Steele v Stuart

An unfair-prejudice petition may be struck out as an abuse of process where the respondent makes a fair and sufficiently certain open offer matching the relief sought, but the petitioner declines it because the valuation depends on unresolved matters. Exclusion from management does not, by itself, establish unfair prejudice. The petitioner must show exclusion without a fair offer to buy the shares. The jurisdiction to strike out is exercised sparingly, and a petition should not be used to obtain relief which can properly be pursued through summary judgment or a third-party costs order.

The petitioner held shares in JHS Land Limited with the two individual respondents. He alleged exclusion from management and sought relief under section 459 of the Companies Act 1985, principally a buy-out and alternatively a just and equitable winding-up.

The respondents applied to strike out the petition. They had made open offers for the petitioner’s shares at an undiscounted pro rata value, to be determined by an independent expert, with provision for costs. The petitioner maintained that valuation should await the outcome of related property proceedings involving the company, the petitioner and his wife. He also sought amendments concerning the use of company funds and injunctive relief.

The central issues were whether the offers were fair and sufficiently certain, whether the petition was premature or an abuse of process, and whether the proposed amendments disclosed a viable basis for relief.

1. Disposition. The petition was struck out as an abuse of process. The proposed amendments and injunctive relief were refused.
2. The requirements identified in O’Neill v Phillips [1999] 1 WLR 1092 were applied. A respondent’s open offer should provide for purchase at an undiscounted pro rata value, valuation by a competent independent expert, and provision for the petitioner’s costs. The first offer appeared to satisfy those requirements.
3. The court’s strike-out jurisdiction must be exercised sparingly and only on the clearest grounds, consistently with In re Copeland and Craddock [1997] BCC 294. However, the reasonableness of the offer was central. Following CVC Opportunity Equity Partners Ltd v Demarco Almeida [2002] 2 BCLC 108, the principle that a petition should not be restrained or struck out where the offer’s reasonableness is open to question applied equally to an unfair-prejudice petition.
4. The petitioner’s insistence that valuation await the property action showed that the petition was premature. If proceedings are pursued without a present intention to accept an offer mirroring the relief sought, they may constitute a device to exert improper pressure. Exclusion alone is insufficient; unfair prejudice requires exclusion without a fair buy-out offer.
5. The proposed amendments concerning company-funded litigation did not establish a basis for injunctive relief. If the petitioner or his wife had an overwhelming claim, summary judgment was the proper course; any appropriate third-party costs order could be made under section 51 of the Supreme Court Act 1981. An unfair-prejudice petition could not properly supplement the court’s costs jurisdiction. The case was distinguished from North Holdings Ltd v Southern Tropics Ltd [1999] 2 BCLC 625.