King & Ors v Kings Solutions Group Ltd & Ors (Costs)

The court determined costs and ancillary issues arising from an application to strike out parts of the Points of Claim in an unfair prejudice petition under section 994 of the Companies Act 2006. Three discrete passages were struck out because they breached CPR Part 38.7 and amounted to an abuse of process. The remaining eleven passages were not struck out because the judge was satisfied they pleaded a sufficient connection between the private conduct complained of and the conduct of the company so as to make relief under section 996 arguable, applying the test in Graham v Every.

On costs the judge ordered the Petitioners to pay the Applicants' costs of the strike out application in respect of the three struck-out passages, and directed an apportionment such that the Petitioners pay 25% of the Applicants' claimed costs of the application while 75% are costs in the petition. A payment on account of £40,000 was ordered within 28 days and no VAT was to be paid on that payment on account. Permission to appeal was refused for want of a real prospect of success and lack of compelling reason.

This judgment concerns costs, permission to appeal and the form of order following an earlier substantive decision on a strike-out application in an unfair prejudice petition (see the substantive judgment [2020] EWHC 2861 (Ch)). The underlying proceedings are an unfair prejudice petition under section 994 of the Companies Act 2006 brought by the Petitioners against a number of respondents. The applicants sought to strike out fourteen passages in the Points of Claim.

The court framed the dispute as two distinct events: (i) the application to strike out passages (1), (3) and (5) on the primary bases that the Petitioners had failed to comply with CPR Part 38.7 and that those allegations were an abuse of process; and (ii) the application to strike out passages (2), (4) and (6)–(14) on the primary basis that the allegations did not involve the conduct of the affairs of the company.

Key findings and reasoning:

• The judge held that passages (1), (3) and (5) should be struck out because the Petitioners had not complied with CPR Part 38.7, made no application for permission to advance those allegations, and permitting them to proceed would be an abuse of process.
• On passages (2), (4) and (6)–(14), the judge found that the Points of Claim pleaded a sufficient causal and factual connection between the private conduct and the company’s affairs to make relief under section 996 at least arguable. The court applied the analysis in Graham v Every and concluded the allegations could not be struck out at this stage.
• In relation to costs the general rule that the unsuccessful party pays was applied, but the judge balanced the different outcomes. The Petitioners were ordered to pay the Applicants’ costs relating to the struck-out passages; overall the judge apportioned the Applicants’ claimed costs so that the Petitioners pay 25% of those costs and 75% are costs in the petition. A payment on account of £40,000 was ordered within 28 days. The court directed that no VAT should be payable on that payment on account; VAT recoverability to be determined on detailed assessment.
• Permission to appeal was declined. The judge considered that the Applicants had no real prospect of success on appeal as the court had applied Graham v Every and had been satisfied that the Points of Claim adequately pleaded a causal connection; the judge also rejected the argument that the case raised a compelling point requiring appellate clarification.

The judgment therefore disposed of the costs and permission to appeal: partial success for the Applicants on abuse / non-compliance grounds; partial success for the Petitioners in resisting strike-out on the section 994/996 connection ground.

Application allowed in part. Passages (1), (3) and (5) of the Points of Claim were struck out because the Petitioners had failed to comply with CPR Part 38.7 and the allegations constituted an abuse of process. Passages (2), (4) and (6) to (14) were not struck out because they pleaded a sufficient connection to the conduct of the company to make relief under section 996 arguable. Costs were apportioned: Petitioners to pay 25% of the Applicants' claimed costs of the application and 75% to be costs in the petition; a payment on account of £40,000 to be made within 28 days and no VAT to be paid on that payment on account. Permission to appeal was refused for lack of real prospect and lack of compelling reason.