Summary
In an unfair-prejudice petition, the court must be satisfied that the statutory requirements are met before granting relief. A procedural rule deeming allegations admitted cannot replace proof of conduct which is said to be unfairly prejudicial. The petitioner must establish the relevant conduct by sufficient evidence, even where the respondent’s defence has been struck out, although the respondent may be restricted from advancing an inconsistent factual case.
A trustee or family shareholder is not automatically liable for unfair prejudice caused by a settlor, director or relative. Mere ownership, control or non-involvement is insufficient. There must be a sufficient connection with the conduct, such as knowledge of threatened misconduct and a failure to act. Pleadings must identify the conduct, the respondent’s connection with it and the relief sought.
Factual background
The judgment concerned applications in three related unfair-prejudice petitions under sections 994 and 996 of the Companies Act 2006, involving Bankside Hotels Ltd, Pedersen (Thameside) Ltd and G&G Properties Ltd.
Truchot Trustees Ltd applied to strike out the claim against it in the Bankside petition. Neil and Charles Gourgey applied to strike out claims against them in the G&G petition. The petitioners also sought to proceed to relief on the basis that the respondents’ defences had been struck out, without adducing evidence to prove the pleaded facts. The central issues were the necessary connection between a respondent and unfairly prejudicial conduct, the adequacy of proposed amendments, and whether procedural rules permitted judgment without proof.
Held
- Strike-out applications. The applications by Truchot Trustees Ltd and by Neil and Charles Gourgey were granted. The existing pleadings did not disclose a sufficient case connecting those respondents with the alleged unfairly prejudicial conduct. The proposed Bankside amendments also failed to provide a real prospect of obtaining the relief sought.
- Under sections 994 and 996 of the Companies Act 2006, the court’s jurisdiction concerns the conduct of the company’s affairs and relief must relate to the matters complained of. Relief against a respondent requires a sufficient connection between that respondent and the unfairly prejudicial conduct. Direct conduct or agency will ordinarily suffice. Beyond agency, the question is whether the respondent is sufficiently implicated, applying the standard of fair commercial dealing required by the statutory regime.
- Mere ownership of shares by trustees or family members does not automatically attribute the settlor’s or relative’s misconduct to them. Knowledge of threatened misconduct, a failure to act despite the power to do so, or a sham trust might establish the necessary connection. None of those matters was adequately pleaded here. Dealings by a shareholder with his own shares, including failure to decide whether to ratify a purported pre-emption transaction, were not conduct of the company’s affairs for section 994 purposes.
- A petitioner must plead the material allegations, the respondent’s connection with them and the relief sought. Proposed late amendments must be fully particularised and must have a real rather than fanciful prospect of success. Relief must be proportionate to the unfair prejudice established and remains discretionary.
- The requirement in section 996 that the court be satisfied that there has been unfairly prejudicial conduct is substantive and jurisdictional. Rules which deem uncontroverted allegations admitted cannot override that requirement. The petitioners therefore remained obliged to adduce sufficient evidence to establish unfair prejudice, notwithstanding the striking out of the respondents’ defences. The respondents could not advance a factually inconsistent case, but the extent of any permitted cross-examination or documentary use was for the trial judge.
- Rule 3.5(5) of the CPR was unavailable because the petitioners had no entitlement to a particular discretionary remedy without a judicial determination of the appropriate relief. Summary judgment under Part 24 might in principle determine the unfair-prejudice issue in a suitable case, but no such application had been made. Further directions and argument on amendments to the other petitions were left for the hand-down hearing.
The court’s approach to earlier authorities
Available to signed-in members.
Appellate history
The judgment records earlier decisions in the related proceedings, including the Simon judgment and the Anderson judgment. It also records that an appeal from Simon J’s decision was unsuccessful. This judgment determined the applications then before the High Court.
Key cases cited
19 authorities cited.
- Thevarajah v Riordan & Ors [2015] EWCA Civ 41
- Grace v Biagioli & Ors [2005] EWCA Civ 1222
- VB Football Assets v Blackpool Football Club & Ors [2017] EWHC 2767 (Ch)
- Apex Global Management Ltd & Anor v FI Call Ltd & Ors [2015] EWHC 3269 (Ch)
- Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm)
- Re BC&G Care Homes Ltd [2015] EWHC 1518
- McKillen v Misland (Cyprus) Investments Ltd & Ors (Rev 1) [2012] EWHC 2343 (Ch)
- F&C Alternative Investments (Holdings) Ltd v Barthelemy & Anor [2011] EWHC 1731 (Ch)
- Football Dataco Ltd & Ors v Smoot Enterprises Ltd & Anor (Rev 1) [2011] EWHC 973 (Ch)
- Davidson v Seelig [2016] WTLR 627
- Baygreen Properties Limited v Gill [2003] HLR 12
- Re Premier Electronics (GB) Ltd [2002] 2 BCLC 634
- Re Legal Costs Negotiators Ltd [1999] BCLC 171
- Re Full Cup International Trading Ltd [1998] BCC 58
- In re Leeds United Holdings Ltd [1997] BCC 131
- Re Full Cup International Trading Ltd [1995] BCC 682
- In re Unisoft Group Ltd (No 2) [1994] BCC 766
- Re Tecnion Investments Ltd [1985] BCLC 434
- In re Fildes Bros Ltd [1970] 1 WLR 592
Sign in to see how the court treated each authority. A free account is enough.
Cases citing this case
1 later case · 1 caution
Most senior citing decisions:
- Dinglis v Dinglis & Ors [2019] EWHC 1664 (Ch) distinguished
Sign in for the full treatment table. A free account is enough.