Ondhia v Ondhia

An unfair prejudice petition cannot ordinarily be used by a shareholder who has contracted to sell the shares to complain of conduct occurring after the agreement. Once the beneficial interest and risk have passed, the former shareholder’s remedy is ordinarily a claim for the purchase price, specific performance or an account. A dispute over the precise price does not necessarily make the agreement uncertain where the contract provides a valuation mechanism. Later proceedings may also constitute abuse of process where the claimant knew of the claim, could and should have raised it earlier, positively declined the opportunity to participate, and would thereby cause unjust harassment or prejudice.

The petitioner sought relief under section 994 of the Companies Act 2006 concerning a family pharmacy company. He alleged that company property had been sold to the first respondent at an undervalue and that company funds had been improperly distributed. The respondents relied on agreements made in 1986, 1992 and 1993 under which the petitioner had agreed to sell his interests in the company, with the price to be calculated under an agreed mechanism.

The first respondent applied for summary judgment under Part 24, strike-out for abuse of process under rule 3.4, and relief based on delay. The central issues were whether the agreements transferred the beneficial interest in the shares and whether the petition was an abusive attempt to raise matters which could have been advanced in earlier proceedings.

1. Summary judgment. The 1986, 1992 and 1993 agreements were sufficiently certain and intended to have legal effect. The fact that the precise amount payable remained disputed did not invalidate them because they contained a mechanism for calculating the purchase price. The beneficial interest in the shares passed to the first respondent in stages under those agreements.
2. The reasoning in Baker v Potter [2004] EWHC 1422 (Ch) applied. After a shareholder has agreed to sell, the relevant risk passes to the purchaser. Conduct occurring after the agreement cannot ordinarily found an unfair prejudice claim by the vendor. Accrued rights arising before the sale might be different, but none were claimed here.
3. The petitioner’s proper remedy, if he sought payment of the outstanding purchase price or an account, was an ordinary civil claim. An unfair prejudice petition could not be used to enforce the share sale agreements. Gamlestaden Fastigheter AB v Baltic Partners Ltd was inapplicable in its context: that decision concerned a member who also had a substantial creditor interest in an insolvent company.
4. Abuse of process. The approach in Johnson v Gore Wood & Co [2002] 2 AC 1 required a broad, merits-based assessment of all the circumstances. Relevant considerations included whether the claim could and should have been raised earlier, the claimant’s conduct and election, the risk of unjust harassment, the effect on the integrity of a settlement, and delay.
5. The petitioner had been given a clear opportunity in the 2009 proceedings to assert any beneficial interest. He declined to become a party and reserved only a claim for unpaid monies. The present claims concerned matters raised or capable of being raised in those proceedings. The delay, the prior settlement and the resulting prejudice made the later petition an abuse of process. The petition was dismissed.