King v Kings Solutions Group

The court considered an application by the majority investors and certain directors to strike out parts of the petitioners' Points of Claim in an unfair prejudice petition brought under section 994 of the Companies Act 2006. The judge applied the statutory framework in Part 30 of the Companies Act, the established authorities on what constitutes "conduct of the company's affairs" and the Civil Procedure Rules powers to manage cases and strike out pleadings (in particular CPR 3.4 and CPR 1.4).

Key legal principles applied were that (i) conduct relied on in a section 994 petition must amount to conduct of the company's affairs or an act/omission of the company, (ii) allegations which duplicate or arise out of facts which gave rise to a discontinued claim require permission under CPR 38.7 and may be struck out if that permission was not sought, and (iii) the court has a broad case-management responsibility to identify issues and dispose summarily of those which cannot support the petition.

The judge struck out specific passages which repeated or re‑ran the petitioners' discontinued misrepresentation claim and related factual assertions because they arose out of the same or substantially the same facts as the discontinued proceedings and no permission under CPR 38.7 had been obtained. Other pleaded allegations concerning a wider alleged "Campaign" by the respondents to obtain the petitioners' shares at a depressed value, the conduct of charging/order-for-sale proceedings and related enforcement and costs conduct were left to trial because they raised arguable unfair‑prejudice issues and a sufficient causal link to the company's affairs had been pleaded.

The petitioners (Anthony King and his parents) brought a petition under section 994 of the Companies Act 2006 alleging that the affairs of Kings Solutions Group Ltd had been conducted in a manner unfairly prejudicial to their interests. The respondents included Primekings (the majority investor), a holding company, and several directors. The background included a 2013 investment and share-transaction package, subsequent litigation (a misrepresentation claim which the petitioners discontinued after trial), costs orders and charging orders over the petitioners' shares, and further related claims and proceedings.

Nature of the application: The Second to Fifth respondents applied to strike out many passages of the Points of Claim. The disputed passages ranged from alleged pre‑transaction misrepresentations and the petitioners' belief about those representations, to allegations about attempts to obstruct exercise of a put option, the obtaining and enforcement of charging orders and an order for sale of shares, the conduct of costs proceedings, alleged harassment and an alleged campaign to expropriate the petitioners' shares at an undervalue.

Issues framed by the court:

• Whether the pleaded matters amount to the conduct of the company's affairs (a threshold requirement for relief under section 994).
• Whether parts of the Points of Claim should be struck out because they repeat or arise out of the same or substantially the same facts as the petitioners' discontinued misrepresentation claim and therefore required permission under CPR 38.7.
• Whether allegations amounted to abuse of process or should otherwise be struck out under CPR 3.4 for disclosing no reasonable grounds or for obstructing the just disposal of proceedings.

Reasoning and outcome on those issues: The judge applied authorities emphasising that the court must control scope of unfair‑prejudice petitions and that conduct relied upon must amount to conduct of the company's affairs. He identified two clusters of material:

• Allegations that essentially repeat the discontinued misrepresentation claim (including pre‑transaction inducement and the petitioners' antecedent beliefs and the conduct of the misrepresentation trial) were struck out. The judge concluded those matters arose out of the same or substantially the same facts as the discontinued proceedings; no permission under CPR 38.7 had been sought and it would be an abuse of process in relation to defendants (notably a director who was not sued previously) to permit the repetition.
• Allegations concerning a wider asserted "Campaign" by the respondents — including obstruction of a put option, the obtaining and enforcement of charging orders, the Part 8 order for sale, valuation methodology and the conduct of costs proceedings — were not struck out. The judge found the petitioners had pleaded a sufficient causal connection between those personal acts and the conduct of the company's affairs to permit those matters to proceed to trial; the issues were contested and required fuller fact-finding (including cross-examination and valuation evidence).

The judge therefore struck out identified passages (set out in the Appendix) but dismissed the strike-out application as to many other pleaded paragraphs, leaving them for trial. He directed the parties to agree an order about the result and costs or to return to the court for determination.

The strike‑out application was allowed in part and dismissed in part. The court struck out passages of the Points of Claim that repeated or materially re‑ran the petitioners' discontinued misrepresentation case and related matters because they arose out of the same or substantially the same facts as the discontinued proceedings and no permission under CPR 38.7 had been obtained; those passages therefore failed for non‑compliance and risked abuse of process. Allegations forming part of a pleaded "Campaign" to deprive the petitioners of their shares, and allegations relating to the enforcement of charging orders, the Part 8 order for sale and related costs and valuation conduct, were not struck out because the petitioners had pleaded a sufficient causal connection to the conduct of the company's affairs and those matters raised triable issues.