Aidiniantz vThe Sherlock Holmes International Society Ltd, Court of Appeal - Civil Division, November 28, 2017, [2017] EWCA Civ 1875

Issuing Organization:Civil Division
Actores:Aidiniantz vThe Sherlock Holmes International Society Ltd
Resolution Date:November 28, 2017
 
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Neutral Citation Number: [2017] EWCA Civ 1875

Case No: A3/2016/3215

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION (COMPANIES COURT)

MR MARK ANDERSON QC (sitting as a Deputy Judge

of the High Court)

Petition No: 4695 of 2014

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 28/11/2017

Before:

LORD JUSTICE KITCHIN

LORD JUSTICE FLOYD

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Between:

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Thomas Roe QC (instructed by Smithfield Partners Ltd) for the

Applicant/Appellant

Christopher Brockman (instructed by Gordon Dadds LLP) for the Respondent

Hearing date: 9 November 2017

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Lord Justice Kitchin:

Introduction

  1. The Sherlock Holmes International Society Limited (``the Company'') is a company limited by guarantee which from 2004 until 2012 was involved in running the Sherlock Holmes Museum (``the Museum'') in Baker Street in London. The Company ceased trading in September 2012.

  2. On 1 July 2014, the respondent, Mr John Aidiniantz (``Mr Aidiniantz''), a founder of the Museum, presented a creditors' petition to wind the Company up. The petition debt of £112,449 was due to Mr Aidiniantz under a default costs certificate dated 16 June 2014.

  3. The Company, acting by solicitors instructed by the appellant, Mr Stephen Riley (``Mr Riley''), vigorously opposed the petition on the basis that the petition debt was disputed on substantial grounds and that the Company had a cross-claim against Mr Aidiniantz for a much larger sum in respect of admission fees to the Museum which, so it was alleged, he had misappropriated but had later agreed to pay back to the Company. On 1 October 2014, the Company began proceedings against Mr Aidiniantz and various companies which he controlled in order to recover the fees, but these proceedings were stayed pending the hearing of the petition.

  4. The hearing of the contested petition took place before Registrar Derrett on 15 January 2015 and on 11 March 2015 she gave judgment. She held that the Company should be wound up and made an order to that effect.

  5. On 19 June 2015, Henderson J (as he then was) gave the Company permission to appeal on the basis that the grounds of appeal were arguable and that an appeal would have a real prospect of success. He also stayed the winding up pending the outcome of that appeal.

  6. The appeal was fixed for hearing on 3 November 2015 with a time estimate of two days. However, on 27 October 2015, Mr Aidiniantz applied for a declaration that Mr Riley's appointment as a director of the Company was invalid. He contended that only persons who were members of the Company were eligible for appointment and Mr Riley was not and had never been a member. He also sought an order dismissing the appeal on the basis that the Company had no other director with the authority to pursue the appeal or resist the petition any further.

  7. The appeal and application came on for hearing on 3 November 2015 before Mr Mark Anderson QC, sitting as a deputy judge of the Chancery Division of the High Court. The parties agreed that the appeal could not proceed until the application had been resolved. It also emerged that Mr Aidiniantz had two additional objections to Mr Riley's appointment, namely that the Board was inquorate when he was appointed and that anyway, his appointment, if valid, had expired. It was not possible to hear the application in view of the late stage at which it had been made and accordingly the deputy judge adjourned it for hearing at a later date and gave directions for the service of particulars of claim and a defence and for the filing of evidence.

  8. The application was restored for hearing on 11 January 2016, again before the deputy judge, and lasted for four days. On 23 May 2016, he gave judgment. He found that Mr Riley was eligible for appointment as a director and that his appointment had been made by a quorate board, but that he had ceased to be a director on 31 December 2014. In these circumstances the Company had no directors and could give no instructions for its further participation in the appeal. The deputy judge therefore directed that the appeal against the order of Registrar Derrett be dismissed.

  9. By order dated 22 December 2016 Henderson LJ (as he had now become) joined Mr Riley to the proceedings for the purposes of the appeal and gave him permission to appeal.

  10. It is now contended on behalf of Mr Riley that the deputy judge fell into error and that he ought to have found that it was far too late for Mr Aidiniantz to assert that Mr Riley was no longer a director of the Company and that justice required the dismissal of Mr Aidiniantz's application and an order remitting the appeal against Registrar Derrett's order to the High Court so that Mr Riley could conduct it on the Company's behalf.

    The facts

  11. The following narrative is drawn in large part and with gratitude from the judgment of the deputy judge.

  12. These proceedings form part of a long running and bitter family dispute between, on the one hand, Mr Aidiniantz and, on the other hand, Mr Aidiniantz's half-siblings, Linda Riley (``Ms Riley''), Jennifer Decoteau (``Ms Decoteau'') and Mr Riley (collectively ``the Riley siblings''). The mother of Mr Aidiniantz and the Riley siblings, Grace Aidiniantz (``Grace''), was also involved in the dispute until shortly before her death on 28 November 2015.

  13. Mr Aidiniantz controls and is a director of three companies, Rollerteam Limited (``Rollerteam''), The Sherlock Holmes Museum Limited and Sherlock Holmes Limited (collectively ``the Museum companies''), which between them own and operate the Museum.

  14. The Company was incorporated by Mr Aidiniantz in 2004 so as to receive the admission fees generated by the Museum whilst taking the benefit of a VAT cultural exemption scheme. Mr Aidiniantz understood that the Company could receive the admission fees without charging VAT so long as it made no profits and its directors were not financially interested in the Museum. He also understood that he could not be appointed as a director of the Company but that there was no bar to the appointment as director of any other member of his family. Following its incorporation, the Company was granted a right by Mr Aidiniantz and Rollerteam to receive the Museum admissions fees.

  15. The memorandum of association of the Company provides, so far as relevant:

    ``3. The Company's objects are: To provide and promote interest in the Sherlock Holmes legend and to manage the [Museum] in London for the benefit of the public, on a non-profit making basis.

  16. The income and property of the Company shall be applied solely towards the promotion of its objects as set forth in this [memorandum] and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit, to members of the Company and no Director shall be appointed to any office of the Company paid by salary or fees, or receive any remuneration or other benefit in money's worth from the association. ...

  17. If, upon the winding up of or dissolution of the Company, there remains after the satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the Members of the Company, but shall be given or transferred to some other institution or institutions, having objects similar to the objects of the Company, and which shall prohibit the distribution of its or their income and property to an extent at least as great as is imposed on the Company under or by virtue of Clause 4 hereof, such institutions to be determined by the members of the Company at or before the time of dissolution, and if and so far as effect cannot be given to such provision then to some charitable object.''

  18. The articles of association of the Company provide, so far as relevant:

    ``3. The subscribers to the Memorandum of Association and such other persons as the Board shall admit to membership in accordance with the Articles shall be members of the Company. No person shall be admitted as a member of the Company unless he is approved by the Board. Every person who wishes to become a member shall deliver to the Company an application for membership in such form as the Board shall require executed by him.

  19. A member may at any time withdraw from the Company by [giving] at least seven clear days' notice to the association. Membership shall not be transferable and shall cease on death.

  20. Unless the Company has elected by Elective Resolution to dispense with the holding of Annual General Meetings the Company shall hold a General Meeting in every calendar year as its Annual General Meeting...

  21. Until and unless otherwise determined by the Company in General Meeting, there shall be no maximum number of members of the board and the minimum number shall be one.

  22. The Board may from time to time and at any time appoint any member of the Company as a Director, either to fill a casual vacancy or by way of addition to the Board, provided that the prescribed maximum be not thereby exceeded. Any member so appointed shall retain his office only until the next Annual General Meeting, but he shall then be eligible for re-election.

  23. Only persons who are members of the Company shall in any circumstances be eligible to hold office as a Director.

  24. The Office of a Director shall be vacated ....

    (C) If he ceases to be a member of the Company.

  25. The Board may meet together for the dispatch...

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