Birdi v Specsavers Optical Group Ltd & Ors

This is a first-instance unfair-prejudice petition under section 994 of the Companies Act 2006 arising from a joint-venture Specsavers store. The petitioner, Ms Birdi, alleged that Specsavers Optical Group Ltd (SOG) and a new partner, Mr Singh, had conducted the affairs of the store in a manner unfairly prejudicial to her interests and sought, among other remedies, purchase of her A shares at fair value with adjustments for culpable conduct.

The court framed six discrete issues drawn from the petition (matters arising from the exit and payment to a former partner; costs and management charges during the petitioner’s suspension; staff salary and bonus changes; the recruited partner’s remuneration; the costs of investigation and disciplinary procedures; and dividend/benefit equalisation). The judge applied the statutory unfair-prejudice framework under s. 994 and the directors’ duties now embodied in ss. 171–177 of the Companies Act 2006 (treated as reflecting the corresponding pre‑October‑2007 common law and equitable duties where relevant).

The court found breaches by SOG in relation to conflicts of interest and failures of disclosure/board procedure which had prejudicial effects in two respects: (i) Loss Prevention/management charging arrangements led to an identifiable over‑charge (quantified at £8,400) and created a real risk of other over‑charges (Issue 2); and (ii) SOG failed properly to investigate (and thereby to secure) an equalisation payment claimed by the petitioner (about £8,705.61) (Issue 6). Other complaints (including the arrangements for the departure of the prior partner, certain small payments to that partner, the design of a staff bonus scheme, and the level of Mr Singh’s salary) were either not proved or did not cause loss/unfair prejudice to the petitioner.

The court held that the proven matters amounted to unfairly prejudicial conduct and that an adjustment to the price payable for the petitioner’s shares was warranted, but left the quantum and method of adjustment to an independent valuer (the agreed expert) to determine in accordance with the court’s directions.

The petition was issued by a 50% A‑shareholder in Dartford Specsavers Ltd (Dartford). Dartford used the familiar Specsavers dual-company/store structure: A shares held by joint‑venture partners (JVPs), B shares held by SOG. The petitioner alleged that SOG and Mr Singh (a later JVP) had misused SOG’s position and conducted store affairs unfairly to her detriment, ultimately seeking either other relief or, alternatively, purchase of her shares at fair value with adjustments for any breaches. It was common ground that SOG would purchase the shares and that the price would be set by an independent valuer, subject to any court-directed adjustments for wrongdoing.

• Nature of claim/application: unfair‑prejudice petition under s. 994 Companies Act 2006; trial directed on six discrete issues limited to whether specified conduct constituted breaches of contractual and/or fiduciary duties warranting an adjustment to the share price.
• Parties and structure: petitioner Ms Swarandeep Birdi (50 A shares), Mr Nimesh Patel (former 50 A shares sold in 2007), SOG (100 B shares), later Mr Kamaljit Singh (acquired A shares from SOG in 2008). Relevant documents: Articles, Shareholders’ Agreement (delegating day‑to‑day management to A Directors and reserving certain matters to board decision), service contracts, internal Specsavers processes (Loss Prevention, Business Transfer, Shared Venture).
• Issues framed: six issues focused respectively on (1) the exit of Mr Patel and related costs, (2) costs charged to Dartford during petitioner’s suspension (notably Loss Prevention emergency management charges), (3) staff salary and bonus changes introduced while petitioner was suspended, (4) the salary awarded to Mr Singh on his appointment, (5) costs of investigation/suspension/disciplinary processes culminating in petitioner’s dismissal, and (6) alleged failure to declare/dividend equalisation payments to the petitioner.

Court’s reasoning (concise): the court applied the standard unfair‑prejudice analysis: conduct of the company's affairs; prejudice to the member's financial interests; unfairness judged by reference to the shareholders’ bargain, fiduciary principles and accepted equitable considerations; and the court's discretion on relief. The judge examined the facts in detail, finding that (a) Loss Prevention’s practice of charging Dartford (and using a blended charge rate) combined with SOG’s unilateral decisions exposed a conflict of interest and resulted in an identifiable over‑charge (£8,400) relating to management cover and created a realistic risk of further over‑charges (Issue 2); and (b) SOG failed properly to investigate the petitioner’s claim to an equalisation payment of about £8,705.61 and did not adequately pursue whether that sum had been due (Issue 6). On these two points the judge concluded there was unfair prejudice warranting adjustment to the purchase price of the petitioner’s shares. For other pleaded complaints the court found either no breach, no prejudice or that any procedural irregularity would not have altered the outcome and so was not unfairly prejudicial.

Relief and procedure: the court declared that the two proven unfairly prejudicial matters should be taken into account in fixing the price to be paid for the petitioner’s shares; the precise monetary adjustment and method of reflecting the prejudice was left to the independent valuer (expert) instructed under the Shareholders’ Agreement. The court declined to resolve ancillary contractual questions about the timing of transfer/valuation which had not been pleaded for determination.

This is a first‑instance petition under s. 994 CA 2006. The petition is allowed in part. The court found that SOG breached duties (including by creating and failing to manage conflicts of interest and by failing to investigate/pay an equalisation claim) in ways that were unfairly prejudicial to the petitioner (Issues 2 and 6). Other allegations failed. The court ruled that an adjustment to the price payable for the petitioner’s A shares is warranted in respect of the proven breaches but left the quantum and precise method of adjustment to an independent valuer acting as an expert, to value the shares and to determine a fair adjustment to reflect the prejudice identified. The remainder of the petition is dismissed so far as no unfair prejudice was established.