The Sherlock Holmes International Society Ltd v Aidiniantz
| Jurisdiction | England & Wales |
| Judge | Mark Anderson |
| Judgment Date | 23 May 2016 |
| Neutral Citation | [2016] EWHC 1076 (Ch) |
| Docket Number | Petition No: 4695 of 2014 |
| Court | Chancery Division |
| Date | 23 May 2016 |
[2016] EWHC 1076 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF THE SHERLOCK HOLMES INTERNATIONAL SOCIETY LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
On appeal from Registrar Derrett
Royal Courts of Justice
Strand, London, WC2A 2LL
Mark Anderson QC
Petition No: 4695 of 2014
Mr Thomas Roe QC and Mr Robert Strang (instructed by Pinder Reaux and Associates) for the Appellant
Mr Hugh Sims QC and Mr Christopher Brockman (instructed by Gordon Dadds LLP) for the Respondent
Hearing dates: 3, 4 November 2015, 11 – 14 January 2016
Mark Anderson QC:
Introduction
This application is made within an appeal against a winding-up order in respect of the Sherlock Holmes International Society Limited (" the Company"). The application is for a declaration that the Company has not authorised the appeal and that its name should be struck out and the appeal dismissed.
The current litigation arises in the context of a family dispute between the petitioner John Aidiniantz (" Mr Aidiniantz") on one side, and on the other his three half-siblings, Linda Riley, Jennifer Decoteau and Stephen Riley (" Ms Riley", " Ms Decoteau" and " Mr Riley" respectively, collectively " the Riley siblings"). Their mother Grace (sometimes known as Aidiniantz and sometimes as Riley, to whom I shall refer as " Grace") died on 28 November 2015. She was also involved in the dispute before she fell ill.
The dispute has given rise to litigation on several fronts since December 2012. The application bundle before me contains no fewer than six fully reasoned judgments dealing with various aspects of the family feud, and I believe there are others. This appeal alone, including all the applications within it, occupied the court for some eleven days.
The issue before me
The Company is a company limited by guarantee, incorporated on 14 July 2004, which until 2012 was involved in running the Sherlock Holmes Museum in Baker Street.
It is agreed for the purpose of this application that the Company's only members since incorporation have been Mr Aidiniantz and Grace, whose demise therefore left Mr Aidiniantz as the sole member.
The only director of the Company recorded at Companies House is Mr Riley.
On 1 July 2014, Mr Aidiniantz presented a petition to wind up the Company on the insolvency ground. The petition debt was £112,449 under a default costs certificate which forms part of the more detailed history to follow.
The issue raised in this application is whether Mr Riley was properly appointed and remains properly in office as a director; and whether, therefore, he is capable of authorising the Company to bring this appeal, and to instruct Pinder Reaux and Associates, solicitors, to act on its behalf. Where I speak hereafter of the Company's actions or submissions, I mean the actions and submissions of those claiming to act on its behalf.
The basis of the Company's unsuccessful opposition to the petition was that the petition debt was genuinely disputed on substantial grounds, and that it also had a valid cross-claim against Mr Aidiniantz which exceeded the petition debt.
Although the parties agree for the purpose of this application that Mr Aidiniantz is the sole member and therefore has the only vote, and although Mr Aidiniantz wants the Company to be wound up and does not want Mr Riley as a director, Mr Aidiniantz chose not to pass a resolution to that effect until the morning of the hearing of this application, which resolution was subsequently withdrawn to avoid an adjournment. I will have more to say about this and the consequences below.
One of the conspicuous features of this application is that no one has given sworn evidence about any of the controversial issues, despite there having been a direction for exchange of witness statements and for a trial with cross examination. The absence of sworn evidence tested in cross examination requires me to make such findings as I can from hearsay statements and pleadings and by inference from the parties' recorded actions and sometimes inaction.
The background
Mr Aidiniantz controls and is a director of Rollerteam Limited, The Sherlock Holmes Museum Limited and Sherlock Holmes Limited (" the Museum Companies") which between them own and operate the Sherlock Holmes Museum in Baker Street. The Company also played a role in the Museum between July 2004 and September 2012 as will be seen below.
The Company was formed in July 2004 to take the benefit of a VAT exemption. The Museum had been running successfully for some 14 years by then. The Riley siblings and Grace all participated in the business to some degree until 2012. Ms Riley was at one time a director of Rollerteam. The family remained on good terms until the events of September 2012 related below.
The Company was granted a right by Rollerteam to receive admissions income from the Museum. In paragraph 19 of his defence dated 7 March 2013 in subsequent litigation concerning the terms of that agreement (the " 2013 Defence"), Mr Aidiniantz said that its terms were agreed between him and Grace in 2004.
The Memorandum of Association provides that the Company's objects include promoting the Sherlock Holmes legend and managing the Museum on a non-profit making basis, and prohibits the payment of any dividend to members or any remuneration to directors. Mr Aidiniantz's understanding was that the Company could receive admission fees without charging VAT so long as it made no profits and its directors were not financially interested in the Museum. That meant that Mr Aidiniantz could not be a director, but it was no bar to any other members of the family.
The articles of association upon incorporation provided as follows:
"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.
5. 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 …
30. 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.
32. 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.
33. Only persons who are members of the Company shall in any circumstances be eligible to hold office as a Director.
38. The Office of a Director shall be vacated:
… (c) if he ceases to be a member of the Company.
39. The Board may meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business. Unless otherwise determined, two shall be a quorum."
The subscribers to the Memorandum were company formation agents. There is no record or minute of any resolution admitting Mr Aidiniantz and Grace to membership, nor of the original subscribers' resignations, but the parties are agreed for the purpose of this application that Mr Aidiniantz and Grace became members upon incorporation and were the only members thereafter.
Grace and Ms Riley were appointed as directors on the date of incorporation. Thereafter the directors changed as follows:
• 24 March 2005: Ms Decoteau was appointed and Grace resigned
• 1 August 2008: Grace was re-appointed and Ms Decoteau and Ms Riley resigned
• 1 April 2011: Mr Riley was appointed and Grace resigned
• 22 August 2011: Mr Riley resigned and Grace was re-appointed.
All of these appointments, except those of Grace, were inconsistent with the requirements of articles 32, 33 and 38(c) that only members could be directors (" the membership requirement") because the Riley siblings were not members. I have no evidence as to why the various appointments were made nor about what, if anything, changed on the ground when the directors changed. Later appointments and resignations, after the family feud had broken out, are related below.
The feud broke out in September 2012. It involves allegations and counter-allegations about misappropriation of the admission fees to the Museum. Acting on behalf of the Museum Companies, on 7 September 2012 Mr Aidiniantz terminated the Company's right to receive the admission fees, so that it no longer had any role to play in the Museum business. The family then split into the two factions in which it still finds itself: Mr Aidiniantz on the one side and the Riley siblings on the other. Both Mr Aidiniantz and the Riley siblings have claimed Grace's allegiance from time to time, but in the litigation she sided with the Riley siblings.
Various proceedings ensued in late 2012. In summary:
i. Rollerteam brought a claim against the Riley siblings in respect of £175,000 taken from Rollerteam's bank account by Ms Riley.
ii. Grace and Ms Decoteau (who had become a director as related in paragraph 22 below) caused the Company to bring a claim against Mr Aidiniantz and the Museum Companies claiming that a large sum of money had been misappropriated from entrance fees. I have already mentioned Mr...
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