Griffith v Gourgey & Ors

Applications to amend unfair-prejudice petitions must identify a properly particularised case with a real, rather than fanciful, prospect of success. A respondent shareholder is not liable for a director’s misconduct merely because the shareholder held shares, permitted another person to exercise voting rights, or hypothetically might have failed to act. Liability under sections 994 and 996 of the Companies Act 2006 requires a sufficient connection between the respondent and the unfairly prejudicial conduct. Substantial late amendments may be allowed where they disclose an arguable case, but the respondents must then be permitted to plead fully. Derivative relief and relief benefiting company creditors cannot be introduced without the detailed pleading and procedural safeguards required by the statutory scheme.

The court considered amendment applications in three related unfair-prejudice petitions concerning Bankside Hotels Limited, G & G Properties Limited and Pedersen (Thameside) Limited. The applicants sought to introduce further allegations against trustees, shareholders and directors, enlarge proposed buy-out relief, seek an account of profits, obtain permission for derivative proceedings and request the winding-up of Pedersen.

The applications followed an earlier judgment which had struck out or criticised parts of the petitions and defences. The central issues were whether the proposed amendments disclosed an arguable case, whether they were adequately particularised and supported by evidence, whether delay made them abusive, and whether the proposed remedies were available within the petitions.

1. Bankside. The proposed paragraph 3A amendments were refused. The allegations that Truchot was a cypher, quasi-agent or quasi-estoppel for Mr Gourgey were inadequately particularised and unsupported. Truchot’s ownership of shares, its failure to interfere in management, and its alleged hypothetical response to a request never made did not establish the necessary connection with the alleged unfairly prejudicial conduct. A shareholder’s inability to manage the company did not make it a cypher, and Truchot’s lack of knowledge of the alleged misconduct was material. Permission was granted for the paragraph 3B amendment concerning eight additional shares, conditional on the respondents being permitted to plead fully.
2. G & G. Most proposed amendments were allowed. Taken as a whole, the amended petition disclosed an arguable case that Neil and Charles, as directors and shareholders, knew or ought to have known of Mr Gourgey’s conduct and might thereby be sufficiently connected with it for relief under sections 994 and 996 of the Companies Act 2006. The pleaded authorisation or ratification by all shareholders could also amount to participation in the company’s affairs, even if ineffective because one shareholder had not consented. The representation allegation in paragraph 35A(3) was refused for lack of evidence and particularisation. Permission was conditional on full defences being allowed.
3. Pedersen. Amendments seeking an account against Brentford, permission for derivative proceedings and winding-up relief were refused. Creditors had their own remedies and could not obtain relief indirectly through an unfair-prejudice petition. Section 260 and Part 11 of the Companies Act 2006, together with CPR 19.9, required derivative claims to be properly pleaded and procedurally addressed. The proposed pleadings did not identify the underlying claims with sufficient detail or establish Brentford’s involvement in unfairly prejudicial conduct. The court left open whether winding-up could ever be ordered under section 996.
4. The applications were therefore allowed only to the stated limited extent. The Bankside and G&G amendments were conditional on full further pleadings, and the specified Pedersen amendment was allowed only with corresponding deletions from the petition.