Brett v Migration Solutions Holdings Limited

The petitioner, a 21% minority shareholder and former director, brought a petition under section 994 of the Companies Act 2006 alleging that the majority shareholders had acted in a manner unfairly prejudicial to his interests and seeking a court-determined buyout of his shares. The court examined (i) the nature of the parties' relationship and any equitable expectations, (ii) the reasons and process for the petitioner’s dismissal as a director and employee, and (iii) whether subsequent valuation procedures (the auditors’ non-speaking valuation by Deloitte) were affected unfairly by timing issues (notably the absence of a executed 20‑year lease).

The judge found that the relationship between the parties was essentially an arm’s-length commercial joint venture governed by negotiated documentation (articles and employment contract) and that the petitioner had legal advice and understood the contractual consequences of dismissal. The majority’s decision to terminate employment and remove him as a director was within the bounds of reasonable commercial judgment given evidence of disengagement, a breakdown in working relations and expressed willingness to be bought out. The court further found no unfairness in the valuation process: the absence of a final executed long lease at the valuation date reflected the factual position then and did not disclose contrivance to depress value. Secondary allegations (misuse of company card, improper expenses, outside interests) were considered but either insufficiently proved or not of the character that would by themselves have justified summary dismissal as a "Bad Leaver". The petition was dismissed.

Background and parties: The petitioner, Paul Brett, was a minority (about 21%) shareholder and director in Migration Solutions Holdings Ltd (MSHL). Majority economic control was held by Limpopo (a Cayman company) and related parties. Brett had helped source DC1 (a data centre) and became involved as Property Director under an employment contract. The venture involved Thames (holder of freehold), MSHL (holding/operating company) and MSL (the consultancy/operating entity).

Nature of the claim / procedural posture: This is a first-instance petition under section 994 Companies Act 2006 presented 8 August 2012. Brett alleged unfair prejudice arising from his removal as a director and employee in June 2011 and sought a court valuation/buyout of his shares at proper value; Deloitte had earlier valued his shares at £475,000 under the articles' mechanism. Liability (unfair prejudice) was tried first, valuation to follow if liability found.

Issues identified by the court:

• Was the relationship between the parties such that equitable constraints ("quasi‑partnership" or legitimate expectations) limited the enforcement of strict legal rights in the articles/employment contract?
• Why was Brett excluded and was that exclusion fair?
• Were there later-discovered matters (expenses, misuse of card, outside interests) which, if known earlier, would have justified dismissal as a Bad Leaver?
• Was the valuation procedure unfairly affected by the absence of a 20‑year lease at the valuation date, or by the timing of dismissal?

Court’s reasoning and findings:

• The arrangement was negotiated at arm’s length, with detailed articles and employment terms and with Brett having access to legal advice. The facts did not support characterising the venture as a "quasi‑partnership" giving rise to broad equitable restraints beyond the agreed documentation.
• The board legitimately regarded Brett as disengaged, with a deteriorated relationship with the operational director, and with expressed interest in being bought out. Those factors provided reasonable grounds for termination; the dismissal was not arbitrary or contrived.
• Allegations of misuse of company funds and dishonest expense claims were examined. The court found isolated improper conduct (an unauthorised cash withdrawal) but not proven to the degree or of the quality that would have clearly justified summary dismissal as a Bad Leaver; the specific expense items pursued at trial were not shown to amount to fraud or such misconduct as would alone have warranted summary dismissal.
• On valuation, the absence of a final, executed 20‑year lease at the valuation date reflected the real factual position (including tax/SDLT constraints and consequent restructuring discussions) and did not show contrivance to depress value. The auditors’ process was open to submissions from both sides and produced a non-speaking valuation; the timing and basis were not unfair in context.

Result: The petition under s.994 was dismissed. The court dismissed unfair prejudice and upheld the operation of the agreed procedures under the articles and employment contract as applied to the facts.

The petition is dismissed. The court held that the parties’ relationship was essentially an arm’s-length commercial arrangement governed by negotiated documents and legal advice; the board’s decision to terminate the petitioner’s employment and remove him as a director was a reasonable commercial decision in the light of disengagement and breakdown in relations, and there was no unfair prejudice in the timing or conduct of the valuation process. Secondary allegations of misconduct were either insufficiently established or not of a character that would have plainly justified summary dismissal as a Bad Leaver.