Wootliff v Rushton-Turner & Ors

A claim for wrongful dismissal is not automatically excluded from an unfair-prejudice petition. In a quasi-partnership, the petitioner’s employment relationship may form part of the arrangements constituting the members’ interests. The court may therefore grant compensation for breach of a service agreement under Companies Act 2006, section 996, provided the conduct is unfairly prejudicial to the petitioner in his capacity as a member. The question is fact-sensitive. The court must also prevent double recovery where related employment proceedings exist. Where the employment and unfair-prejudice issues arise from the same facts, hearing them together may be appropriate.

The petitioner, formerly the Company’s chief executive and a shareholder, presented a petition under section 994 of the Companies Act 2006. He alleged that his suspension, dismissal and removal from management were unfairly prejudicial, and sought compensation for the loss of income under his service agreement.

Related Employment Tribunal claims had been withdrawn with permission to pursue wrongful dismissal elsewhere. The respondents sought to strike out the wrongful-dismissal head, arguing that it was an employee’s contractual claim rather than a claim by a member. The central issue was whether such compensation could be sought within the unfair-prejudice petition.

1. Strike-out refused. A wrongful-dismissal claim was not, as a matter of jurisdiction, excluded from an unfair-prejudice petition. The point was novel, but the pleading should not be struck out.
2. Section 994 requires conduct that is both unfair and prejudicial to the interests of members. In a quasi-partnership, the relationship between employment, management and shareholding may be sufficiently close that exclusion from employment and management is prejudicial to the petitioner as a member. The inquiry is fact-sensitive.
3. The relief available under section 996 is wide. It may include compensation for breach of a service agreement where the agreement reflects the overall relationship between the members and the Company. Whether the petitioner’s separate capacities as employee and member exclude relief must be determined after hearing the evidence.
4. The court considered Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26 and R&H Electric Ltd v Haden Bill Electrical Ltd [1995] 2 BCLC 280 to support the breadth of the jurisdiction. The authorities concerning quasi-partnerships, including Re Phoenix Contracts (Leicester) Ltd [2010] EWHC 2375, showed that employment and membership interests may be inseparable.
5. Any concurrent Employment Tribunal compensation must be taken into account. The court should be astute to prevent double recovery, including through adjustments to any share valuation. Since the issues arose from the same facts, separate proceedings could be inefficient and risk inconsistent findings. The court indicated that all issues should be tried together before a High Court Registrar.

Counsel were invited to agree the order.