly convened.
14. The convening of that meeting, it seems to me, is critical to the disposal of both of these claims and it seems to me that there cannot be any proper basis upon which I can conclude that that meeting was validly convened because there is no dispute that 14 days notice was not given. There is no evidence that both the people entitled to attend and to vote at that meeting agreed to shorter notice. There is a real dispute as to whether shorter notice was actually given, to which any agreement could have been attached as it were by Lee, because his case is he did not receive it.
15. I cannot, therefore, on the evidence, conclude that the meeting which took place on the 2nd September was either called on 14 days notice or took place on shorter notice with the agreement of Lee, which is what I have to find before I can find the business of the meeting to have been properly conducted, and having concluded, as I have, that by reason of failure to comply with Section 307 of the Companies Act, the meeting was not properly convened, it follows that I cannot find that his removal from office was valid and his replacement by his father was valid and so the claim fails because the claim is for exactly that. Obviously I cannot grant an injunction without granting the declaration so the claim for a declaration fails and the claim for an injunction fails."
"3.1 The Learned Judge should not have found as he did that Lee Schofield's presence at the company was other than acquiescence in short notice. In accordance with the principles of Section 312 of the Companies Act 2006 alternatively in the case of Re Duomatic Limited namely, that if it can be shown that all the shareholders at a General Meeting assent to the same matter, that assent is as binding as a resolution in a General Meeting. And further the acquiescence by a shareholder with knowledge of the matter is as good as actual consent. Silence by a shareholder at a meeting is as good as acquiescence and establishes consent.
3.2 There was simply no evidence that Lee Schofield had protested at the meeting as to the short notice. The only evidence was that he was silent as to the point. Silence in such a circumstance can only be construed as acquiescence which equals consent."
"Now the view I take of both these decisions is that where the transaction is intra vires and honest, and especially if it is for the benefit of the company, it cannot be upset if the assent of all the corporators is given to it. I do not think it matters in the least whether that assent is given at different times or simultaneously."
".... I proceed upon the basis that where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be."
"The decisions show that the law is that the consent of all members expressed together is as good as a special resolution. It is also clear that acquiescence by shareholders with knowledge of the matter is as good as actual consent. In this case the silence of Mr Mohanan is, in my view, as good as acquiescence and establishes that he as much as his wife had assented by conduct to this change in the objects of the company."
"62. I see nothing in the circumstances of the present case to exclude the Duomatic principle. It is a sound and sensible principle of company law allowing the members of the company to reach an agreement without the need for strict compliance with formal procedures, where they exist only for the benefit of those who have agreed not to comply with them. What matters is the unanimous assent of those who ultimately exercise power over the affairs of the company through their right to attend and vote at a general meeting. It does not matter whether the formal procedures in question are stipulated for in the Articles of Association, in the Companies Acts or in a separate contract between the members of the company concerned. What matters is that all the members have reached an agreement. If they have, they cannot be heard to say that they are not bound by it because the formal procedure was not followed. The position is treated in the same way as if the agreed formal procedure had been followed. …"
"It happened that these five directors were the only shareholders of the company, and it is admitted that the five, acting together as shareholders, could have issued these debentures. As directors they could not but as shareholders acting together they could have made the agreement in question. It was competent to them to waive all formalities as regards notice of meetings, etc., and to resolve themselves into a meeting of shareholders and unanimously pass the resolution in question. Inasmuch as they could not in one capacity effectually do what was required but could do it in another, it is to be assumed that as business men they would act in the capacity in which they had power to act. In my judgment they must be held to have acted as shareholders and not as directors, and the transaction must be treated as good as if every formality had been carried out."
"What these corporators did and did not do after 9th December 1965 down to 12th December 1969 when they swore their affidavits disclosing this defence points, in my view, to one conclusion only. The conclusion is that they outwardly accepted the resolution to wind up as decisively as if they had positively voted in favour of it. If corporators attend a meeting without protest, stand by without protest while their fellow-members purport to pass a resolution, permit all persons concerned to act for years on the basis that resolution was duly passed and rule their own conduct on the basis that the resolution is an established fact, I think it is idle for them to contend that they did not assent to the purported resolution."
"... I do not accept that a shareholder's mere internal decision can of itself constitute assent for Duomatic purposes. I was not referred to any authority in which it had been decided that a mere internal decision would suffice. Further, for a mere internal decision, unaccompanied by outward manifestation or acquiescence, to be enough would, as it seems to me, give rise to unacceptable uncertainty and, potentially, provide opportunities for abuse. A company may change hands or enter into an insolvency procedure; in either event, it is desirable that past decisions should be objectively verifiable. In my judgment, there must be material from which an observer could discern or (as in the case of acquiescence) infer assent. The law applies an objective test in other contexts: for example, when determining whether a contract has been formed. An objective approach must, I think, also have a role with the Duomatic principle."
"Please be advised that I, Sara Elizabeth Garry [formally Schofield] formally give notice that in my capacity as Company Secretary of the above mentioned company give my clear and unequivocal support to Mr Lee Neil Schofield in his capacity as Managing Director of Avenue Road Development Ltd ....
Avenue Road Development Ltd is a wholly owned UK subsidiary company of Reggiesco Ltd. This letter represents a vote of confidence in Mr Lee Neil Schofield's ability to manage the assets of Avenue Road Development Ltd. In addition to my position as Company Secretary I also own a 50% stake in Reggiesco Ltd. Until such times as a board meeting is held at the Reggiesco's registered office dictates otherwise.
It is also within my remit to clarify that I am in full agreement with the Board Resolution passed by Avenue Road Development Ltd on the 5th September 2009 appointing Firefox Resourses LLP to the position of Company Secretary. ..."
Please be advised that, to assure corporate governance, Mr Lee Schofield has appointed Firefox Associates [UK] LLP as the company secretary for Avenue Road Development Ltd as appears on the register at Companies House.
A letter from you addressed to Mr Lee Schofield has been brought to our attention purporting to call an "EGM" on the 2nd October 2009. Please clarify which company is calling the meeting is it Reggiesco Ltd or Avenue Road Development Ltd? If it is Avenue Road Development Ltd then who authorised the meeting? As company secretary why were we not given the statutory 28 days notice under section 304 [1b] the companies act? I also bring your attention to the section 312 of companies act 2006 – removal of directors.
If you are acting for Reggieco Ltd then please let us have sight of the board resolution calling for the removal of Mr L Schofield details of who is being appointed in his place and the certificate of good standing from the Belize Registered office.
Also be aware that Mr Lee Schofield and Firefox Associates LLP enjoy the support of Miss Garry who is both a director and major shareholder of Reggiesco Ltd – see attached board resolution dated 5th September 2009 and supporting letter dated 8th September 2009. You should also be aware of the statutory notice of AGM under section 304 the companies act 2006 sent to all concerned [a copy was served on Mr N Schofield by hand] and a notice was sent to Reggiesco's registered in Belize City – this meeting is set for the 8th of October 2009 at noon. We are anxious for comments."
LORD JUSTICE THOMAS
LORD JUSTICE MAURICE KAY