Faulkner & Ors v Vollin Holdings Ltd & Ors

An unfair-prejudice petition should not ordinarily be summarily determined where the issues depend on disputed evidence, contractual interpretation and the overall commercial context. Overlapping facts may support both a defence and a discontinued counterclaim; discontinuing the counterclaim does not, without more, prevent reliance on those facts in the defence. Proceedings pursued for mixed motives are not abusive where at least one legitimate purpose is present. Debarring a party from defending is an exceptional and proportionate remedy, appropriate only where a fair trial cannot otherwise be achieved. The court should instead manage the trial so that cross-examination and evidence remain focused on the issues that remain live.

Minority shareholders in Compound Photonics Group Limited petitioned for relief under sections 994–996 of the Companies Act 2006. They sought an immediate order requiring the active respondent shareholders to purchase their shares at fair value, following the discontinuance of a substantial counterclaim against one petitioner.

The petitioners argued that the counterclaim had been intimidatory and abusive, that its discontinuance left no properly arguable defence to alleged unfair prejudice arising from Dr Sachs’s departure, and that overlapping allegations could not be advanced in the defence. The central questions were whether summary relief or a debarring order was justified and how the trial should proceed.

1. The application for an immediate share-purchase order, whether by debarring the active respondents from defending or otherwise, was refused. The trial was to proceed, with cross-examination managed proportionately.

2. The active respondents had an arguable defence concerning Dr Sachs’s departure. Whether he had an entrenched or qualified right to remain a director, including in light of the shareholders’ statutory power under section 168(1) of the Companies Act 2006, was seriously disputed. The issues also involved contractual interpretation, the commercial context of the investment, the alleged duty of good faith and disputed evidence. They could not fairly be resolved summarily.

3. The discontinuance of the counterclaim did not prevent reliance on overlapping facts in the defence. The court distinguished the finality principle associated with Henderson v Henderson and Johnson v Gore Wood from a case where the same facts were relied on for different procedural purposes.

4. The counterclaim’s intimidatory appearance and distorting effect did not establish abuse of process. Where proceedings are pursued for mixed motives, there is no abuse if one purpose is legitimate: JSC BTA Bank v Ablyazov No. 6, [2011] EWHC 1136 (Comm). In any event, debarring the respondents would be an extreme remedy. Fairness and proportionality required consideration of whether a fair trial remained possible, applying the approach illustrated by Summers v Fairclough Homes Ltd, [2012] UKSC 26, and Alpha Rocks Solicitors v Alade, [2015] EWCA Civ 685.

5. Following the counterclaim’s discontinuance, the trial should focus principally on the events surrounding Dr Sachs’s resignation in March 2016, while retaining sufficient background to assess their context. Cross-examination should be kept within appropriate and proportionate bounds.