Griffith v Gourgey & Ors

This judgment determines multiple applications to amend petitions and corresponding particulars of claim in contested unfair-prejudice petitions under the Companies Act 2006 (notably sections 994 and 996). The court reiterated the controlling principles on amendment and strike-out: a party’s case is defined by its pleading; an amended claim must be particularised and have a real (not merely arguable) prospect of success; relief must be proportionate to the conduct complained of; and attribution of a director’s misconduct to a third-party shareholder or trustee requires a sufficient connection (the Sales J / F&C test as elucidated by Asplin J in Re TPD Investments).

Applying those principles, the judge refused the extensive additional allegations seeking to make the trustee (Truchot) liable (the new paragraph 3A amendments) because they were insufficiently particularised, unsupported by evidence and legally unsustainable (including attempts to plead quasi-agency, quasi-estoppel and quasi-sham). Permission was granted to amend to include the acquisition of an additional 8 shares (paragraph 3B) but on the clear condition that respondents be permitted to plead in full to the expanded claim.

Similarly, substantial amendments to the G & G petition and corresponding particulars were allowed in large part (reflecting allegations that Neil and Charles Gourgey were aware of or sanctioned the director’s conduct and/or breached fiduciary duties), but one specific new pleading alleging an unparticularised representation (paragraph 35A(3)) was refused; the permission to amend was conditional on respondents being permitted to plead in full.

Proposed amendments to the Pedersen petition which would have sought relief against Brentford (including an account, winding-up and derivative claim authorisations) were refused for lack of pleaded particulars, lack of proper basis to treat third parties as liable under sections 994–996 and because creditors have their own remedies; one limited amendment (paragraph 0 disavowing reliance on certain PoC paragraphs) was allowed but the corresponding paragraphs in the Pedersen petition must be struck out.

The petitions arise from shareholder disputes concerning Bankside Hotels Limited, Pedersen (Thameside) Limited and G & G Properties Limited. The judge had previously delivered an earlier judgment addressing strike-out and amendment principles and certain preliminary applications; this judgment deals with subsequent applications by the petitioners (and by Mewslade in the Pedersen proceedings) to re-amend petitions and particulars of claim.

Nature of the applications:

• Applications to re-amend Bankside and G&G petitions and the corresponding particulars of claim to add factual allegations and to extend relief (including buy-out orders and valuation bases).
• Mewslade’s application to amend the Pedersen petition and particulars to seek, in alternative forms, an inquiry and account against Brentford, permission to bring derivative claims and winding-up relief to protect creditors.

Issues the court framed:

• Whether the proposed amendments were an abuse of process given their lateness and prior opportunities to amend.
• Whether the proposed amendments were sufficiently particularised and supported by evidence to have a real prospect of success (not merely arguable).
• Whether the pleaded facts could establish the necessary connection to attribute an individual director’s alleged unfairly prejudicial conduct to a third-party shareholder or trustee under sections 994/996.
• Whether the remedies sought (including buy-out orders, inquiries, accounts, derivative claim authorisations and winding-up) were available and proportionate.

Reasoning and disposition:

• The court reiterated the F&C/Sales J test and Asplin J’s guidance in Re TPD: mere connection to acts is not enough; the respondent must be so connected to the unfair prejudice that it is just to grant relief against them.
• On Bankside, the bulk of the new allegations were not new in substance but the new pleading failed to cure prior defects: critical allegations (quasi-agency, treatment as a cypher, estoppel, actual or constructive knowledge) were inadequately pleaded and unsupported by evidence; several legal constructs advanced (quasi-agency, quasi-estoppel, quasi-sham) were rejected as unprincipled or incoherent. The court therefore refused paragraph 3A amendments. The limited amendment to add the additional 8 shares (paragraph 3B) was allowed but only if respondents could plead in full to the revised PoC because allowing that amendment opened up materially different relief and required full answer and evidence from respondents.
• On G & G, taking the proposed amendments as a whole the judge considered that there was an arguable case that Neil and Charles, as directors and shareholders, might have known of or participated in or authorised the contested payments and conduct; although many particulars remained deficient, the amended pleadings raised a substantial case that required answering. Accordingly the court allowed most of the G & G amendments except one unparticularised new representation allegation (35A(3)), imposing the same condition that respondents be permitted to plead in full.
• On Pedersen, the proposed new remedies against Brentford, derivative authorisation against non-party directors and an order for winding-up were refused. The court held that creditors have their own remedies and that the petition and PoC lacked the specific pleaded facts (and evidence) needed to make Brentford or other third parties liable under sections 994–996 or to justify the extraordinary relief sought; permission to include paragraph 0 (disavowing reliance on some PoC paragraphs) was allowed but corresponding paragraphs in the Pedersen petition must be struck out.

The judgment records that further Points of Defence must properly particularise the respondents’ case and that allowing conditional amendments was intended to enable the parties to have a fair opportunity at trial to address the matters raised.

This is a first-instance judgment. The court allowed the amendment applications in part and refused them in part. The judge refused the extensive proposed amendments alleging responsibility of the trustee Truchot (the new paragraph 3A amendments) because they were insufficiently particularised, unsupported by evidence and legally unsustainable; he allowed an amendment to add the additional 8 shares (paragraph 3B) on the condition that respondents be permitted to plead in full. Substantial amendments to the G & G petition and particulars were allowed except for one unparticularised representation allegation (paragraph 35A(3)), again conditional on respondents being allowed to plead in full. The proposed Pedersen amendments seeking account/inquiry against Brentford, winding-up and derivative-authorisation were refused for lack of pleaded particulars and proper basis; paragraph 0 (disavowal) was allowed but corresponding Pedersen-petition paragraphs must be struck out. The court’s reasons rely on principles governing amendment, the need for particularisation and evidence, the F&C/Sales J attribution test (as explained in Re TPD) and proportionality of remedies under sections 994–996 CA 2006.