Re Bankside Hotels Ltd

This judgment concerns three consolidated unfair prejudice petitions under section 994 of the Companies Act 2006 and remedies under section 996. The court applied established section 994 principles: relief is available only in respect of matters complained of, the petition and Points of Claim delimit the case, and a respondent must be shown to be sufficiently connected to the conduct complained of to warrant relief against him (Sales J's test).

The court granted strike-out applications so far as they concerned (1) the very limited pleadings against the trustee company Truchot Trustees Ltd (Truchot) in the Bankside petition and (2) references to Neil and Charles Gourgey in the G&G petition. The judge held that mere ownership by trustees or family members of shareholdings gifted by a settlor/father does not, without more, expose those trustees or family members to relief under section 996. Proposed amendments seeking to cure those defects were refused in relation to Truchot as being inadequate; further amendment of the G&G pleadings was left for consideration but the existing petition as pleaded disclosed no real prospect of relief against Neil and Charles.

The court also decided that, despite strike-out of defences, petitioners must still present evidence to satisfy the court that unfair prejudice has occurred; the Civil Procedure Rules cannot be used to treat denied facts as effectively proved in circumstances where the statutory requirement of the court being satisfied is jurisdictional.

This is a case-management and interlocutory judgment in three related unfair-prejudice petitions invoking section 994 and remedial powers in section 996 of the Companies Act 2006. The petitions arise from alleged breaches of an alleged 'Understanding' between three original collaborators in Bankside Hotels Ltd, Pedersen (Thameside) Ltd and G & G Properties Ltd and concern allegations that one participant, Maurice (M.S.) Gourgey, conducted company affairs in a manner unfairly prejudicial to the petitioners (Nicholas Griffith and Mewslade Holdings Ltd).

Nature of application: multiple interlocutory applications including strike-out of references to particular respondents (Truchot Trustees Ltd; Neil and Charles Gourgey), proposed amendments to petitions and Points of Claim, and procedural questions about whether petitioners must adduce evidence where respondents' defences have been struck out.

Issues framed:

• whether the petitions/Points of Claim disclose reasonable grounds for relief against the trustee (Truchot) and the petitioned sons (Neil and Charles),
• whether ownership of shares by trustees or family members alone suffices to make them liable under section 996,
• whether, following strike-out of defences, petitioners can rely on deemed admissions under the CPR (eg rule 16.5 / rule 3.5) and avoid adducing evidence to satisfy the court under section 996, and
• whether the Bankside petition should be stayed against Truchot pending other outcomes.

Court’s reasoning and conclusions:

• The court reiterated that section 994 is concerned with the company’s affairs and relief under section 996 must be founded on unfairly prejudicial conduct attributable to the person against whom relief is sought. The legal tests and authorities on attribution and pleadings (including Sales J’s approach and the requirement that pleaded allegations define the case) were followed.
• As to Truchot, the petition and Points of Claim contained only limited allegations (trust ownership of 50% and the Understanding) and lacked any pleaded knowledge, authorisation, agency or constructive knowledge linking Truchot to the alleged unfairly prejudicial conduct by the settlor. The court held there was no real prospect of relief against Truchot on the pleaded case and refused the proposed amended pleading as failing to particularise knowledge/connection adequately.
• As to Neil and Charles, the G&G petition relied on an allegation that their father acted 'with the support of his sons' but gave no particulars of how the sons were involved or which duties they breached. The petition as pleaded disclosed no reasonable prospect of relief against them; amendment would be required before any viable case was presented.
• On procedure, the court held that the statutory requirement that the court be 'satisfied' that unfair prejudice occurred is a jurisdictional condition inconsistent with treating denied facts as conclusively proved merely because a defendant’s pleading has been struck out. The petitioners must adduce sufficient evidence to satisfy the court of unfair prejudice. Procedural deemed-admission rules (eg CPR rule 16.5 or rule 3.5(5)) cannot be used to bypass that requirement. The court may, however, determine appropriate issues by summary procedures where justified, and the judge hearing the substantive issue will decide the scope for cross-examination and evidence.
• The application to stay the Bankside petition against Truchot did not arise after the strike-out ruling; the judge would likely have refused a stay and emphasised that petitioners must not preserve procedural advantages by late amendments.

The court allowed the strike-out applications made by Truchot Trustees Ltd and by Neil and Charles Gourgey in respect of the pleadings as they stood, concluding that the petitions did not plead a sufficient connection between those respondents and the alleged unfairly prejudicial conduct to justify relief under sections 994/996. Proposed amendments against Truchot were refused as insufficiently particularised. The court also held that petitioners must adduce evidence to satisfy the court that unfair prejudice has occurred notwithstanding struck-out defences; procedural rules cannot be used to treat denied facts as proved for the jurisdictional satisfaction required under section 996.