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||Neutral Citation Number:  EWCA Civ 1129
||Case No: A3/2015/0676
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
3433 of 2013,  EWHC 222 (Ch)
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE DAVID RICHARDS
SIR PATRICK ELIAS
|| RICHARD CHARLES FOX-DAVIES
||- and -
Timothy Collingwood (instructed by New Media LLP) for the Appellant
Andrew Thornton (instructed by Slaughter and May) for the Respondent
Hearing date: 15 December 2016
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
Lord Justice David Richards:
- It is common for a company to lose touch with some of its shareholders because they do not notify the company of changes of address, with the result that the company cannot communicate with those shareholders and dividends go unclaimed.
- The appellant carries on the business of tracing lost members of companies and, for a fee or commission, reuniting them with their shares. In furtherance of this business, he requested a copy of the register of members of the respondent company Burberry PLC (Burberry), under section 116 of the Companies Act 2006. Burberry refused to supply it and applied under section 117 for a direction that it should not comply with the request. After a contested hearing, Registrar Briggs made the direction sought by Burberry. The appellant appeals with permission granted by the Registrar.
The statutory framework
- Every member of a company is required to supply his name and address to the company, and every company is required to maintain a register of members containing their names and addresses, the dates on which they were registered as members and the number of shares held by them: section 113.
- The register must be kept available for inspection either at the company's registered office or some other place of which notice is given to the Registrar of companies: section 114.
- The rights to inspect and take copies of the register are set out in section 116:
(1) The register and the index of members' names must be open to the inspection-
(a) of any member of the company without charge, and
(b) of any person on payment of such fee as may be prescribed.
(2) Any person may require a copy of a company's register of members, or of any part of it, on payment of such fee as may be prescribed.
(3) A person seeking to exercise either of the rights conferred by this section must make a request to the company to that effect.
(4) The request must 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.
- The rights and obligations of a company on receipt of a request under section 116 are contained in section 117:
(1) Where a company receives a request under section 116 (register of members: right to inspect and require copy), it must within five working days either-
(a) comply with the request, or
(b) apply to the court
(2) If it applies to the court it must notify the person making the request.
(3) If on an application under this section the court is satisfied that the inspection or copy is not sought for a proper purpose-
(a) it shall direct the company not to comply with the request, and
(b) it may further order that the company's costs (in Scotland, expenses) on the application be paid in whole or in part by the person who made the request, even if he is not a party to the application.
(4) If the court makes such a direction and it appears to the court that the company is or may be subject to other requests made for a similar purpose (whether made by the same person or different persons), it may direct that the company is not to comply with any such request.
The order must contain such provision as appears to the court appropriate to identify the requests to which it applies.
(5) If on an application under this section the court does not direct the company not to comply with the request, the company must comply with the request immediately upon the court giving its decision or, as the case may be, the proceedings being discontinued.
- A refusal or failure to permit inspection or provide a copy as required under section 116, otherwise than in accordance with an order under section 117, is an offence on the part of the company and every officer in default: section 118(1). Additionally, by section 118(3), the court may by order compel an immediate inspection or direct that the required copy be provided.
- Section 119 creates two further offences. First, it is an offence for a person knowingly or recklessly to make in a request under section 116 a statement that is misleading, false or deceptive in a material particular: section 119(1). Secondly, it is an offence for a person in possession of information obtained by the exercise of the rights conferred by section 116 to do anything that results in the information being disclosed to another person or to fail to do anything with the result that the information is disclosed to another person, knowing or having reason to suspect that person may use the information for a purpose that is not a proper purpose: section 119(2).
- It is apparent from these provisions that they seek to balance two interests that may conflict. The first is the interest of both members of the company and the public at large in being able to know the identity of the members of companies and the extent of their shareholdings. As well as facilitating communications between shareholders, the ownership and control of companies is a matter of legitimate public interest (although access to the register of members may in practice be of limited effect in this regard, given the ability to hold shares through nominees). That interest extends also to the addresses of members so that communications may, in appropriate circumstances, be sent to them.
- The second is the interest in protecting members from abuse of the right of access to their personal information as members of a company. While the first interest is promoted by the right of access granted to members of the company and all members of the public by section 116(1) and (2), the second interest is protected by the requirements of section 116(4) as to the contents of a request for inspection or a copy of the register and by the power of the court under section 117 to direct a company not to comply with a request if satisfied that the inspection or copy is not sought for a proper purpose. Both interests are recognised by the offences created by sections 118 and 119.
- The protection of the interests of members is directed at two concerns. The first concerns the extent to which information about members obtained under section 116 will be disseminated. Thus, section 116(4)(d) requires the request to give the details there specified of the persons to whom the information will be disclosed. The second concerns the purpose of the request, which must be stated in the request (section 116(4)(c)). If the purpose is ruled improper by the court under section 117, the company will be directed not to comply with the request.
- These provisions of the 2006 Act, and in particular section 117, were considered by this court in In re Burry & Knight Ltd  EWCA Civ 604,  1 WLR 4046 (Burry & Knight). The request for inspection and copies of the register was made by a member, who stated in his request three purposes, one of which was "to write to shareholders and trustees detailing my written concerns about past conduct of directors which remain relevant". While that might normally be a proper purpose for requesting a copy of the register, it was held not to be so in the particular circumstances of the case, because (a) the court at first instance found as a fact that his real purpose was to harass other members and (b) as held by this court, his purpose was in any event improper because he was intending to ventilate stale claims in communications that would be of no real value to his fellow members.
- In the course of her judgment (with which Briggs and Christopher Clarke LJJ agreed in short concurring judgments), Arden LJ noted at  that in enacting section 117, which changed the previously unrestricted right of access to a register of members, Parliament had not adopted the final recommendation of the Steering Group of the Government's Company Law Review to limit the purposes of a request to a prescribed list but had "left the words "proper purpose" at large for the courts to work out in the conventional way, using the context and on a case by case basis". Parliament intended to leave the meaning of "proper purpose" open for the courts to determine, and not to limit or define it.
- Arden LJ gave important guidance on the application of section 117, to which I will later return.
- Like many companies with publicly-traded shares, Burberry has a significant number of registered shareholders for whom it has no current address (lost members).
- Burberry has included in its articles of association provisions enabling it to sell the shares of lost members at the best price reasonably obtainable at the time of sale, subject to compliance with a number of conditions including advertisements. The company must pay the net proceeds of sale to the former shareholder, if claimed.
- In 2013, Burberry appointed a search company, ProSearch Assets Solutions Limited (ProSearch) to trace and contact lost members. For this purpose, it is given access to Burberry's register of members. Once located, the members are notified of their shareholding in Burberry by means of a claim form agreed with Burberry detailing the number of shares and the outstanding cash entitlements. They are given the option of claiming the shares directly with Burberry or through ProSearch. If they choose to contact Burberry directly, they pay no charges but, if they use ProSearch, they are charged a fee at the rate of 12.5% of the cash and the value of the shares recovered. As at January 2015 some 30% of lost members, representing about 50% of unclaimed entitlements, had recovered their shares. Approximately 55% had done so directly and the remainder through ProSearch.
- The appellant gave evidence that he had established an asset tracing business known as Trust Property Researches (TPR) in 1995. He had operated separate companies under the TPR name in a number of countries but his activities are now confined to the UK. He is also a director and shareholder of Interum Limited (Interum), a company incorporated in Gibraltar, to which he provides the names and last known addresses of lost members. His evidence was that Interum is registered under the Data Protection Act 1998 and that its IT systems are secure. Interum makes the information available to "locally owned companies or individuals in the relevant countries", being "specialist researchers" who will assist in tracing the lost members and with whom he will share his fee. These researchers are independent of the appellant and Interum and not controlled by them. The evidence before the Registrar did not identify the researchers, the tracing methods used by them, how the information provided to them is kept confidential and whether they are bound by confidentiality terms.
- Once a lost member is traced, the appellant will notify them that he has information that will lead to them recovering an asset to which they are entitled, but he does not give them any information about the asset or its value, nature or location. They must agree to pay his commission, before any information about the property is disclosed. The commission will be payable whether the shareholder uses the appellant's services or deals directly with the company concerned, provided only that the information helps or makes possible the recovery of the property. The commission is fixed by reference to the value of the shares and any cash recoverable, but no rate is published nor has any evidence of rates been given in evidence. The appellant's publicity material states only that the commission "is based on the nature and complexity of the individual case" and will be given in the offer made to the shareholder.
- As part of his business, the appellant decided to seek to trace missing members of Burberry. To this end, he submitted a request under section 116 to Burberry for a full copy of its register of members under cover of a letter dated 27 March 2013, received by Burberry on 4 April 2013. On 10 April 2013, Burberry responded that it did not consider that the request complied with the requirements of section 116. In a letter dated 29 April 2013, the appellant submitted a further request in similar terms to his first, and enclosed the prescribed fee. On 2 May 2013, Burberry again refused the request and referred to the possibility of an application under section 117. The application was issued on 9 May 2013.
The Registrar's decision
- Following a fully argued hearing, at which both parties were represented by counsel, the Registrar held in a reserved judgment that the requests did not comply with section 116, so that Burberry was not in any event obliged to comply with them, and further that they were not made for a proper purpose. Because both parties were anxious to have a ruling on the proper purpose point, they agreed that the second request should be treated as compliant with section 116. On that basis, and in accordance with section 117(3)(a), the Registrar directed Burberry not to comply with it.
- The Registrar gave permission for this appeal, on which the appellant challenges both limbs of the Registrar's decision. I will refer to the Registrar's judgment when dealing with each of the grounds of appeal.
The validity of the requests
- I have earlier set out the terms of section 116(4) containing the information which a request "must contain". It is accepted that the requests complied with paragraph (a), giving the appellant's name and address, and that paragraph (b) was not applicable.
- The Registrar held that the requests did not comply with the requirements of paragraph (d).
- Section 116(4)(d) requires the request to state whether the information will be disclosed to any other person and, if so, his name and address or, where the person is an organisation, the name and address of an individual responsible for receiving the information on its behalf and, in either case, the purpose for which the information is to be used by that person. While the requests stated that the information would be disclosed to Interum, they did not disclose that the appellant would disclose to the specialist researchers the names and addresses of those shareholders he wished them to trace, still less state the names and addresses of the researchers. The Registrar held that the requests therefore did not comply with the requirements of paragraph (d) and were not valid requests to which section 117 applied. The appellant challenges this conclusion on several grounds.
- First, the appellant submitted that "the information" in paragraph (d) means all the information, that is, in this case, the entire register of members. It follows that where the names and addresses of only some members are disclosed to another person, the requirement of paragraph (d) does not apply. The only support for this submission was the use of the definite article in the phrase "the information". I can see no reason why paragraph (d) should apply only in those circumstances. Whatever the precise purpose of the requirement to inform the company of those who will receive the information, it applies as much to disclosure of some of that information as to the disclosure of all of it. Mr Collingwood, appearing for the appellant, submitted that the purpose of the requirement was to enable the company to assess the statement required by paragraph (c) as to "the purpose for which the information is to be used". Even if that is right, it is as much a reason for requiring a statement of the persons who will receive some of the information as of those who will receive all of it. The information can be misused as easily by dividing it among a number of recipients as by providing them with all of it. Moreover, it serves the important purpose of providing a check on the extent to which personal data will be disseminated.
- Second, it was submitted that the requirement is aimed at sham requests, that is, requests made apparently by one person but in fact on behalf of another. I need only say that I can see nothing in the wording or context of section 116 to justify this reading.
- Third, paragraph (d) should not be construed in a way that is too strict or technical, particularly in view of the summary nature of the scheme, evidenced by the short period of only five days in which the company must respond to a request. A request should be a straightforward document to complete. By stating that the information would be provided to Interum which "may share information with other parties in accordance with its registration and obligations under the UK Data Protection Act", there was substantial compliance with paragraph (d). It may be impractical or impossible to provide names and addresses of all the persons to whom information may be disclosed. This was the case with the appellant's requests. He could not identify the appropriate researchers before receiving the register and, from it, learning the countries in which members' addresses were located.
- In my judgment, there is no good reason to read paragraph (d) as not requiring the identification of persons to whom the information may, but not necessarily will, be disclosed. The policy reasons for paragraph (d) apply as much to those persons as those to whom the information will definitely be disclosed. The answer in this case is to provide the names and addresses of all the researchers, not to provide none of them. As to the possibility that it may later become unexpectedly necessary to disclose the information to some other person, the requirement speaks as at the time the request is made.
- Fourth, a failure to comply with the requirements of section 116(4), alternatively the requirements of section 116(4)(d), does not invalidate the request or excuse the company from compliance with it. As regards paragraph (d), the mischief of misuse by third parties is met by the offence created by section 119(2).
- This too is a submission that I cannot accept. Section 116(4) is clear that the request "must contain" the information specified in the sub-section, and section 117(1) requires a company to comply with "a request under section 116". The statutory scheme strongly suggests that this is a mandatory requirement and that a company is not obliged to comply with a request that does not contain the necessary information. It is hard to see that paragraphs (a) and (b) could be anything other than mandatory. Paragraph (c) is essential to enable the company to form a view whether the requester's purpose is proper and so decide how to proceed under section 117. As to paragraph (d), the appellant's own submission is that it is directed at enabling the company to assess the purpose. In any event, it would be very odd if compliance was mandatory as regards paragraphs (a) to (c) but not paragraph (d). Substantial compliance with section 116(4) might suffice, but in this case there was a wholesale failure to comply with paragraph (d).
- In my view, the Registrar was right to hold that non-compliance with section 116(4)(d) invalidated the requests.
- The Registrar also held that the request did not comply with section 116(4)(c) because it did not sufficiently or accurately state the appellant's purpose, but for two reasons it is unnecessary to consider further that part of his first decision. First, he held, and we have agreed, that the request did not comply with paragraph (d). Secondly, the parties agreed to treat the second request as complying with section 116(4), so as to obtain a decision on whether the appellant's purpose was proper.
Was the appellant's purpose in requesting a copy of the register a proper purpose?
- A company is not required to comply with a request, and will be directed not to do so, if, on its application, the court "is satisfied that the inspection or copy is not sought for a proper purpose". It is apparent from this wording that the onus lies on the company. It requires a two-stage process. First, the purpose of the request must be established. This no doubt starts with the purpose stated in the request as required by section 116(4) but, as Arden LJ noted in Burry & Knight at , the statute does not restrict investigation of it to the stated purpose. The court will find the purpose as a fact, on a balance of probabilities, on the evidence before it. Secondly, once the purpose is established, the court must make an evaluative judgment as to whether it is a proper purpose. As stated above, this case has concentrated on whether the appellant's purpose was proper.
- As I earlier mentioned, Arden LJ noted in Burry & Knight that, rather than specify proper purposes, Parliament had left it to the courts to determine proper and improper purposes in the conventional way, using the context and on a case by case basis. The judgment whether a purpose is proper will often depend on the precise facts and circumstances in which it arises for decision.
- It is, of course, possible to identify some purposes that, in general, will be either proper or, conversely, improper. Arden LJ noted a number of them. A member who wants to obtain support to requisition a general meeting will generally have a proper purpose, except on unusual facts such as those in Burry & Knight itself. A person, whether or not a member, who was genuinely investigating some possible corporate impropriety would generally have a proper purpose, as would a journalist investigating in good faith the ownership of or interests in the company's shares: see Burry & Knight at  and . On the other hand, there are some obvious abuses. It could never be a proper purpose to use the information to harass shareholders.
- In Burry & Knight, Arden LJ drew attention to the reports and recommendations of the Company Law Review that preceded the enactment of the Companies Act 2006, and in particular their reference to abuse by "bounty hunters" and advertisers. In the initial consultation document (Developing the Framework, March 2000), there was given as examples of abuse of the right of unrestricted access to registers of members ""bounty hunters" [who] may use the lists in combination with other information to contact members who are thought to be unaware of their holdings". In its next consultation document (Completing the Structure, November 2000), the Steering Group acknowledged that its proposal for reform would not preclude "bounty hunters" from accessing registers. The provisions contained in sections 116 and 117 differ significantly from the Steering Committee's proposal and by adopting the general and flexible test of proper purpose enable the court to exclude "bounty hunters" without having to exclude tracing agencies that do not justify that pejorative description.
- The Court of Appeal also held that, in considering whether a purpose was proper, it was legitimate for a court to have regard to the guidance note on this subject issued by the Institute of Chartered Secretaries & Administrators (ICSA) in June 2007, as it distils the experience of its members, while of course being non-binding and non-exhaustive: see Arden LJ at . Mr Thornton, on behalf of Burberry, relied on the following example of improper purpose:
"requests from agencies which specialise in identifying and recovering unclaimed assets for their own commercial gain by then contacting and extracting commission or fees from the beneficiaries, where the company is not satisfied that such activity is in the interests of shareholders;"
- Registrar Briggs set out his reasons for concluding that the appellant's purpose was improper in his judgment at  - .
- At -]55], he said that different considerations were likely to arise in respect of access sought by a member of the company and access sought by a non-member. As a result of a "strong presumption" in favour of shareholder democracy, corporate transparency and good corporate governance, the purpose of the member will generally be proper where it relates to his or her rights as a member, but the company may show that the purpose is not proper, as occurred in Burry & Knight. In the case of a non-member, the "strong presumption" does not apply. "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."
- At  he considered that the qualification in the ICSA guidance note as regards tracing agencies ("where the company is not satisfied that such activity is in the interests of shareholders") was consistent with the policy behind the section and provided a working guide and flexibility for companies.
- At , the Registrar set out the reasons for his own conclusion that the interests of shareholders were not advanced in this case:
"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 [the appellant] is not able to choose [ProSearch] or go direct to the Company without paying a fee to [the appellant];
58.4 [the appellant] is based out of the jurisdiction;
58.5 the commercial practice of [the appellant] 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."
- His conclusion and the reasons for it are set out at :
"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."
- The appellant challenges the Registrar's reasons and conclusion on several grounds. He submits that the Registrar wrongly applied a subjective test, as opposed to an objective test (taking account at [59(vi)] of Burberry's sensitivities regarding access to the information); that he applied a test that looked to the mechanics of implementing the purpose, rather than finding that "a particular purpose was improper in itself"; that he was wrong to apply a test based on whether the purpose was in the interests of shareholders as a class; and that he took account of extraneous matters that were not relevant to the propriety of the purpose, such as "the characteristics" of the appellant and the retention of ProSearch by Burberry as a tracing agency.
- The appellant submits that the right approach is to ask whether the purpose (once identified) "in itself is improper". The propriety of the purpose is to be assessed objectively, involving a value judgment. To be a proper purpose, it may be, but need not be, in the interests of the company or its shareholders. The intended use of the information and the way it is to be used, as well as the characteristics of the requester, are relevant only if they justify a finding of a different or additional purpose to the purpose stated by the requester.
- I agree with some of the submissions made by Mr Collingwood on behalf of the appellant.
- First, the test of whether a purpose is improper is objective, in the sense that it is made by the court on the basis of its evaluation of the purpose. The ICSA guidance is correct that the company must form its own view about the propriety of the requester's purpose if it is to decide under section 117(1) to refuse a request, but on the ensuing application to the court, it is for the court to reach its own view. The court's decision does not depend on the company's subjective view nor is the court reviewing the company's decision. In my view, the Registrar did form his own view on what he identified as the appellant's purpose and, if there was any error in this respect, it was by having regard to the company's "sensitivities regarding access to the information."
- Second, I agree that the test as to whether a purpose is proper does not depend on whether it is in the interests of shareholders. It is not mentioned in the Act as a determining factor, and I see no reason to imply it. It is not difficult to think of several examples of requests that have nothing to do with the interests of shareholders individually or as a class. Indeed, the ICSA guidance gives examples: requests for the purposes of credit or identity checks or general statistical research or enforcing judgments. In appropriate cases, investigative journalism might be another example.
- Mr Collingwood was critical of references made by the Registrar to the interests of shareholders and their protection. I have earlier referred to the Registrar's view in his judgment at  that, where the request is made by a non-member, the "emphasis switches from shareholder democracy to the protection of the shareholders as a class, objectively viewed". As a general proposition, this is expressed too widely. The examples given in the previous paragraph show that, whether or not the requester is a member, the protection of the shareholders as a class may well be irrelevant. Moreover, I do not accept that there is a clear distinction to be made between requests made by members and those made by non-members. The Act makes no such distinction, except that a fee is payable by a non-member under section 116(1), and it applies the same purpose test to all requests. Of course, shareholder democracy will generally justify a request for the register for the purpose of circulating shareholders on matters relating to the company, but a member may have other purposes that are proper but are unrelated to questions of shareholder democracy.
- Mr Collingwood also criticised the Registrar's conclusion at  that "the real purpose is not in the interests of shareholders and the request is not for a proper purpose." If the Registrar meant that, in order for the purpose to be proper, it had to be in the interests of shareholders, then I would respectfully disagree with him, but I do not think that is a correct reading of his judgment. At  he found the appellant's purpose to be to extract a commission or fee from traced lost member and he took the view that the interests of shareholders were not advanced by the appellant's proposed use of the register. His judgment indicates that he concluded that the particular use to which the appellant would put the information in the register would be contrary to, and damaging to, the interests of lost members. If borne out by the facts, that in my judgment could, indeed almost certainly would, legitimately found a conclusion that the purpose was not proper.
- The core of Mr Collingwood's case on behalf of the appellant is that, in considering the requestor's purpose and whether it is proper, the manner in which the purpose is to be effected is irrelevant, unless it shows that there is another purpose. In my view, no such sharp distinction between ends and means can be made. In my judgment, the Registrar was justified in finding that the appellant's purpose was to "extract" a commission or fee from traced lost members, by not disclosing the asset to which they may be entitled before they agree to pay his commission, and that this purpose was not proper. Members of a company are required to provide their names and addresses to the company and the company is in turn required to record that information in its register of members. The appellant's request involves obtaining that personal information by the statutory machinery and then using it to his financial advantage through the expedient of not disclosing to those members the very information that he has obtained, namely that they hold shares in Burberry.
- In his judgment at  (quoted above) the Registrar listed six reasons for his conclusion that the interests of shareholders were not advanced by giving access to the appellant to the register. I have already explained that, while a proper purpose need not be in the interests of shareholders, the purpose in this case is said by the appellant to be in their interests but the Registrar's conclusion is, on a reading of the full judgment, that access to the register would be against their interests. Read in isolation, the six reasons are open to criticism, and some of them (for example, the appellant being based out of the jurisdiction) could not even cumulatively justify a finding that the purpose was improper. None of them was necessary to the Registrar's decision that, insofar as they were known, the terms that the appellant would offer to lost shareholders made his purpose improper. However, some of the reasons did legitimately draw attention to the fact that Prosearch was doing the same job on unobjectionable terms. Those reasons are addressed to the way in which the appellant would go about his business, once armed with a copy of the register. As I have earlier said, means and ends cannot be separated in a case like this. Above all, at  and elsewhere in his judgment, the Registrar identified the terms on which the appellant would obtain payment from traced members, and his use of the register for that purpose, as amounting to an improper purpose.
- In my judgment, the Registrar was fully entitled on the material before him to conclude that the appellant's purpose was not proper and accordingly to direct Burberry not to comply with the appellant's requests, even if they had otherwise complied with section 116.
- The appellant had a third ground of appeal, that the Registrar erred as a matter of fact in finding that the appellant's purpose was not in the interests of shareholders and he thereby created an anti-competitive market. In the light of my conclusions on the other grounds, this does not arise for decision and it was not the subject of oral submissions.
- For the reasons given in this judgment, I would dismiss the appeal.
Sir Patrick Elias:
- I gratefully adopt the account of the material facts set out by David Richards LJ in his judgment. Ultimately I agree with the conclusions he has reached but I respectfully disagree with certain aspects of the reasoning of Mr Registrar Briggs which have in part been approved by David Richards LJ. I am not persuaded that the Registrar did approach the issue of proper purpose in an appropriate way and I would not uphold his reasoning on that aspect of the case.
Was there a valid application?
- The first issue before the Registrar was whether the request dated 27 March 2013 complied with section 116. The significance of this is that if it did, the company did not make its application to the court within five working days as required by section 117, and therefore that application, being out of time, could not properly be considered at all. The company would be obliged to accede to the request. However, if there was no valid request, no obligation to apply to the court was ever triggered.
- The Registrar held that there was no valid section 116 request for two reasons. First, the applicant failed to give the names and addresses of persons to whom the information would be disclosed; and second, the application failed properly to set out the relevant purpose for which the information would be used.
- For reasons given by David Richards LJ, I agree that the failure to provide the names and addresses of those to whom the information would be given constituted a failure to comply with section 116(4) and invalidated the request. In particular, I agree that there is no basis whatsoever for saying that the names and addresses need only be provided where the full register is made available to a third party but not if it is only partially revealed. I was more troubled by the argument that no relevant information has been revealed to the third party within the meaning of the subsection in circumstances where the identity of the company is not made known to the third party at all. That is allegedly the position here. The appellant says that whilst third parties would know in general terms the value of the shareholding of the person whom they were being asked to trace, they would not know the identity of the company in which shares were held. I see some merit in the argument that the relevant information referred to in section 116(4)(d) is the share register itself, and that merely providing the names of shareholders does not constitute information about the share register if the company's identity remains concealed. The names are not being disclosed qua shareholders as such. However, on balance I accept that since the names disclosed to third parties are only known as a result of the request, it is appropriate to treat that information as falling within the scope of section 116. The company still has a legitimate interest in knowing to whom the details will be revealed.
- In my opinion the alternative ground on which the Registrar found the request not to comply with section 116, namely the fact that the stated purpose did not reflect the true purpose, raises more difficult issues. However, in view of the fact that the request was invalid in any event, it is not necessary to resolve that issue on this appeal.
What is a proper purpose?
- The Registrar found that the real purpose of the application was commercial self-interest, namely to extract a commission or fee from a traced lost member. To the extent that this will be the primary objective of any commercial organisation undertaking tracing activities, that was plainly a justified, indeed uncontroversial, finding. I do not accept, however, that the failure to identify this as the company's objective misrepresented the true purpose of the request. In my view it is fanciful to suggest that there is any deception in failing to identify this as a specific objective. It is obvious that any business will be seeking to make a profit out of the tracing activity; this will not be a philanthropic exercise. Moreover, the fact that the objective is commercial does not of itself demonstrate that the purpose is improper. Indeed, this company has an arrangement with another search organisation, ProSearch, who also seek to make a profit out of the activity and yet it was given access to the register. Furthermore, whilst the wider objective may be commercial, there is still the related purpose, essential if the commercial objective is to be achieved, of connecting or re-connecting the lost shareholder with the company.
- In my judgment the appellant was justified in identifying this as the relevant purpose in the application. If he had simply informed the company that his purpose in seeking the information was to make a profit from his dealings with shareholders, that would have been an unhelpful statement which would not have revealed to the company what it really needed to know, namely how the information was to be used. I do accept, however, for reasons developed below, that the appellant should have revealed the commercial terms on which he was willing to re-connect shareholders with the company and that the failure to do so was critical in this case.
- David Richards LJ places great emphasis on the fact that ProSearch would inform the shareholder that he or she has shares in Burberry thereby enabling the shareholder to take steps to re-connect with the company without having to pay any commission to the tracing agent. He considers that the fact that the appellant will not enable the shareholder to do this, but will seek a commission before revealing the name of the company, necessarily involves extracting money from the shareholders which cannot be a legitimate purpose. He asserts that it cannot be proper to obtain personal information about a shareholder from the register and then refuse to reveal that information to that shareholder unless and until a fee is paid. I respectfully disagree. Costs will inevitably be incurred in tracing lost shareholders, and any commercial organisation will have to determine how to cover those costs. ProSearch has chosen only to charge those who opt to use their services to re-connect the shareholder with the company, but it is unrealistic to think that they would undertake this exercise unless they were confident that enough traced shareholders would pay that commission to make the business viable. I do not accept that any tracing business will have to operate in this way in order to render its purpose in accessing the register a proper one. Nor do I accept that it cannot be in the interests of the shareholders for a company to seek to cover its costs by requiring a fee before the identity of the company is made known. If the sum charged is a modest proportion of the value to the shareholder, it is unjust to characterise the company as a bounty hunter. It still leaves potentially a very substantial benefit to the shareholder which, but for the tracing activity, he may well never receive. Moreover, it is entirely a matter for the shareholder whether to accept the offer or not.
- However, I do agree with David Richards LJ that when deciding whether a purpose is proper, it may be necessary not only to look at the objective but also the means of achieving it. That was indeed the view of this court in In re Burry & Knight Ltd  EWCA Civ 604,  1 WLR 4046. I accept that if, for example, the terms on which a lost shareholder may be re-connected to the company are commercially oppressive, a court can properly find that it is not in the interests of the shareholder because of the way in which the purpose is being pursued, and accordingly conclude that the purpose is not a proper one. This is consistent with seeking to distinguish between a bounty hunter who exploits the shareholder unfairly and the party who, whilst making a profit out of the tracing activity, does so in a way which potentially benefits the class of lost shareholders.
- However, where I respectfully disagree with both the Registrar and David Richards LJ is in the range of considerations which may properly bear upon the question whether a purpose is proper. The finding of the Registrar was that the real purpose was a commercial one which could only be justified if it was otherwise in the interests of the shareholders. He concluded that it was not, for reasons set out in para.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 to 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 RFD as a tracing agent is in doubt or unknown;
58.6 nothing is known about the external agencies used by the tracing agent: I do not accept that section 119 of the Act provides a sufficient prophylactic where information is to be provided to unknown persons or organisations in foreign jurisdictions."
- David Richards LJ suggests (para. 50 ) that properly read, the Registrar was not intending to say that the purpose was improper because it was not in the interests of the shareholders but rather because it was positively harmful to them. It may well be that the Registrar would have found that more draconian test satisfied, but in my view he was not adopting that test. Rather he was applying the ICSA guidance (see para.38 above) to the effect that agencies who trace for commercial gain will not be acting for a proper purpose where the company is not satisfied that such activity is in the interests of the shareholders. Para. 58 identifies in terms why the Registrar concluded that the interests of shareholders were not advanced; he does not assert that they were harmed.
- However, in my view nothing turns on the particular test he adopted. In my judgment whichever test was applied, none of the factors identified in para.58, save to a limited extent the last, is material to the question of proper purpose. I recognise that the ICSA guidance permitted the Registrar to have regard to the interests of the shareholders. But that is only in the context of determining the purpose of the request: is the information going to be used for a proper purpose? The guidance cannot be interpreted so as to deny access where a purpose is otherwise proper. It will not proper be if the terms are exorbitant, for example, and in such cases it will not be in the shareholders' interests to receive the communication.
- Accordingly, I accept that the terms on which the tracing activity is carried out by the company may in principle render an otherwise legitimate objective illegitimate. But in my judgment the focus must be on how the requesting company is going to use the information. In particular, I do not think that it is legitimate to have regard to the fact that there is another agency already carrying out the same task, yet the first three factors identified by the Registrar all rely upon that fact. If the terms on which the requesting party provides the tracing service are otherwise appropriate (if, for example, in this case the services offered by the appellant were in fact similar to, those offered by PS, which is of course considered to be acting for a proper purpose) I can see no basis for asserting that an otherwise proper purpose could be treated as improper because another search agency was already in place and carrying out tracing functions. I would accept that it may not be desirable to have competing search agencies (although that is far from self-evident since one may contact lost shareholders which the other was unlikely to trace and vice versa) but the test is not whether it is desirable to make the register available, nor whether the service which the requester seeks to provide may be achieved more beneficially from the shareholders' point of view. In my judgment access to the register cannot be denied merely because the company believes that one body acting as a tracing agent should suffice and seeks to adopt a policy to that effect. That policy is not material to the question whether the second body is seeking access for a proper purpose. In my judgment it distorts the language of section 116 to say that an otherwise proper purpose becomes improper because another party is already seeking to achieve the same objective. The point can be tested by considering the case of a second tracing agent who provides a cheaper service to shareholders than the agent already in place. Could it seriously be said to be acting for an improper purpose? Or would the purpose for which the original agent was using the share register suddenly become an improper one because less beneficial to shareholders than the new tracing agency? In my judgment either conclusion would be bizarre. The company (and subsequently the court) can only refuse the second request if, having regard to the purpose and manner in which the share register will be used by that requester, it concludes that the purpose is an improper one.
- Nor, in my view, was the Registrar entitled to reject the request because the appellant was based out of the jurisdiction or their commercial practice was unknown. The former requirement discriminates against foreign based organisations without any obvious justification; and the latter, if relevant, would require an appellant to provide details of its commercial operation which Parliament has not required it to provide. Once the mandatory information required by section 116 is provided, the only reason for rejecting the request is that the purpose is improper, and it is for the court to determine that question. If the circumstances relating to the way in which the applicant conducts his business cast doubt upon whether its stated purpose is its real purpose, for example where there is reason to believe that it would not be capable of providing the services it claims to want to provide, that may be relevant. But otherwise I do not believe that it is legitimate for a court to deny access to the share register because of suspicions about whether the requesting party operates efficiently.
- As to the final factor, the failure to provide details of the external agencies renders the request invalid, for reason already given. But if that information had been provided, I do not accept that it would be legitimate to have regard to the fact that nothing is known about the way those agencies operate. There is no statutory obligation to provide information about such third parties business practice in the section 116 request, and in my view no basis for implying that it may need to be provided save perhaps where this information may have a legitimate bearing upon whether a purpose is proper or not. Contrary to the views of the Registrar, in my opinion section 119, which renders it a criminal offence to provide information obtained from the register to a third party in circumstances where the applicant knows or has reason to suspect that the third person may use the information for an improper purpose, is intended to provide sufficient safeguards from potential third party abuse.
- Having given these reasons for concluding that the interests of the shareholders were not advanced, the Registrar in para. 59 (set out in para. 43 above) then referred to a host of other factors which he said that he had "had in mind" in reaching his conclusion that the application was not in the interests of the shareholders and was not for a proper purpose (see para. above). It is not clear whether he intended each of these factors to point against the inference that there was a proper purpose, or was merely identifying what he believed to be potentially relevant considerations. It is, however, apparent from the judgment read as a whole that the fact that ProSearch was already engaged to trace lost members engagement, the characteristics of the requester, and the stated purpose of the request all militated against acceding to the request. For reasons I have given, I do not think that these were legitimate factors to weigh against the appellant.
- In view of what in my judgment were material mis-directions by the Registrar, I would not support his conclusions for the reasons he gave. He has in my opinion taken into account improper considerations. In my judgment he is in effect asking whether it is desirable that the requester should be allowed access to the register. If that were the test, I would not be inclined to interfere with his conclusion; but it is not. The focus must be on the purpose for which access is sought, and the method of achieving that.
- However, in the particular circumstances of this case I have concluded that the only proper response, if the correct approach had been adopted, was to refuse access to the register. Without information about the commercial charges – and none was provided to the court – a court could not properly determine whether or not the purpose was proper. The terms on which the information is provided are in my view critical to that question. Although I accept that the onus is on the company to show that the purpose is improper, the requester must at least provide sufficient information about the terms on which the lost shareholder will be reconnected to enable a proper assessment of the stated purpose to be made. Only the requester can provide this information and without it neither the company nor the court can be satisfied that the shareholder will not be exploited in a manner which renders the purpose improper. So long as there is a real risk that this might be so, and the only party who can provide evidence to remove that concern is the appellant, the failure to give any evidence even to the court is in my view decisive of the application.
- I would add this. I recognise the force of the point, referred to by the Registrar, that a potentially unfortunate consequence of my analysis is that, assuming that the appellant had been successful in gaining access to the register, a shareholder may have made a payment to him in order to obtain information about the shareholding and very shortly afterwards have been approached by ProSearch, from whom he could have obtained the information for nothing. I do not think that this in any way invalidates the purpose, essentially for reasons I have given. It is a choice which the shareholder has made, and it is important to remember that there may be cases where, but for the intervention of the appellant, no successful re-connection would be made. But if it were to be thought that the failure to inform the shareholder that other agencies, if they were successfully to trace the shareholder, might provide the service more cheaply rendered an otherwise proper purpose improper, this might arguably be dealt with by imposing a condition on the use of the information, perhaps requiring the appellant to reveal that possibility to the shareholder. The court in Burry and Knight envisaged that if there were both proper and improper purposes arising from the manner in which the purpose was pursued, the court can in an appropriate case impose conditions on the use of the information to ensure that it is used only for the proper purpose: see the discussion by Arden LJ, paras. 81-88. In that case the court imposed terms on the basis on which one shareholder could communicate with others. I raise this as a possibility; it was not a point raised or argued before us.
- For these reasons, therefore, which differ from those of Mr Registrar Briggs and David Richards LJ, I too would dismiss this appeal.
Lord Justice Longmore:
- Parliament has, almost ostentatiously, provided no assistance to company lawyers seeking to understand the new provisions in the 2006 Act entitling a company to invite the court to direct the company not to comply with a request to inspect and copy the register of members
"if the court is satisfied that the inspection or copy is not sought for a proper purpose."
As Arden LJ observed in Burry Parliament neither accepted the recommendation of the Steering Group nor did it follow the precedent of the Australian Companies Act but just left the court to develop the law on a case by case basis. Burry is of no direct assistance since the application was by a fellow-member of the company and was made in order to pursue a private vendetta. Unsurprisingly that was held not to be a proper purpose.
- Inspection and copying of the register is sought in the present case by a company owned and managed by Mr Fox-Davies who, if he will forgive my saying so, is no more and no less than an ordinary member of the public. On the face of it there is no reason why he or his company should not inspect the register of members. But there is no public interest in his doing so; he wants to make money for his company by tracing shareholders or their heirs who have forgotten or lost interest or do not know that they have shares in Burberry and informing them that he can tell them something to their advantage if they are prepared to pay a fee amounting to a percentage of the value of any shares or dividends they may acquire. Before 20th January 2007 when section 117 of the 2006 Act came into force, there would have been no reason to inhibit Mr Fox-Davies from doing this.
- Mr Thornton for Burberry submits that one of the relevant mischiefs to which sections 116 and 117 are addressed is the unsolicited inquiry. The idea, as he colourfully expressed it, was to stop elderly grandmothers being pestered by outside agencies. The difficulty with that is that Parliament has not given any support to that idea; grandmothers might not like to be pestered but younger members of the family might be pleased to assist their grandmothers if they thought that they might benefit in due course.
- In these uncharted waters, Registrar Briggs has asked himself whether the interests of the shareholders are advanced by allowing Mr Fox-Davies to inspect and copy the register and has concluded that they are not advanced, largely because Prosearch offers the same service on apparently better terms namely no up-front payment and allowing the shareholder to do his own work of recovery, if he wishes, after obtaining the relevant information.
- I agree with David Richards LJ and Sir Patrick Elias (1) that Mr Fox-Davies' request did not comply with section 116(4)(d) because it did not identify the names and addresses of the persons to whom "the information will be disclosed"; a statement of disclosure to Interum only (and not the researchers to whom the information was also to be disclosed) was insufficient; and (2) that one of the (main) purposes of the request to inspect the register was to enable Mr Fox-Davies to persuade any shareholder, with whom he made contact, to accept on his terms the need for his services before informing such shareholder of the nature or value of the asset which is potentially recoverable and that that, on the facts of this case, is not a proper purpose, in the absence of disclosure of the full terms on which the lost shareholder will be reconnected to the company.
- That is enough to dispose of this appeal in Burberry's favour and to uphold the order of Registrar Briggs.
- But since my Lord and Sir Patrick have expressed conflicting views on the question whether Registrar Briggs took irrelevant considerations into account in concluding that Mr Fox-Davies' purpose in requesting inspection of the register was an improper purpose, I should give my own views on that question.
- The stated purpose of the request was:-
"to assist and allow shareholders who may otherwise be unaware of their entitlement to reassert ownership or recover benefit of their property."
Registrar Briggs found as a fact that "the real purpose" of the request was "to extract a commission or fee from a traced lost member". That is a finding from which this court should not differ.
- The question then arises whether that inspection of the register was sought for a "proper purpose". Registrar Briggs followed the ICSA guidance to the effect that the purpose of third parties, in seeking to identify and recover unclaimed assets for their own commercial gain by contacting and extracting commission or fees, would be an improper purpose "where the company is not satisfied that such activity is in the interests of the shareholders". In my view Registrar Briggs was entitled to follow that guidance and, substituting "the court" for "the company", entitled to ascertain whether the activity of Mr Fox-Davies was in the interests of shareholders. He concluded that it was not. In so doing he relied on the six circumstances set out in para 58 and the twelve considerations set out in para 59.
- In my view the Registrar's reasoning was over-elaborate and liable to give rise to debate about the legal relevance of some of the circumstances and the considerations, as can be seen from the fact that my Lord considers that the Registrar was entitled to have a number of them in mind whereas Sir Patrick thinks that some were irrelevant and, to that extent, the Registrar's decision was open to criticism. To the extent that the Registrar may have thought either that Mr Fox-Davies' purpose was to make a commercial profit or that the existence of Prosearch rendered his purpose improper and that those were in themselves relevant considerations, I agree with Sir Patrick that they were not. But the Registrar did not commit himself to either of those bald propositions because he qualified them by the phrase "where the company [the court] is not satisfied that such activity is in the interests of the shareholders". (I do not myself read the Registrar's judgment saying that Mr Fox-Davies' purpose was positively harmful to the shareholders).
- The real problem in this case was that Prosearch was already on the scene offering apparently better terms to shareholders than Mr Fox-Davies was offering and without full information about Mr Fox-Davies' terms (which was never forthcoming) showing that in fact his terms were at least as favourable, the court was unable to hold that his activity was in the interests of the shareholders. That was effectively the Registrar's third circumstance in para 58 of his judgment. For my part I consider the existence of Prosearch and knowledge of the terms on which they were prepared to deal with the shareholders were relevant matters for the Registrar to take into account. When one couples that with the fact that Mr Fox-Davies would only reveal to a shareholder the existence of the Burberry shares after the shareholder had agreed his terms, whatever they were, it can be seen that his purpose was not a proper purpose. The Registrar therefore reached the correct conclusion and I agree that this appeal should be dismissed.
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