Wootliff v Rushton-Turner

The court refused an application to strike out a wrongful dismissal head of claim brought within an unfair prejudice petition under section 994 of the Companies Act 2006. The judge held that the Companies Court's wide discretion under section 996 may, in appropriate circumstances (for example in a quasi-partnership), permit it to grant relief that addresses loss of employment or compensation for breach of a service agreement where those interests are closely connected to the petitioner’s membership rights. The court emphasised the practical need to avoid multiplicity of proceedings and double recovery and concluded that factual inquiry will determine whether the petitioner’s interests as employee and member are inseparable.

Background and parties:

• The petitioner, Mr Wootliff, was initially the sole director and shareholder of Smart Diner Group Limited and later entered a service agreement as Chief Executive following a share reorganisation and merger. After suspension and dismissal in 2013 he was removed as a director. The petitioner presented a section 994 petition alleging unfairly prejudicial conduct, including that his dismissal and the later issuance of shares diluted his holding.

Procedural posture and related proceedings:

• Mr Wootliff had pursued and then withdrawn remaining Employment Tribunal claims, reserving the right to pursue wrongful dismissal elsewhere under rule 52(a) of the Employment Tribunals Rules of Procedure 2013. The unfair prejudice petition was presented on 1 June 2015 and transferred to the High Court.

Relief sought:

• The petition sought the usual relief under section 996 of the Companies Act 2006, and specifically sought provision of a remedy for the claims advanced in the Employment Tribunal proceedings, including compensation for loss of income under the service contract (wrongful dismissal).

Issues framed:

1. Whether a claim for wrongful dismissal (a breach of contract claim) may properly be advanced and determined within a section 994 unfair prejudice petition;
2. Whether the court should strike out the wrongful dismissal head of claim;
3. Case management: whether the issues should be tried together to avoid inconsistent findings and double recovery.

Court’s reasoning:

• The judge distinguished wrongful dismissal (contractual) from unfair dismissal (statutory) and noted that Employment Tribunals lack jurisdiction to grant contractual remedies in the same terms as the High Court. That distinction did not, however, automatically bar the Companies Court from entertaining contractual claims within a section 994 petition where the petitioner’s employment and membership interests are closely connected.
• The court surveyed authorities on quasi-partnerships and the scope of unfair prejudice (including Ebrahimi, O'Neill v Phillips, Re Phoenix Contracts and others) to show that exclusion from management and loss of employment can amount to unfair prejudice to a member where equitable considerations apply.
• Section 996 gives the court wide discretion to make such order as it thinks fit; past authorities show the court can make orders addressing loss of remuneration or compensation where necessary to remedy unfair prejudice, subject to avoiding double recovery or overlap with derivative claims.
• Given the fact-sensitive nature of the inquiry and the risk of inefficiency and inconsistent findings if parallel proceedings were pursued, the judge concluded it would be inappropriate to strike out the wrongful dismissal head. He directed that all issues be tried together before a Registrar to permit proper determination and to address any potential double counting in the remedy.

Subsidiary findings and wider implication:

• The point was novel in that there was no direct authority on striking out a wrongful dismissal head within an unfair prejudice petition; nevertheless existing authorities demonstrate that contractual claims can be considered where the petitioner’s roles are inseparable. The court will be careful to prevent double recovery if a buy‑out order or other relief is made.

The respondents' application to strike out the wrongful dismissal head of claim is dismissed. The court held that the Companies Court may, in appropriate cases and depending on the factual matrix (notably where a quasi-partnership exists and the petitioner’s roles as member and employee are inseparable), entertain a claim for breach of a service agreement within an unfair prejudice petition under section 994. Section 996 gives the court a wide discretion to grant relief; issues arising from the same facts should be tried together to avoid inefficiency and inconsistent findings.