Burberry Group Plc v Fox-Davies [2015] EWHC 222 (Ch)

[2015] EWHC 222 (Ch)Case No 3433 of 2013Date 9 February 2015
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Before
Mr. Registrar Briggs
Between
BURBERRY GROUP PLCClaimantRICHARD CHARLES FOX-DAVIESDefendant
Mr. Andrew Thornton (instructed by Slaughter and May) for ClaimantMr. Timothy Collingwood (instructed by New Media LLP) for DefendantHearing Hearing dates: 20 January 2015
JUDGMENTMr. Registrar Briggs:Introduction
[1]On 9 May 2013 Burberry Group Plc (the “Company”) made an application to the court for relief pursuant to section 117(3) of the Companies Act 2006 (the “Act”). The application followed a request made by Richard Fox-Davies (“RFD”) for a copy of the register of members in accordance with section 116 of the Act. RFD is not himself a member of the Company. His stated reason for the request to inspect or make a copy of the Company’s register of members is to assist and allow shareholders who may otherwise be unaware of their entitlements to reassert ownership or recover the benefit of their property. Summary[2]The letter dated 27 March 2013 was an invalid request. Accordingly time did not begin to run from the date of receipt pursuant to section 117(1) of the Act.[3]The inspection or copy of the register of members sought by RFD is for an improper purpose. The purpose stated by RFD is not the real purpose. The Company is directed not to comply with the request.

Background

[4]The Company was incorporated in England & Wales on 30 October 1997. It is a well-known British luxury fashion brand which was established in 1856. On 18 July 2002 the Company was floated and registered as a public company.[5]The Company’s most recent articles of association were adopted on 15 July 2010 and contain a clause to deal with untraced shareholders. In short the clause provides that after taking certain precautions to trace the missing shareholder, the Company may by a mechanism set down in the articles, sell the shares. The Company may use the proceeds but is obliged to account to the missing shareholder who is entered as a creditor in the accounts: “The Company shall be entitled to sell at the best price reasonably obtainable at the time of sale any certificated shares of a member or the shares to which a person is entitled by virtue of transmission on death or bankruptcy or otherwise by operation of law if:a. the shares have been in issue either in certified or uncertified form throughout the period of twelve years prior to the date of the publication of the advertisements……….and at least three dividends in respect of the shares have become payable and no dividend in respect of those shares has been claimed; andb. the Company has caused advertisements to be published in both a national newspaper and in a newspaper circulating in the area in which the last known postal address of the member or the postal address at which service of notice of its intention to sell the said shares; andc. during such period of twelve years and the period of three months following the publication of such advertisements the Directors in office at the end of such period of three months are not then aware that the Company has received any communication from such a member or person. …..The net proceeds of sale shall belong to the Company which shall be obliged to account to the former member or other person previously entitled…for an amount equal to such proceeds and shall enter the name of such former member or other person in the books of the Company as a creditor for such amount which shall be a permanent debt of the Company.[6]On 12 February 2013 the Company appointed ProSearch Asset Solutions Limited (“PS”) to undertake an asset reunification programme in relation to ‘gone-away’ shareholders. PS was initially appointed on an exclusive 12 month contract but all the parties now agree that PS’s contract has been extended and they continue to carry out their obligations according to the agreement with the Company. Specifically PS is engaged to carry out investigations and use its best endeavours to establish the current contact details of shareholders who have not collected their dividends and have been referred to in the hearing as the ‘lost members’. Once PS has established contact the identity of the lost member is verified and that lost member is provided with a claim form. In order to start its searches PS has access to the Company’s register of members.[7]The services provided by PS are charged to the lost member once that lost member makes a valid claim through PS. The charges are 12.5% of the outstanding cash, shares, dividends or accumulated interest due to the lost member. A further fee is due if the lost member requires a new share certificate. However, the lost member is given the option of contacting the Company direct to deal with any claim. In such circumstances PS makes no charge. The letter of engagement with PS provides that when undertaking its tracing activities it will: 7.1. comply with its obligations under the Data Protection Act 1998; 7.2. keep all information disclosed confidential; 7.3. not use the information disclosed to it for any purpose other than the performance of its agreed services.[8]The lay out and content of the claim form to be sent out by PS to lost members is agreed with the Company. It states that the ‘records held by [the Company] show that dividends have been sent to you and remain uncashed. The Company is therefore concerned that you may not have received these dividends or have moved away from the address on their records….’. The lost member is told the number of shares held, the cash entitlements and provided with options as to what should be done with his or her interest.[9]The evidence is that PS has been successful in tracing lost members since its engagement. In her third witness statement the Company secretary, Catherine Sukmonowski, explains:
“ProSearch continue with their efforts to identify ‘gone away’ shareholders and to reunite them with their entitlements. As at the date of this witness statement approximately 30 per cent of “gone away” shareholders (representing 50% of the total value of unclaimed entitlements) have recovered their entitlements. Importantly, approximately 55 per cent of these shareholders have made their claims directly to the Company or the Registrar rather than using ProSearch’s services. This means that such shareholders were able to recover the full value of their entitlement without having to pay a fee to ProSearch to do so. I understand from ProSearch that this is a very good rate of recovery. It also reflects the Company’s commitment to reunite ‘gone away’ shareholders with their entitlements in a manner which it believes to be in the best interests of its shareholders.”
[10]The Defendant established a business known as Trust Property Researches (“TPR”) in 1995. TPR is a tracing agency and one of its activities is tracing lost members in public quoted companies. RFD operated separate companies under the TPR trading name in Malaysia, Singapore, Australia and New Zealand. He was involved in European companies carrying the same trading name. In his evidence he says that his interests are presently confined to the shores of the UK but provides an example of his early day business: “When I first established TPR I was primarily interested in shareholdings that had been unclaimed for some considerable period usually as the result of the demise of the shareholder. The first share register that I investigated was that of Shell Transport and Trading. I was able to identify a number of shareholdings owned by members of the French Aristocracy who had been deceased for some considerable time and using the service of a Paris-based genealogy partnership, we were able to trace their heirs and provide them with the means to claim ownership of the shareholdings of their deceased ancestors."[11]RFD is also a director and shareholder of a company incorporated in Gibraltar known as Interum Limited. The business of Interum and TPR is connected. RFD explains in his evidence that Interum is registered under the Data Protection Act 1998 and incorporated for the purpose of acquiring, controlling and protecting data obtained by TPR. A flow-chart featured on the former TPR website explained that Interum collates the information received from TPR to identify lost company members. The collated information is then made available to “locally owned-companies or individuals in the relevant countries”. He describes the locally owned-companies as ‘specialist researchers’ who assist him. He says:
“I will provide [the specialist researchers] with the name and last known address of the shareholders that I wish them to attempt to trace……I engage the researchers on the basis that they will share in any fee I can negotiate and consequently I will provide them with my approximation of the value of the shareholdings so that they can assess how much time and effort to expend on tracing the shareholder. I do not identify the shareholding in any way.”
[12]I am unclear how the first and last sentences of the above evidence can be reconciled if the name of the shareholder is provided to the researcher unless it is purely a matter of not disclosing the number or class of shares held. Further, if the researcher is successful he/she contacts the lost member and offers terms.[13]The ‘specialist researchers’ appear to be independent and therefore are not controlled by RFD/Interum or TPR. The evidence provided by RFD fails to show or identify: 13.1. the researchers; 13.2. what methods are employed by the researchers in their quest to identify lost members; 13.3. how information provided to the researchers is kept confidential by them; and 13.4. whether the researchers are bound by confidentiality terms.[14]RFD’s fee-structure as explained to the court, is less favourable than that of PS in terms of the pricing, and due to a requirement that a lost member will be bound to pay his fees, once an agreement is entered into, regardless of whether that member uses his service to progress a claim or deals directly with a company.[15]As regards the security of the IT systems used, RFD asserts that the ‘Interum system is linked to servers operated by Rackspace in the United States and Amazon in the Republic of Ireland. The Interum IT system is physically secure as required by the Data Protection Act and operationally secure because I control access to the data.’

The Claim

[16]On 4 April 2013 the Company received a letter dated 27 March 2013 from RFD which set out a request:
“We wish to purchase a copy of the full shareholder register for your company: including the usual statutory data for both present and former members, as provided for under the Companies Act. So that we can agree the statutory fee for this, can you please advise how many relevant entries there are? A formal statement in compliance with section 116(4) is provided below.”
[17]The formal statement of compliance states that the application is made pursuant to the Companies Act 2006 and in terms sets out information in the order of section 116(4) of the Act.[18]In respect of the section 116(4) menu: 18.1. (a) it is said that the request is made by RDF; 18.2. (c) that the purpose for which the information is requested is to assist and allow shareholders who may otherwise be unaware of their entitlements to reassert ownership or recover benefit of their property; 18.3. (d) (i) the information will not be shared directly with any individual; 18.4. (d) (ii) the information will be shared with Interum……The person responsible for receiving the information on behalf of Interum is its Company Secretary for the time being; 18.5. (d) (iii) the purpose for which [Interum] will use the information is to assist and allow shareholders who may otherwise be unaware of their entitlements to reassert ownership or recover benefit of their property. [Interum] will share the information with other parties in accordance with its registration and obligations under the UK Data Protection Act.[19]On 10 April 2013 the Company responded that the letter dated 27 March 2013 did not constitute a request within the meaning of section 116 of the Act stating, “Burberry is committed to the interests of its shareholders and manages it shareholder relationship accordingly. Burberry has an asset reunification programme in place with another provider to assist its shareholders in relation to which Burberry has taken steps to ensure the protection of data….”. The Company did not explain in terms why the letter failed to constitute a request pursuant to section 116 of the Act but did say that it thought the letter asked only the number of shareholders. The Company’s response relied on the guidance given by the Institute of Chartered Secretaries and Administrators.[20]Nineteen days later on 29 April 2013 RDF wrote to the Company’s company secretary, Ms Sukmonoski, thanking her for the letter of 10th April 2013 and positing that there had been ‘some misunderstanding as to the purpose of the request.’ In the letter RFD commented that he was aware of the ICSA guidance:
“I am aware of concerns raised by ICSA during the consultative stages of the Company Act review: specifically the possibility that share registers might be used for direct marketing, or other objectives outwith the purpose under which the data had been first provided by the shareholders. There is no question of the data you supply me with being used for any such improper purpose.”
[21]He ends the letter by apologising for any initial misunderstanding and “make this formal request for a copy of the Burberry Group share register (including both present members and members still on the register).” At the bottom of the letter he sets out a declaration in similar terms as that set out in the letter of 27 March 2013 and encloses a cheque for the prescribed fee.[22]On 2 May 2013 Ms Sukmonowski responded that the Company remained of the view that the purpose was improper and informed RDF that it ‘ will, if necessary, apply to the court under section 117 of the Act for a direction that access does not need to be provided…’. On 9 May 2013 an application pursuant to section 117(3) of the Act was issued after which directions were given for the hearing of the application.

The law

[23]The register of members, and the index (where required to be kept) must be open to the inspection of any member for no charge, and to the inspection of any other person on payment of ‘such fee as may be prescribed'. Nevertheless the right to inspect and the right to make copies of the register are subject to restrictions which are set out in sections 116 and 117 of the Act. Section 116(4) of the Act provides that the:
“request must (my emphasis) contain the following information— (a) in the case of an individual, his name and address; (b) in the case of an organisation, the name and address of an individual responsible for making the request on behalf of the organisation; (c) the purpose for which the information is to be used; and (d)whether the information will be disclosed to any other person, and if so— (i)where that person is an individual, his name and address, (ii) where that person is an organisation, the name and address of an individual responsible for receiving the information on its behalf, and (iii) the purpose for which the information is to be used by that person”
[24]These sections are bolstered by section 119 of the Act which makes it a criminal offence if someone(a) knowingly or recklessly makes a statement that is misleading, false or deceptive in a material particular, or(b) discloses information obtained or fails to prevent the disclosure of information knowing or having reason to suspect that the recipient may use the information for an improper purpose.[25]Section 117 of the Act informs a company receiving such a request what it has to do. It has two options. The first is to comply with the request within 5 working days; the second is to apply to the court. Section 117(3) provides that if the court is satisfied that the inspection or copy is not sought for a proper purpose it shall direct the company not to comply with the request. The Act does not define a proper purpose. There is only one authority on the issue in this jurisdiction. In Burry & Knight Ltd v Knight [2014] 1 WLR 4046 the Court of Appeal considered the guidance provided by the Institute of Chartered Secretaries and Administrators useful but not definitive. The guidance considers that a proper purpose be one of the following: 25.1. to check a register entry by a stockbroker to confirm ownership of shares before processing a transaction relating to the shares; 25.2. to make a request from a regulated provider of financial services or credit reference agency for the purpose of performing credit or identity checks for the purposes of the Money Laundering Regulations or as an anti-fraud measure on a particular shareholder in connection with the provision of credit services to that shareholder or a company associated with that shareholder; 25.3. when made by creditors or potential creditors checking a shareholding before accepting security over the shares of that member or before advancing credit facilities or other financial accommodation on the security of those shares; 25.4. a request by persons seeking shareholder information with a view to enforcing a judgment whether by charging order, stop order, stop notice, third party debt order or otherwise; or a request by 25.5. an administrator, liquidator, receiver, supervisor of a company or individual voluntary arrangement or a trustee in bankruptcy or court appointed receivers seeking to identify title to assets[26]Conversely an improper purpose be one of the following: 26.1. any purpose that would be unlawful (eg obtaining personal information for the purposes of identity fraud or purposes that might abuse someone's rights under the DPA 1998); 26.2. any representation or communication to members that the company considers would threaten, harass or intimidate members or would otherwise be an unwarranted misuse of the member's personal information; 26.3. offers relating to securities; 26.4. any other purpose not related to the members in their capacity as members of the company or to the exercise of their shareholder rights (eg commercial mailings); and 26.5. a request made by an agency specialising in identifying and recovering unclaimed assets for their own commercial gain by then contracting and extracting commission or fees from the beneficiaries (my emphasis)[27]The Company Law Review Steering Group recommended that “use of information in a company's register of members be restricted to purposes relevant to either the holding of interests recorded in the register, or the exercise of rights attached to them, and to other purposes approved by the company”. The view of the authors of the Annotated Companies Legislation (Oxford) reflects the CLRSG’s recommendation.[28]In Burry & Knight Ltd v Knight the Court of Appeal was concerned with a request from a member as opposed to a member of the public. It held that the words proper purpose should be given their ordinary, natural meaning and that a proper purpose ought generally, in the case of a member, relate to their interest in that capacity and/or to the exercise of shareholders' rights. Mr. Collingwood summarised the legal position in the following way: 28.1. the words proper purpose should be given their ordinary meaning; 28.2. it is not possible to provide an exhaustive definition of what is a proper purpose; 28.3. the Court may have regard to the guidance note issued by the ICSA, but that guidance is non-binding and non-exhaustive; 28.4. where there are multiple purposes (some proper and some not) a proper purpose is not necessarily tainted by being coupled to an improper purpose; 28.5. the Court needs to find what the purpose of the request is; 28.6. the onus is on the claimant company to demonstrate to the court that it should be satisfied that the request is an improper purpose. Satisfied means satisfied on the balance of probabilities; 28.7. it is not for the court to rule out access on discretionary grounds. If the court cannot conclude that access is not sought for an improper purpose then the requester has a right to access under s.117(5); and 28.8. where possible the action should be heard summarily.[29]The summary provided by Mr. Collingwood is based on the judgment of Arden L.J in Burry & Knight Limited. I would add the following. A person other than a member may have a legitimate interest in accessing the information on the register. The decision to disallow inspection and apply to the court is that of a company which maybe a subjective decision but the test applied by the court is objective: is the purpose proper in the context of the Company, its relationship with its shareholders, its trading and the request made. Leaving aside issues that may be specific to members seeking inspection, there may be cases where the court can never be satisfied that a purpose is proper, but generally the issue requires a fact sensitive inquiry. Gore-Browne on Companies (10A) analyses Burry & Knight and describes the fact nature of the inquiry. This is reflected by the submission on appeal that the Registrar was not entitled to make findings of fact on matters in dispute as to a party’s purpose where that party had put in a witness statement containing a statement of truth, in the absence of cross-examination. The Registrar was entitled to make a finding, without cross-examination, that ‘the member was really embroiled in a family vendetta. Two of his stated purposes, namely to study current shareholders and write to them detailing concerns about past conduct of directors, were improper because of this and the relevant considerations included the fact that he himself had been a director at the relevant times, had previously raised concerns that had been properly rejected and had delayed for many years before making the request for access.’ The Registrar was satisfied that Dr. Knight’s purpose was improper and the Court of Appeal agreed.[30]Another relevant factor when undertaking the inquiry is the public policy need for strong corporate governance: the relationship between the board and the shareholders is relevant. Lastly if an application is made to the court it is legitimate for the court to consider not only the stated purpose for the request, but also how the purpose is carried out. In Burry & Knight Limited Arden L.J expressed the position (paragraph 87) this way:
“However a purpose may be improper not only because of the end it seeks to achieve, but also because of the way in which it seeks a proper purpose. Thus a person may also have an improper purpose if he wants to use the opportunity to communicate matters which are not relevant to shareholders’ interests….”
[31]Arden L.J provides an example of irrelevant matters that may be communicated to shareholders such as how to make payments to some extraneous organisation. The class of improper purpose is not closed.

Improper purpose: the Company view

[32]Ms Sukmonowski explains in her second statement that the Company’s major concern is that it is not clear who will be given access to the personal information relating to the shareholders. The reason she articulates this concern is that RFD has set out in his evidence that he carries on trading under a name Trust Property Researches which operates in various different jurisdictions. The ability to trace lost members is reliant not on his personal efforts but on sub-contracting the work to other unidentified parties.[33]The third party researchers appear to be independent and therefore are not controlled by RFD/Interum or TPR. There is no evidence as to the methods employed by the researchers to identify the lost members. There is no evidence regarding how information provided to the researchers is kept confidential.[34]Ms Sukmonowski raises a further concern. She says that the best interests of the members of the Company are not served by permitting an outside agency to communicate and deal with shareholders: she emphasises the lack of impartiality.[35]The Company concludes that the purpose is not proper as there are insufficient measures in place to ensure security of information, and potentially a significant number of third parties receiving personal information relating to the Company’s members. There is little protection for members in respect of potential fraud or other wrong-doing.[36]In her most recent witness statement Ms Sukmonowski builds on her lack of security and transparency themes. She says that there is a real concern that information may leak into the public domain where animal rights activists may obtain private and sensitive information for their cause. She informs the court that the web-site for TPR has become (since the issue of these proceedings) inactive. The same has happened to Interum’s web-site (which appears to no longer exist). Further enquiries have revealed that TPR (Singapore and Malaysia) remain in existence but do not appear active. TPR-UK was served with a strike-off notice pursuant to section 1000 of the Act on 30 December 2014. TPR Claims was dissolved on 11 November 2014.[37]From these researches Ms Sukomonowski concludes that the disappearance of TPR and Interum websites casts great doubt on the evidence produced as these are key entities in the data-processing, tracing and claim handling procedures explained by RFD. It would be wrong to permit personal information relating to the shareholders of the Company to be provided to such an unstable and unknown system.[38]Mr. Thornton for the Company develops these points by reference to the Company’s retained reunification and search company: PS. He says that a nakedly commercial enterprise such as that run by RFD is not in the interests of shareholders when a secure and controlled tracing company is already doing the same job. There is no evidence produced by RFD to support or permit him to contend that he would do a better job than that undertaken by PS, or that PS’s activities are in any way inadequate. The risks of permitting disclosure of the register to an unknown, untested and seemingly unstable tracing agent far outweigh any benefit that could be derived from the process. Mr. Thornton points out the following: 38.1. RFD is the applicant in his own right; 38.2. he no longer has any companies in the TPR group, save for Interum; 38.3. the European companies previously forming part of the TPR group are either dissolved or about to be dissolved; 38.4. nothing is known about whether or not RFD has carried out any business in recent years; 38.5. there is no ability for the court to assess his business worth or ability to conduct business properly, fairly and in the interests of third parties - there are no sole trader accounts; 38.6. he has no presence in the UK. The address provided on the request letters is merely a mail forwarding business; 38.7. he lives and is based in Malaysia; and 38.8. nothing is known about the researchers he has referred to, their whereabouts or ability to treat information confidentially.[39]Although Mr. Thornton accepts that there is a penal provision within the Act (section 119) he contends that the reality is that this will be difficult or almost impossible to enforce against unknown parties acting in unknown parts of the world. Accordingly in these circumstances the penal provision affords no protection in reality.

Proper Purpose- the view of RFD

[40]Mr. Collingwood emphasises the need to focus on purpose. The purpose for inspection has always been clear from the start. In the letters of request dated 27/3/13 and 29/4/13 RFD stated that his purpose is “to assist and allow shareholders who may otherwise be unaware of their entitlements to reassert ownership or recover benefit of their property”. He also stated that such was the purpose of Interum, to which he would disclose the information.[41]Mr. Collingwood submits that unlike in Burry & Knight Limited it is not possible to infer a different purpose: there is no evidential basis for alleging that RFD’s purpose is to pass information from the register to animal rights activists. RFD has confirmed that he has no connection with any animal rights activists or campaigners and that there is no basis at all to suggest that he would provide data to them.[42]Mr. Collingwood says that this matter is more about principle. He says in submissions and in his skeleton argument that:
“In the current case this resolves into a matter of public policy upon which the court is asked to rule. Does the court endorse or reject the business of unclaimed asset tracing agencies such as [RFD]. That is the issue underlying the current claim. Is the court satisfied that such a business does not constitute a “proper purpose”?”
[43]Mr Collingwood says the question he poses should be answered negatively for the following reasons: 43.1. the service provided by RFD is in the interests of shareholders. The goal is to reunite those entitled to shareholdings but who have lost track of their shareholdings; 43.2. in the absence of a service such as that provided by RFD those entitled will never receive the benefit of their entitlement, which simply stagnates. That is not a commercially beneficial or productive state of affairs and does not keep boards of directors properly accountable; 43.3. the purpose of RFD is a purpose that is approved by the Company. It is the same purpose as the purpose of PS; and 43.4. the fact that Company has retained an unclaimed asset search agency does not affect RFD’s purpose.[44]Mr. Collingwood argues, although with perhaps less enthusiasm, that RFD is serving a public interest and that it would be anti-competitive to find that his request is for a purpose which is improper.[45]In response to the issue relating to disclosure of sensitive information to unknown parties and the failure to demonstrate security and confidentiality, it is argued that section 119 of the Act provides a sufficient safeguard. Mr. Collingwood submits that it would be wholly impracticable, if not impossible in certain cases, for a requester to identify by name and address all the persons who might potentially be provided with the information from the register of members. In any event the evidence, it is argued, is that Interum is registered under DPA 1998 and that RFD is careful to ensure confidentiality, because that protects the value that he creates. If clear words are used to interpret sections 116 and 117 of the Act, it cannot be implied that a prerequisite exists regarding security or confidentiality or that a person seeking a request need provide details of how the requester will store information.[46]Although Mr. Collingwood maintained his position regarding the purpose for the request for access he did accept in argument that the motivation of RDF was not entirely altruistic. He accepted that RFD’s motivation for seeking the request and defending the claim is for ‘naked commercial reasons’. I was shown the terms and conditions used by TPR and it was suggested that RFD is likely to use the same or similar terms. Mr Collingwood accepted that RFD’s services carry greater cost burdens to lost members than those provided through PS, and that the terms and conditions offered by RFD are more onerous than the Company’s existing supplier.

The preliminary argument: conclusion

[47]The preliminary argument made by RFD is that the Company is out of time to make the application to court pursuant to section 117 of the Act.[48]It is submitted that the letter dated 27/3/13 constituted a request pursuant to s.116 CA 2006 in spite of the absence of payment under cover of that letter. As the Company failed to issue the application to the court within 5 working days it cannot now ask the court to find that the purpose is improper. It is accepted that the Company did make the application within the statutory time limit upon receipt of the second letter dated 29/4/13.[49]It has not been argued that the 5 day time limit is anything but strict, can be extended or waived by the court. Mr. Thornton concentrated his argument on the failures within the letter dated 27/3/13 submitting that it did not constitute a proper request under the terms of section 116 of the Act. As a result the Company did not have to apply to court within 5 working days of its receipt. Section 116(4) (d) of the Act provides that if the information is to be disclosed to any other person than the person making the request, the name and address of that person must be disclosed. I accept Mr. Collingwood’s position that RFD did disclose that Interum would receive the information. He also declared that ‘the information would not be shared directly with an individual’ (my emphasis). However it appears that he does directly share the information with individuals and he has failed to disclose the names and addresses of those individuals. At paragraph 15 of his witness statement he says that he instructs Interum to produce a list from the register of the lost members. That list is then disseminated to unknown individuals:
“I then employ the services of specialist researches that I normally engage to assist me with whom I will provide the name and last known address of the shareholders that I wish them to attempt to trace……I may purchase historic registers from (for example) Companies House in Wales in order to identify previous addresses of the shareholders I am trying to trace and I will also provide this information to these researchers…I engage the researchers on the basis that they will share in any fee I can negotiate…… I will provide them with my approximation of the value of the shareholdings so that they can assess how much time and effort to expend on tracing the shareholder.”
[50]It may be that the name of the particular company is not shared with the researcher but it is not correct that he does not share information obtained as a result of an inspection with individuals. The only function Interum appears to serve is to sift the data to provide a list of lost members. The evidence of RFD is that he provides the information to researchers, not Interum.[51]The statute is worded in mandatory terms. The Company must make an application within 5 days and the person seeking the information must set out the names and addresses of any individual with whom he is going to share the information. If that information is not provided, the company receiving the request will not know whether to oppose the request or not. The legislation has a provision that deals with failure to comply with the requirements but in my judgment the mandatory language requires compliance and a failure to comply will invalidate the request. Given the precise, unambiguous language and placed in the context of the section’s purpose, it was right not to advance an argument that the effect of failure to comply with the mandatory requirements of section 116(4) would not invalidate the request or that the failure to detail the individuals was immaterial in some way. It was argued that the court should not adopt an ‘overly technical approach’ when deciding whether a letter meets the requirements of the section. The correct approach in the interests of commercial certainty is in my view to construe letters of request in a manner that is consistent with the language. It was also argued that RFD was acting in person at the time the request was made and as a result some leniency should be afforded. The fact that he was acting in person does not alter the language of section 116 of the Act. I therefore find that the request made on 27/3/2013 is invalid and the strict 5 day time limit imposed on a company receiving such a request (to make the application to court) did not run as a result.[52]In addition I find that the March letter fails as it did not accurately set out the purpose of the request for reasons given below.[53]In my judgment the letter of request dated 29 April 2013 fails for the same reason. However as indicated above the parties have agreed that this letter shall be treated as a valid request on the basis that the Company’s application pursuant to section 117 of the Act was made in time for the purpose of determining whether RFD’s purpose is proper or not.

Proper purpose: conclusion

[54]Different considerations are likely to arise in respect of member access to the share register and access by a member of the public. Where a member seeks access the court will consider the real purpose behind the request and determine as a matter of fact if the information is to be used for improper purposes such as to harangue shareholders. As a result of a ‘strong presumption’ in favour of shareholder democracy, a policy of corporate transparency and the promotion of good corporate governance the approach of the courts to a request by a member will be that he or she should be granted access where the purpose relates to his or her rights. However where access is refused by the board and an application is made to the court, the company may satisfy the court on the balance of probabilities that the request is not for a proper purpose: Burry & Knight Limited provides an example of where the court made a finding of improper purpose.[55]Where a member of the public makes a request the same principle will not apply as the nucleus of the issue is not about the exercise of shareholder rights. The member of pubic seeking access is an outsider. The ‘strong presumption’ regarding shareholder democracy does not obtain. The line drawn between the board of the company and the outsider in this case, is one of shareholder protection on one side and commercial exploitation on the other. The emphasis switches from shareholder democracy to the protection of the shareholders as a class, objectively viewed. But there are some alignments with a member request, so in a similar way the court is concerned to understand not only the purpose stated but the real purpose(s) behind the request. Once all purposes are clearly understood the court may weigh the rights of the company and the outsider taking into account the need for transparency, the reason for request and the reason for its refusal. In this regard motive (mentioned in the parliamentary debates) may be a relevant factor to take into account, and the history, timing of events and delay may also be relevant: see Burry & Knight Limited at first instance.[56]I conclude from the evidence that the real purpose for the request made by RFD is consistent with his motivation, namely to extract a commission or fee from a traced lost member. His interest in finding lost members is commercial self-interest.[57]The ICSA guidance considers it an improper purpose if the purpose of the request is made by an agency “specialising in identifying and recovering unclaimed assets for their own commercial gain by then contracting and extracting commission or fees from the beneficiaries….”. I infer that the ICSA seeks to protect members from potential harassment and commercial exploitation. Nevertheless the guidance is qualified so that such activities are improper “where the company is not satisfied that such activity is in the interests of shareholders”. It is clear from the qualification that the guidance is not recommending a blanket ban on such activities. In my judgment the qualification is consistent with the policy behind the section and provides a working guide for a company and permits circumstance flexibility.[58]In my judgment the interests of shareholders are not advanced in this case as the following circumstances prevail: 58.1. two or more agencies with more than one set of terms and conditions may lead to confusion if both contact a lost member; 58.2. the terms of engagement applicable to one lost member differ to one another merely because one agency reached a lost member before another; 58.3. a lost member may have a grievance upon learning that another agency was offering better terms but due to the terms and conditions imposed by RFD is not able to choose PS or go direct to the Company without paying a fee to RFD; 58.4. RFD is based out of the jurisdiction; 58.5. the commercial practice of RDF as a tracing agent is in doubt or unknown; 58.6. nothing is known about external agencies used by the tracing agent: I do not accept that section 119 of the Act provides sufficient prophylactic where information is to be provided to unknown persons or organisations in foreign jurisdictions.[59]Having in mind(i) the ordinary meaning of words in section 117 of the Act(ii) the reason for the legislative changes incorporated in the 2006 Act(iii) the guidance provided by the ICSA(iv) the real purpose for the request, as I have found(v) the Company’s articles of association(vi) the Company’s sensitivities regarding access to the information(vii) the Company’s engagement of a tracing agent prior to the request(viii) the continuing nature of the engagement(ix) the stated purpose of the request(x) the characteristics of the defendant requester(xi) the intended use of the information and(xii) the way in which the information is to be used, I conclude that the real purpose is not in the interests of shareholders and am satisfied that on the balance of probabilities the request is not for a proper purpose.[60]As a result of finding that the purpose is improper within the meaning of the section 117 of the Act, I direct that the Company shall not comply with the request. I will hear counsel on the issue of costs but have in mind an order pursuant to section 117(3)(b) of the Act.

Cited in 1 later judgment