Ondhia v Ondhia

This was an unfair prejudice petition under section 994 of the Companies Act 2006 brought by a minority shareholder in a family company. The court held that binding agreements made in 1986, 1992 and 1993 provided a clear mechanism for the sale of the petitioner’s shares and that the beneficial interest in the shares passed to the purchaser in tranches when those agreements operated. As a result, alleged conduct of the company and its directors after the share sale agreements could not give rise to an unfair prejudice remedy in favour of the vendor. The judge applied the reasoning in Baker v Potter to hold the vendor’s interest had converted into a right to the purchase price and that any unpaid price is a matter for ordinary proceedings, not a section 994 petition. The petition also failed the Part 24 test for a real prospect of success and, separately, the court concluded the petition was an abuse of process under the Henderson v Henderson line of authority (considering Johnson v Gore Wood & Co) because the petitioner could and should have raised his claims in earlier related proceedings; there was inordinate delay and prejudice to the respondents. The petition was dismissed.

The dispute concerned FSC Andrews Ltd, a family pharmacy company with 75 issued shares. The petitioner was a middle brother and registered holder (in part) of shares; the first respondent was a younger brother and also a director. The petitioner sought relief under section 994 Companies Act 2006 asking the court to order purchase of his shares on the assumption that the company still held certain property and funds which, he alleged, had been diverted by the first respondent.

The factual matrix included three written arrangements (dated 1986, 1992 and 1993) by which the petitioner agreed to sell his shares to his brother with a specified valuation mechanism and staged payment provisions. The company sold the trading premises in 2005, and there were accounting movements between 2008 and 2009. Separately, the oldest brother (Yashu) had brought a 2009 Chancery claim asserting beneficial ownership issues between himself and the first respondent; notice of those proceedings was served on the petitioner under the Civil Procedure Rules so that he could choose to become a party but he expressly declined to acknowledge service and said he would be a witness only while reserving rights to pursue sums said to be owing.

The first respondent applied under Part 24 CPR for summary judgment or, alternatively, that the petition be struck out as an abuse of process or for inordinate delay under CPR 3.4. The court framed the principal issues as (i) whether the share sale agreements were binding and had transferred the beneficial interest so as to deprive the petitioner of locus to bring an unfair prejudice petition, (ii) whether the complained-of acts post-dated the sale agreements and therefore could not ground an unfair prejudice claim, and (iii) whether the petition was an abuse because the petitioner could and should have raised his case in earlier proceedings and had delayed unreasonably.

The court found the agreements to be sufficiently certain and enforceable with a mechanism for valuing and determining the purchase price; accordingly the beneficial interest had passed to the purchaser in tranches in accordance with those agreements. Relying on the reasoning in Baker v Potter, anything occurring after the sale could not found an unfair prejudice petition by the vendor, who now had a right to the purchase price rather than continuing shareholder rights. The court further rejected the petitioner’s reliance on the Privy Council Baltic Partners authority, distinguishing it on the ground that that case concerned a party who was also a significant creditor and thus had a different form of locus. Finally, applying the abuse principles in Henderson v Henderson as explained in Johnson v Gore Wood & Co and related authorities (including the effect of the CPR 19.8A notice), the judge concluded the petitioner could and should have asserted his interest in the 2009 proceedings, that he chose not to, and that bringing the present petition after long delay would unjustly harass the respondents. The combination of no real prospect of success and abuse of process led to dismissal of the petition.

The petition under section 994 Companies Act 2006 is dismissed. The court held the 1986, 1992 and 1993 agreements were enforceable and transferred the beneficial interest in the shares to the purchaser; post-contractual conduct could not give rise to an unfair prejudice remedy for the vendor. The petition had no real prospect of success under Part 24 CPR and, alternatively, constituted an abuse of process under the Henderson v Henderson principles (as explained in Johnson v Gore Wood & Co) given the petitioner’s opportunity to join earlier proceedings and his delay.