Apcar v Aftab

Guidance concerning a respondent’s reasonable offer in unfair-prejudice proceedings does not produce automatic or inevitable strike-out consequences. Even where an offer is fair, the court must consider whether the petitioner acted reasonably in rejecting it and pursuing the petition. The decision whether to strike out is fact-sensitive and ordinarily lies within the judgment or discretion of the first-instance judge. An appellate court should interfere only on recognised principles.

The petitioner brought proceedings under section 459 of the Companies Act 1985 concerning a two-person company in which each shareholder held 50 per cent and neither could resolve a deadlock. The petition alleged exclusion and, principally, breaches of fiduciary duty. The respondent offered to purchase the petitioner’s shares, or alternatively to sell his own shares, following an expert valuation. The petitioner rejected the offer and made a counter-offer. The Companies Court dismissed the petition and refused permission to appeal, holding that the petitioner had not abused the process. The respondent renewed the application for permission to appeal, relying on O'Neill v Philips and contending that the fair offer required an immediate strike-out.

1. Application refused. The Court of Appeal dismissed the renewed application for permission to appeal.
2. Lord Hoffmann’s guidance in O'Neill v Philips concerned the circumstances in which a reasonable offer may remove unfairness and justify striking out an unfair-prejudice petition. The same principle may apply where the petition is principally based on alleged misfeasance.
3. The guidance is expressed generally and cannot be applied automatically in every case. Each case depends on its own facts. A fair offer does not inevitably require the petition to be struck out without further inquiry.
4. The first-instance judge was entitled to consider whether the petitioner’s rejection of the offer and counter-offer was reasonable. He was also entitled to find that the petitioner had acted reasonably in seeking a valuation before deciding which shareholder should purchase the other’s shares.
5. The decision whether to strike out a legal process was essentially one for the first-instance judge’s judgment or discretion. The Court of Appeal could interfere only on well-established principles, and no such ground was shown.
6. The petition could not realistically be struck out after the original offer had been withdrawn and both parties had made competing offers. Which shareholder should leave the company depended on the evidence concerning control and alleged misconduct, matters requiring a full hearing.

• Court of Appeal (Civil Division): renewed application for permission to appeal refused.
• Companies Court, Chancery Division: Mr Kevin Garnett QC, sitting as a deputy judge, dismissed the petition on 9 February 2001 and refused permission to appeal.
• Permission application: permission was previously refused on the documents by Mance LJ on 15 March 2001.