Schofield v Schofield & Ors

Factual and Procedural Background

This appeal arises from proceedings initiated by the Appellant seeking a declaration that he is the sole director of Company A and that his son, the Defendant, has been removed as director. The Defendant, Company A, and an administrator appointed by the Defendant are respondents. The appeal challenges an order from a Recorder in a County Court dismissing the Appellant's claim and ordering him to pay a substantial portion of the Defendant's costs.

The dispute centers on a meeting held on 2 October 2009 at the Appellant's solicitors' offices, attended by the Appellant, the Defendant, and the Appellant's solicitor. The Appellant contends this meeting was an extraordinary general meeting (EGM) of Company A at which the Defendant was removed as sole director and the Appellant appointed sole director. Although the meeting lacked the 14 days' notice required by the Companies Act 2006 (CA 2006), the Appellant argues that, as the representative of the majority shareholder (Company B) holding 99.9% of shares, and the Defendant, holding the remaining share, agreed or are to be treated as having agreed to waive the notice requirement, invoking the "Duomatic" principle from Re Duomatic Ltd [1969] 2 Ch 365.

Company A had two shareholders: Company B, registered in Belize, holding 999 shares, and the Defendant holding one share. The Appellant was the sole director and 50% shareholder of Company B; the other shareholder and company secretary of Company B was another individual. Prior to the meeting, the Defendant was the sole director of Company A.

On 3 September 2009, the Appellant served notice on Company A's secretary (a family member of the Defendant) requisitioning a meeting to appoint a new director and remove the Defendant, acting on behalf of Company B. Subsequently, a new company secretary was appointed by the Defendant and his sister.

Notice of Company A's annual general meeting (AGM) was given for 8 October 2009, including the Defendant's removal as a director as an agenda item. The Appellant's solicitors wrote to the Defendant asserting the validity of the requisitioned EGM and demanding resignation. The Defendant raised concerns about the solicitors' authority to act for Company B and potential conflicts of interest. The solicitors responded that the EGM would be held on 2 October 2009 if the Defendant did not resign.

The Appellant claims that the EGM took place on 2 October 2009 with the Appellant representing Company B, proposing and passing motions to adjourn the meeting (defeated), remove the Defendant as director, and appoint the Appellant as director, all by the Appellant's votes. A form was filed at Companies House on 5 October 2009 appointing the Appellant as director, which the Defendant denies knowledge of or consent to.

The Defendant refused to acknowledge the validity of the 2 October meeting resolutions, attended the AGM on 8 October 2009 as director, and expressed that his powers had been stripped without proper procedure. The Defendant later appointed an administrator of Company A in January 2010. The Appellant commenced proceedings on 17 December 2009 seeking declarations and injunctions related to directorship.

The trial was conducted on paper in February 2010. The Recorder found the 2 October meeting was not properly convened due to lack of the required 14 days' notice and no agreement to shorter notice by both shareholders. The Recorder held the meeting was informal and that the Defendant's presence did not constitute agreement to short notice. Accordingly, the removal and appointment of directors at that meeting were invalid, and the Appellant's claim failed.

The Appellant was granted permission to appeal on one ground: that the Defendant's presence and conduct at the meeting constituted acquiescence or consent under the Duomatic principle, rendering the meeting valid despite inadequate notice.

Permission was granted for the Defendant to submit evidence of a transcription of a recording of the meeting. The Appellant's solicitor, who participated in the meeting, acted as advocate on appeal, though this was acknowledged as less than ideal.

Legal Issues Presented

1. Whether the meeting held on 2 October 2009 constituted a valid extraordinary general meeting of Company A despite lacking the statutory 14 days' notice, by virtue of the agreement or acquiescence of all shareholders under the Duomatic principle.
2. Whether the Defendant's attendance and voting at the meeting amounted to consent or acquiescence to the validity of the meeting and the resolutions passed therein.

Arguments of the Parties

Appellant's Arguments

• The Duomatic principle applies: unanimous shareholder assent, express or by conduct, binds the company even if formal procedures are not followed.
• The Defendant's presence, participation in proposing and voting on motions at the meeting, and silence on the issue of short notice amounted to acquiescence and consent.
• Precedent cases such as Re Duomatic Ltd [1969] 2 Ch 365, Re Home Treat Ltd [1991] BCLC 705, Monecor (London) Limited v Euro Brokers Holdings Limited [2003] EWCA Civ 105, and Re Express Engineering Works Limited [1920] 1 Ch 466 support the application of the Duomatic principle in these circumstances.
• The Defendant should have abstained from attending or left the meeting if he wished to object, as suggested by analogy to Barron v Potter [1914] 1 Ch 895.
• The minutes of the AGM on 8 October 2009 acknowledged the Appellant's directorship, supporting the validity of the 2 October meeting.

Defendant's Position (as inferred from judgment)

• The meeting was not validly convened due to failure to provide the statutory 14 days' notice and no agreement to shorter notice.
• The Defendant's attendance and conduct at the meeting did not amount to agreement or acquiescence to its validity.
• The Defendant maintained objections based on lack of authority of the Appellant to act for Company B and the defective notice.
• Letters presented at the meeting supported the Defendant's position that the Appellant lacked authority and the meeting was not properly convened.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined whether the Duomatic principle could validate the 2 October 2009 meeting despite the statutory notice deficiency. The principle requires unanimous shareholder agreement, either express or implied, to treat an irregularity as valid. The court emphasized that such agreement must be objectively established and unqualified.

Evidence showed that the Defendant attended the meeting amid ongoing disputes about the Appellant's authority to represent the majority shareholder and the adequacy of notice. The Defendant presented letters supporting his position and maintained objections throughout the meeting. His participation, including voting on motions, was understood as conditional and aimed at preserving his objection rather than consenting to the meeting's validity.

The court found no objective evidence of the Defendant's unqualified agreement to waive the notice requirement or to validate the meeting's proceedings. The Defendant’s conduct was consistent with maintaining his objection, not acquiescing. The minutes of the subsequent AGM and the filing of forms at Companies House did not demonstrate the Defendant's consent.

Accordingly, the court upheld the original decision that the meeting was not validly convened under CA 2006 section 307, rendering the resolutions passed at the meeting invalid. The Duomatic principle was inapplicable due to absence of unanimous and objective agreement.

Holding and Implications

The court DISMISSED the appeal.

The direct consequence is that the 2 October 2009 meeting is not recognized as a valid extraordinary general meeting, and the Defendant remains the valid director of Company A. The Appellant's claim for declaration and injunction failed. No new precedent was established; the court applied established principles requiring clear, objective unanimous agreement to validate irregular company meetings under the Duomatic principle.