Key Issues in Bramber Road Management Ltd Case: Appointment of Directors, Validity of Share Transfers, and Procedural Deficiencies

Citation: [2024] EWHC 51 (Ch)
Judgment on

Introduction

The case of “Jeremy Sinclair Clarke & Anor v Yasmin Azim Lakha & Ors (Re Bramber Road Management Limited)” presents several important legal principles concerning the management of companies and the rights of company members and directors. The dispute revolves around internal management issues, particularly the appointment of directors and the validity of share transfers within Bramber Road Management Limited. The High Court’s judgment elucidates on the pertinent regulations and statutory provisions applicable to such cases.

Key Facts

Bramber Road Management Limited, incorporated in 1986, oversees a development with four units, with each unit owner typically holding one ordinary share and nominating one director. Two members, Jeremy Sinclair Clarke and Euan John Lawson, contested the purported rights of Yasmin Azim Lakha and The Forward Project (TFP) to act as directors and members. Furthermore, there were contested facts surrounding the entitlement to membership in the company, the validity of purported resolutions, and the appointments and removals of directors and the company secretary.

The court explored several legal principles:

  1. Alteration of Articles by Conduct: Even without a formal resolution, a company’s articles may be amended by an agreement, including informal agreements (s. 33 Companies Act 2006, Cane v Jones [1980] 1 WLR 1451) or by long-term acquiescence (Ho Tung v Man on Insurance Company Ltd [1902] AC 232), applying the Duomatic principle (s281(4) CA 2006, EIC Services Ltd v Phipps [2003] BCC 931).

  2. Appointment of Directors: The court concluded that upon becoming a registered member, each unit owner has the right to appoint one director by notice to the company, with the right to remove and/or replace that director by notice. This right was inferred from the conduct of unit owners since the early years of the company, effectively amending the company’s articles by conduct.

  3. Estoppel by Conduct: The defendants’ assertion of various consent requirements for directorial appointment and the timing of actions were challenged, with the court pointing out inconsistencies in their positions and procedural irregularities, applying the principles of estoppel by long-term conduct.

  4. Validity of Share Transfers: Section 771(1) of the CA 2006 requires a company to register a transfer or notify the transferee of refusal along with reasons within two months after the transfer is lodged. The failure to do so could lead to the loss of the power to refuse the transfer (Re Swaledale Cleaners Ltd [1968] 1 WLR 1710 (CA); Re Inverdeck Ltd [1998] BCC 256).

Outcomes

  1. The court upheld the Claimants’ membership in the company, confirming that Mr. Lawson and Mr. Clarke were appropriately registered as members in respect of Unit 3 and Unit 4, respectively.

  2. The Claimants were validated in their actions related to the registration of directors, notably with Mr. Lawson’s valid appointment in 2019.

  3. The purported resolutions of June and November 2021 introduced by the Defendants were declared invalid and of no effect, mainly due to procedural deficiencies, including non-compliance with statutory notice periods, a lack of quorum, and failure to include Mr. Lawson in the decision-making process.

Conclusion

The judgment reaffirms the importance of adhering to statutory and internal procedural requirements within a company’s governance. It also highlights that even absent explicit amendments, the consistent and accepted conduct of company members over time can lead to a de facto amendment of a company’s articles of association. This case serves as a caution to directors and members to maintain meticulous records and adhere strictly to procedural formalities to prevent disputes regarding company governance and decision-making processes.