Odutola v Hart & Ors

The court struck out an unfair prejudice petition under the Companies Act 2006 section 994 as disclosing no reasonable grounds for the claim and certified it as totally without merit. The judge applied the strike-out test in CPR r 3.4(2)(a) and (alternatively) the summary judgment test in CPR Part 24, and assumed the petitioner’s facts to be true for the purposes of the strike-out analysis.

Key legal findings were that an unfair prejudice petition must concern the conduct of the company’s affairs, not private acts of individual shareholders, and that mere fear of possible future prejudice is premature. The petitioner’s central complaints — removal as a director (under Companies Act 2006 s168) and alleged failure to circulate minutes — did not, on the facts pleaded, amount to unfairly prejudicial conduct. Allegations of a shadow director, secret financial control, blackmail and other private wrongdoing by individuals were unsupported, irrelevant to an s994 petition or premature, and therefore could not sustain the petition.

Background and parties:

• The petitioner, a former director and former company secretary who remained a shareholder of Cremorne Mansions Residents Association Ltd, brought a 67-page unfair prejudice petition dated 9 April 2018 under Companies Act 2006 s994. The respondents were current and former directors and the residents association. The respondents applied to strike out the petition under CPR r 3.4(2)(a) (or under the court’s inherent jurisdiction) and alternatively for summary dismissal under CPR Part 24.

Nature of the claim and relief sought:

• The petition pleaded a broad range of complaints, including the petitioner’s removal as director and company secretary, alleged connections and control by a fourth respondent (including an assertion he was a shadow director), alleged fraudulent activity by certain residents, alleged illegal activities by companies associated with the fourth respondent, alleged harassment and electronic surveillance, and breaches of lease obligations by certain residents. The petitioner asked for multiple remedies (twelve specific remedies and general relief).

Issues framed by the court:

• Whether the petition disclosed reasonable grounds for an unfair prejudice claim under s994.
• Whether the matters alleged amounted to conduct of the company’s affairs that was unfairly prejudicial to the petitioner.
• Whether many allegations were instead private conduct of individuals or mere fears about future conduct and therefore irrelevant or premature for an s994 petition.

Court’s reasoning and conclusions:

• The court emphasised that s994 remedies relate to the conduct of the company’s affairs and require unfair prejudice to have occurred or be clearly shown; mere fears of future misconduct are not sufficient.
• The petitioner’s removal as a director was an act within the statutory power of shareholders (Companies Act 2006 s168) and, on the pleaded facts, not unfairly prejudicial. There was no evidential basis to treat the removal as inequitable under the equitable exceptions described in O'Neill v Phillips.
• The alleged failure to circulate minutes did not amount to a legal obligation to circulate and, at most, was an inconvenience; it did not constitute unfair prejudice of the kind cognisable under s994.
• Many other allegations (fraudulent claims, harassment, alleged criminality, lease breaches) concerned private acts of individuals or potential causes of action for other remedies and were not material to an s994 petition. Allegations that the fourth respondent exercised control by unspecified financial means or blackmail were unsupported and speculative.
• Accordingly the petition disclosed no reasonable grounds and was bound to fail even assuming the pleaded facts; it was struck out and certified totally without merit. Permission to appeal was refused.

The unfair prejudice petition under Companies Act 2006 section 994 is struck out as disclosing no reasonable grounds and is certified as totally without merit. The judge held that the petition primarily pleaded private acts by individuals or speculative future harm, which are not matters for an s994 petition; the two matters that did concern company affairs (removal as director and alleged failure to circulate minutes) did not, on the pleaded facts, amount to unfairly prejudicial conduct. Permission to appeal was refused.