Rubin & Anor v Parsons & Ors

This appeal concerned the consequence of non‑compliance with an "unless" order and the correct exercise of the court's case‑management powers in an unfair prejudice petition under section 996 Companies Act 2006. The registrar had been invited to debar the respondents from defending after they failed to comply with an order for specific disclosure. Instead he made an immediate monetary award of £54,000 in favour of the petitioners and ordered costs, relying in part on a valuation document not prepared for litigation and on a without prejudice figure disclosed at the hearing. The judge concluded that the registrar erred by treating the matter as a straightforward monetary claim without addressing (i) the petitioners' derivative claims on behalf of the LLP, (ii) the respondents' counterclaim and possible set‑off, and (iii) whether the order extended properly to the fourth respondent. The appeal was allowed and the registrar's order set aside; the application for relief from sanctions was remitted to the registrar for reconsideration.

The dispute concerned OFF2 Logistics LLP, a private hire and chauffeur business owned beneficially between the Rubins and the Parsons. The Rubins presented an unfair prejudice petition under section 996 Companies Act 2006 alleging that the Parsons had excluded them from management, misappropriated assets and caused a competing limited company to be formed. The amended petition sought multiple forms of relief including buy‑out, derivative proceedings on behalf of the LLP, an account of profits and interim injunctive relief.

The registrar made an "unless" order after earlier directions of Arnold J for specific lists of transactions and chattels. The respondents failed to provide the material in the ordered listed form and the registrar made an order in July 2015 debaring them from defending and directing payment to the petitioners of £54,000 and an order for costs. At the hearing the registrar had been shown a valuation not prepared for litigation and the petitioners' counsel disclosed a without prejudice offer figure, which affected the registrar's discussion of settlement.

The principal issues before the High Court were: (i) whether the registrar was entitled to enter summary monetary relief in the terms made after the Unless Order given the wider and non‑monetary relief sought in the petition; (ii) whether the registrar had erred in failing to consider the consequences of the surviving counterclaim and the derivative claims; (iii) whether the fourth respondent was properly caught by the sanction; and (iv) whether the disclosure at the hearing of a without prejudice settlement figure and reliance on a non‑litigation valuation infected the decision.

The court reviewed the law on the operation of an "unless" order and the limits on summary judgments where claims go beyond simple monetary remedies (including reference to CPR 3.5 and authorities such as Marcan Shipping). The judge held that although an "unless" order takes effect automatically, when the claim extends to non‑monetary relief and there is a live counterclaim and derivative claims the court must consider consequences carefully before reducing the dispute to a simple monetary judgment. The registrar had not addressed ownership issues, the derivative claims or set‑off from the counterclaim, had extended the order to a party not properly subject to the original disclosure obligation, and had been influenced by material and a without prejudice figure which should not have dictated the outcome. The appeal was allowed. The application for relief from sanctions was remitted to the registrar and the court encouraged the parties to consider liquidation/settlement or further directions to resolve the competing claims.

The appeal is allowed. The court held that the registrar erred in making a summary monetary award of £54,000 and costs after the operation of the Unless Order without addressing the derivative claims, the counterclaim and the consequences for the LLP's ownership and assets, and in extending the sanction to a respondent not properly subject to the original order. The award was also tainted by reliance on a valuation not prepared for litigation and by disclosure of a without prejudice figure at the hearing. The application for relief from sanctions was remitted to the registrar for reconsideration.

Permission to appeal was granted by Norris J on 16 October 2015. The appeal was from the decision of Mr Registrar Baister of 10 July 2015; the appeal was heard before Peter Smith J in the Chancery Division.