Timothy Michael Lord KC and Others v Sharon Angela Jeanette Kinsella and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Miles |
| Judgment Date | 02 November 2023 |
| Neutral Citation | [2023] EWHC 2748 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2023-000708 |
[2023] EWHC 2748 (Ch)
Mr Justice Miles
Case No: BL-2023-000708
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Tim Lord KC and Edward Hicks (instructed by Ashtons Legal) for the Claimants
Hugh Sims KC (instructed by Thompson Darwin Law Ltd) for the Seventh Defendant, Slaley Hall Lodges Limited
The other Defendants did not attend and were not represented
Hearing dates: 18 October 2023
Approved Judgment
Remote hand-down: This judgment was handed down remotely at 10:30AM on 2 November 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
Introduction
This is an arbitration claim brought under ss. 68 and 69 of the Arbitration Act 2006. The arbitrator was Mr Terence Mowschenson KC. The claim form, issued on 6 December 2022, says (at least on the claimants' primary case) that the relevant award was dated 9 November 2022. The date of the award is in fact one of the contentious issues. The seventh defendant (“SHLL”) says that the 9 November 2022 award simply reincorporated the text of an earlier award dated 11 August 2022, which was already final and binding between the parties. I shall resolve this issue below but shall at this stage simply refer to “the Award”.
In the arbitration the current claimants were the claimants and the current defendants were the defendants.
The dispute concerned the validity of the purported dissolution of the Slaley Hall Owners Club (“the Club”), an unincorporated association of “Members” with timesharing rights (pursuant to 1,850 “Holiday Certificates” on a fixed week basis) to 37 “Holiday Lodges” at the old Slaley Hall estate near Hexham, Northumberland.
The administration of the Club is governed by a Constitution. This refers to a number of defined terms, which I shall adopt here.
There was to be a “Founder Member”. This was originally the promoter of the timeshare scheme but since 20 November 2015 has been SHLL. The Constitution provides for a “Management Company” (to manage Club property at an operational level). Since 9 June 2017 this has also been SHLL. There was also a “Committee” of seven people (at present the 6th Claimant and 1st to 6th Defendants); and a “Trustee” (to hold club property, in particular various “Leases” of the Holiday Lodges expiring 31 December 2069); at present the Trustee is the 8th Defendant (“Hutchinsons”), appointed in 2021.
The Constitution also provides for the Club as a whole to pass resolutions at annual or special general meetings. Clause 24, which was key to the dispute, makes provision for resolutions to wind up the Club, including realisation of Club assets by the Trustee, and distribution of net assets between Members. I shall return to these provisions below.
Seasons Holidays PLC (“Seasons”) owns and operates a number of holiday resorts. The directors of Seasons are Barry Hurley (“Mr Hurley”), and the First Defendant (“Ms Kinsella”).
On 23 April 2019 Seasons acquired 100% of the shares in SHLL. Mr Hurley was appointed the sole director of SHLL, and Ms Kinsella company secretary in place of the existing officers.
On the same date SHLL acquired a 996 year headlease of the Holiday Lodges.
The claimants' case in the arbitration was that, following the acquisition of SHLL and the headlease, Seasons and SHLL, in particular by the actions of Ms Kinsella and her staff, commenced an aggressive campaign, using SHLL's position as Management Company in order to obtain several hundreds of Holiday Certificates from exiting Members (in particular by marketing Seasons' own holiday products in return for a substantial premium and the transfer of the Member's Holiday Certificate) to bring its total holding to 1,445.
The Holiday Certificates so acquired were transferred to the 9th Defendant (“SHLTL”) to hold on trust for Seasons.
In or around November 2021 SHLTL requisitioned a SGM to consider a resolution to dissolve the Club (“the Resolution”). A purported SGM was held via Zoom on 17 December 2021. In a poll SHLTL as a single member purported to cast 1,445 votes (one per Holiday Certificate) in favour of the Resolution. The majority of other Members abstained or voted against the Resolution.
The Claimants contended in the arbitration that Seasons and/or SHLL have made and stand to make a very substantial profit on the dissolution of the Club. They say that Seasons and/or SHLL is favourably positioned to purchase the Leases from Hutchinsons, which, together with the Headlease, will give them an unencumbered virtual freehold. They also say that Seasons has already profited by selling its “loyalty nights” packages to Members for substantial premiums, underpinned by the weeks it controls; and that acquisition of the Leases freed from the Members' timeshare rights will enable it to sell further such products.
The claimants contended in the arbitration that the Resolution to dissolve the Club was invalid. They argued (a) that the Resolution had not properly passed under the Constitution; (b) that in any case the meeting had not been properly convened; and (c) that Seasons had acquired Holiday Certificates as a result of breaches of fiduciary duty by SHLL as the Management Company (in particular by making an unauthorised profit) so that the Holiday Certificates were held by SHLTL on constructive trust for the remaining Members, and the votes attaching to those Certificates could not be exercised by SHLTL.
The most significant provisions about voting under the Constitution were these:
(1) There are provisions in clause 16 about Club Meetings. Materially these are:
“(ii) All General Meetings other than Annual General Meetings shall be Special General Meetings. A Special General Meeting may be convened by the Committee or requisitioned by the Registered Holders of at least 10% of the issued Holiday Certificates.
(v) At a General Meeting of the Club each Member shall have one vote for each Holiday Certificate held subject always to clause 10(vi). In the case of Holiday certificates held in joint names the Holiday Certificate shall carry only one vote and that vote shall be the vote of the first named person on the Holiday Certificate.
(vii) In the case of an equality of votes the Chairman of the meeting shall have a casting vote.
(x) Voting rights shall be exercised initially by a show of hands save that if any Member or proxy shall so require, any vote shall be taken by way of a poll and not by show of hands.”
(2) Clause 20 provides that:
“The Club shall have power:
i) To borrow money
ii) To grant securities and mortgages over its property
iii) To purchase lease or otherwise acquire additional property and
iv) To sell, lease, grant easements over or otherwise dispose of or deal with its property or any rights over its property.
Provided always that the foregoing powers shall be exercisable only with the approval of a resolution of the Club passed by a majority of not less than three quarters of the votes cast upon such resolution at a Special General Meeting of the Club.”
(3) Clause 24(i) provides that:
“i) The Club shall continue in existence for the Term unless earlier determined by not less than a three quarters majority of Members entitled to vote at a Special General Meeting called for such purpose. Should the Members so resolve the Club shall be wound up in accordance with the provisions of this Clause.”
(4) Clause 25 provides materially that:
“No alteration or addition of any nature whatsoever shall be made to this Constitution unless otherwise resolved by not less than a three quarters majority of those Members voting at a General Meeting …”
At [14] of the Award, the arbitrator summarised the issues under four heads:
(1) whether clause 24 of the Constitution requires three quarters of the Members eligible to vote in favour of the Resolution, i.e. one Member one vote, or whether Members were entitled to exercise one vote per Holiday Certificate held;
(2) whether the SGM was procedurally regular; if not, did any breach of procedure affect the validity of the SGM;
(3) whether and to what extent Holiday Certificates held by SHLTL for Seasons were validly acquired due to the alleged breach of fiduciary duty by SHLL;
(4) if the Holiday Certificates were not validly acquired by SHLTL for Seasons can the claimants claim relief in relation to those Holiday Certificates and if so what relief?
In the Award the arbitrator determined these issues as follows.
As to issue (1), on the proper construction of Clause 24, a resolution under Clause 24 required a three quarters majority of votes eligible to be cast on the basis of one vote per Holiday Certificate, rather than a three quarters majority of Members eligible to vote.
As to issue (2), that the SGM on 17 December 2021 was procedurally irregular, because the Constitution did not allow for remote meetings. Accordingly the Resolution was invalid.
As to issues (3) and (4), that SHLL had not acted in breach of fiduciary duty in its role in the acquisition of Holiday Certificates, such that SHLTL did not hold them on a constructive trust for the Club. The arbitrator concluded that there was no overarching fiduciary duty to the Club in respect of the confidential information in the Club's registers [96]; that those members who responded positively to Seasons' offers were impliedly ratifying or acquiescing in any breach of duty owed to them by SHLL [97]; that there was no overarching contractual or fiduciary duty to the Club (i.e. all the Members) to keep the club in existence and any duty was owed to the Members individually and not...
To continue reading
Request your trial