Arrow Trading and Investments & Anor v Edwardian Group Ltd. & Ors

A shareholder’s ordinary right to inspect documents held by a company extends to legal advice obtained in the administration of the company’s affairs, but not advice concerning hostile proceedings between the company and a shareholder. A company joined as a nominal and essential respondent cannot claim privilege over advice about what role it should take in proceedings concerning the interests of shareholders as a whole. Disclosure is also required where documents bear on the independence of directors or the assessment of allegedly excessive remuneration. Each party must personally provide the disclosure statement required by the procedural rules; non-compliance is not a mere technicality.

The petitioners, minority shareholders in Edwardian Group Limited, presented a petition alleging unfairly prejudicial conduct under section 459. They applied for disclosure and further information from the company and the shareholder respondents.

The applications concerned documents relating to the company’s attempted participation in the petition, financial information relevant to directors’ remuneration and possible settlement, the adequacy of the respondents’ disclosure statements, and further information about remuneration, benefits in kind and an alleged quasi-partnership.

1. Disclosure by the company. The privilege application failed. A shareholder is ordinarily entitled to documents obtained by a company in the course of administering its affairs, including legal advice, subject to the exception for advice concerning hostile proceedings between the company and its shareholders. The distinction is between advice for the administration of the company on behalf of all shareholders and advice in defence of proceedings by a shareholder against the company. The principles in Re Hydrosan Ltd [1991] BCLC 418 and CAS (Nominees) Ltd v Nottingham Forest Plc [2001] 1 All ER 954 were applied.
2. The company was a nominal but essential defendant and had no independent position on the remuneration dispute between the petitioners and the shareholder respondents. Advice obtained about the company’s response to the petition was therefore not privileged against the petitioning shareholders. Documents concerning the advice received, and antecedent or subsequent deliberations bearing on the independence of the directors who acted for the company, were relevant and had to be disclosed.
3. The company was ordered to disclose monthly management accounts from January 2003, any 2004 budget document, and valuations since 1998 of the company or its entire interest in freehold or leasehold assets, subject to a reasonable search. These documents were relevant principally to assessing the reasonableness of remuneration and, to a lesser extent, to a realistic Part 36 offer or meaningful mediation. Gnitrow Ltd v Cape Plc [2000] 1 WLR 2327 was applied.
4. Shareholder respondents’ disclosure. The disclosure statements were defective. The rules require each party to assume individual responsibility for the required disclosure statement, including the extent of the search and certification of understanding and compliance with the duty of disclosure. The defects were substantive and not merely technical. The application succeeded.
5. Requests for further information had to be accompanied by statements of truth from each respondent, or where appropriate their solicitors. The petition was to be amended expressly to include benefits in kind within remuneration, after which relevant benefits had to be disclosed. The petitioners had to plead and prove any alleged quasi-partnership; the respondents were not required to provide further information merely denying it. The issue of who first proposed remuneration was unsuitable for further information.

First-instance decision on interlocutory applications arising in a section 459 petition. No prior appellate decision is stated in the judgment.