Griffith v Gourgey & Ors

In an unfair-prejudice petition under section 994 of the Companies Act 2006, the petition identifies the grounds and defines the ambit of the case. Points of claim may particularise those grounds, but cannot introduce a new basis for relief. A late complaint that an allegation is insufficiently particularised will not justify strike-out where the respondent has pleaded to it without seeking further information. Support by directors for wrongful payments may itself amount to breach of duty and support relief against them. Family ownership alone does not justify a buy-out order without a connection to wrongdoing. An amendment adding shares does not reopen a struck-out defence to the existing case, although genuinely relevant defences to the additional relief may be pleaded.

Mr Griffith presented petitions under section 994 of the Companies Act 2006 concerning G&G Properties Limited and Bankside Hotels Limited. He alleged that Mr Gourgey had caused company funds to be paid to connected companies and sought orders requiring the purchase of his shares. In the G&G proceedings, the High Court permitted amendments concerning the Sons but had struck out the relief against them unless the pleadings were amended. In the Bankside proceedings, the High Court permitted an amendment recording Mr Griffith’s acquisition of eight further shares, but made permission conditional on Mr Gourgey being allowed to plead a full defence. The decisions under appeal were [2018] EWHC 1035 (Ch) and [2018] EWHC 2807 (Ch). The central issues were the scope of the petition, the effect of points of claim and the consequences of amending the relief sought.

The appeals were allowed. In the G&G proceedings, the claim for relief against the Sons was restored on ground 2. In the Bankside proceedings, the appeal against permission for a full defence was allowed.

G&G proceedings

1. A petition under section 994 of the Companies Act 2006 must specify the grounds and relief sought and defines the ambit of the case. Where the court directs points of claim, they may provide the necessary particularisation but cannot introduce a new ground. This approach was consistent with the importance of proper pleading recognised in Re Tecnion Investments Ltd [1985] BCLC 434 and the modern qualification of the observations in Re Fildes Brothers Ltd [1970] 1 WLR 592.
2. The points of claim alleged that Mr Gourgey had made payments with the support of the Sons. Their defence did not put those pleaded facts in issue. Although further particulars could initially have been sought, it was too late to strike out the claim for inadequacy after the defence had been served; further information could no longer be sought under CPR 18.1(1)(a). The omission of the allegation from the petition could be cured by amendment because the Sons had known the case since 2013 and had pleaded to it.
3. Support by directors for wrongful payments was capable of constituting breach of fiduciary duty. If the payments were made without Mr Griffith’s consent, the conduct could support a finding of unfair prejudice and a buy-out order against the supporting directors, depending on the facts at trial.
4. Directors may be liable for a fellow director’s acts without actual knowledge where proper performance of their duties would have led them to know of those acts. Merely pleading that the Sons were directors was insufficient, since the burden of proving breach lay on the party alleging it. The court applied the principle in Lexi Holdings Ltd v Luqman [2009] EWCA Civ 117.
5. The Sons’ family relationship with Mr Gourgey and registered ownership of shares, without more, could not justify relief against them. A connection with the alleged wrongdoing had to be shown, such as holding the shares for Mr Gourgey or being directed by him in exercising shareholder rights or directors’ duties. Matters pleaded in a defence could not supply grounds for relief absent from the petition; Thevarajah v Riordan [2015] EWCA Civ 41 did not support the contrary submission.

Bankside proceedings

The amendment recording the acquisition of eight additional shares did not alter the case of unfair prejudice, which was identical in respect of both parcels of shares. Allowing a defence to the whole points of claim would have set at nought the earlier strike-out order. Permission to plead therefore had to be limited. Mr Gourgey could plead matters genuinely relevant to the additional relief, including whether the shares were acquired when Mr Griffith knew of the alleged unfair prejudice and whether the transferor had consented to the relevant conduct. The court expressed no view on the merits of those arguments, which were considered by reference to Bermuda Cablevision Ltd v Colica Trust Ltd [1998] AC 198.

The court also stressed the need to bring the long-running proceedings to trial without further delay, using CPR 1.4(2)(g) and appropriate costs orders where necessary.

• Court of Appeal (Civil Division): Allowed the G&G appeal on ground 2 and allowed the Bankside appeal. [2019] EWCA Civ 2046.
• High Court (Companies Court (ChD)): Sir Nicholas Warren gave the first judgment, allowing strike-out applications unless the pleadings were amended, [2018] EWHC 1035 (Ch); and the second judgment, permitting amendments subject to conditions, [2018] EWHC 2807 (Ch).
• Court of Appeal (Civil Division): An earlier appeal against the strike-out of the respondents’ points of defence was dismissed in July 2017. [2017] EWCA Civ 926.
• High Court (ChD): Simon J struck out the points of defence for failure to comply with orders concerning further information. [2015] EWHC 1080 (Ch).