Blackmore v Richardson & Ors

For purposes of a petition under section 459 of the Companies Act, a share sale is not automatically a private matter outside the company’s affairs. The court may examine the sale with associated meetings and management conduct, and decide whether they are inseparable. Section 459 does not confer a general right of exit: relief depends on identified unfairness assessed in the factual context.

In this permission decision, the Court of Appeal accepted that challenges concerning the effect of a petitioner’s forgery, the clean-hands issue and exclusion from the company were arguable. The merits remained for the full court.

These proceedings comprised applications for permission to appeal arising from a long-running dispute concerning a petition under section 459 of the Companies Act. The respondents included Richardson, Wheeler, Cummings, Supatax 2000 Ltd and Capital Cabs Ltd.

HHJ Wyn Williams had found unfair conduct in connection with proposed share transfers, exclusion from the company’s premises and undisclosed conflicted transactions. He ordered Richardson and Wheeler to purchase the petitioner’s shares and made an order concerning £60,000. The applications challenged, among other matters, the scope of section 459, the effect of a forged letter, clean hands, exclusion, valuation, execution, costs and reopening the case.

The central question was whether the proposed grounds disclosed an arguable basis for permission to appeal.

Lord Justice Buxton determined a series of permission applications. The Court of Appeal did not decide the merits of the proposed appeals.

1. Dealings in shares are not categorically outside the affairs of a company for the purposes of section 459 of the Companies Act. The scope of the expression is wide. A share sale may be considered together with associated meetings and management conduct where, on the facts, the matters cannot be separated. The judge had directed himself correctly by reference to O’Neill v Phillips [1999] 1 WLR 1092 and Gross v Rackind [2004] EWCA Civ 815. Permission was therefore refused on the corresponding grounds.
2. Section 459 does not provide a minority shareholder with a free exit or no-fault remedy. The judge was entitled to identify unfairness in the secret share-transfer negotiations, exclusion from the premises and undisclosed transactions involving a conflict of interest. The parties’ chosen company structure remained relevant even if members were also employees.
3. Permission was granted on the arguable issues whether the petitioner’s forgery could change the nature of the quasi-partnership and whether the clean-hands question required reconsideration. The former issue was supported by observations in In re London School of Electronics Ltd [1976] 1 Ch 211 at 222B. The latter raised a possible tension between that case’s observations at 222C and Lord Hoffmann’s observations in O’Neill v Phillips [1999] 1 WLR 1092 at 1099B. The Court expressed no final view on either issue.
4. Where a point was not taken below, the full court retained jurisdiction to consider whether it could be raised. It would also need to consider whether the equities and the effect of the conduct could properly be determined without specific findings by the trial judge.
5. A stay of execution requires evidence, rather than assertion, of a real risk that assets will be dissipated. No such evidence was produced. The valuation challenge disclosed no arguable basis for appellate intervention in a matter grounded in expert evidence and factual judgment. The order requiring Richardson and Wheeler to purchase the petitioner’s shares was a discretionary decision under section 461, with no separate arguable ground identified.
6. The application by Supatax was adjourned for further written submissions. Permission was granted to Capital Cabs on the £60,000 issue, but refused on costs. The Cummings application was refused. The applications were granted save for A3/2005/0777, which was refused, and A3/2005/0778, which was adjourned. The appeals were directed to be heard, if possible, before 31 July by three Lord Justices, one with company-law experience.

• Court of Appeal (Civil Division) — On 10 May 2005, Lord Justice Buxton determined applications for permission to appeal. Permission was granted on specified grounds, refused in the Cummings application, and the Supatax application was adjourned. The judgment is reported at [2005] EWCA Civ 604.
• Cardiff District Registry — HHJ Wyn Williams determined the underlying section 459 petition, made findings of unfair conduct, ordered Richardson and Wheeler to purchase the petitioner’s shares, and made related financial and costs orders.