In the recent decision of Dickinson v NAL Realisations (released on 3 December 2019) the English Court of Appeal provided useful guidance on the Duomatic principle. The principle provides that where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be. As such, where the articles of a company require a course to be approved by a group of shareholders at a general meeting, that requirement can be avoided if all members of the group give their approval or conduct themselves so as to make it inequitable for them to deny they have given approval. It is tantamount to an amendment to a company’s articles.
NAL, which operated an aluminum smelting facility, had sold freehold factory premises, from which NAL operated, to Mr Dickinson. NAL was owned by Mr Dickinson, and by the trustees of two trusts. For one of the trusts (referred to as the “Pension Scheme”), Mr Dickinson was one of three trustees. The board of NAL was comprised of Mr and Mrs Dickinson at the material time.
Mr Dickinson instructed solicitors to prepare documentation to transfer the property to his name. The property was then leased back to NAL initially for £40,000 per annum then £120,000 per annum. A minute recorded that a board meeting had taken place where the directors had resolved to transfer the property, although it was later acknowledged that no board meeting had in fact taken place.
Mr and Mrs Dickinson argued the transfer could be saved under the Duomatic principle. The Court did not agree. There was insufficient evidence of assent. In the case of trust shares, approval would be required from the trustees who were the registered shareholders. The Court also assumed that all those beneficially interested in the shares could give their approval (possibly on the basis that beneficiaries acting together can bring an end to a trust), but that had also not occurred in this case.
This case will no doubt now be cited (both in England and in the Cayman Islands) as a leading authority on the Duomatic principle.