Primekings v King

The Court of Appeal allowed the appeal and struck out a number of paragraphs in the Petitioners' Points of Claim in an unfair prejudice petition under section 994 of the Companies Act 2006. The court held that personal conduct of respondents may be pleaded in a section 994 petition only where those personal acts are causally connected to an act or omission constituting conduct of the company’s affairs which is said to be unfairly prejudicial. Relying principally on Graham v Every, the court required a clear causal link between personal misconduct and company conduct before permitting personal allegations to survive a strike-out application.

The court found that the disputed paragraphs, which alleged a broad “Campaign” of conduct, failed as a matter of law because many of the complained-of acts (for example, pursuit of costs, obtaining charging orders, attempts to enforce an Interim Costs Order and obstruction of a private put option) were personal actions and were not shown to have caused or resulted in conduct of the company’s affairs within section 994. The court also held that allegations seeking effectively to re-litigate or go behind final costs decisions and detailed assessment outcomes were an abuse of process.

This appeal concerned an interlocutory ruling in an unfair prejudice petition under section 994 of the Companies Act 2006 brought by members of Kings Solutions Group Limited. The petitioners alleged that the majority shareholder and certain directors had mounted a "Campaign" after the petitioners discontinued a prior misrepresentation claim, and that that Campaign involved personal conduct and company-level acts which together amounted to unfairly prejudicial conduct of the company's affairs. The petition sought a buy-out of the petitioners' shares without minority discount, with adjustments for the matters complained of.

Procedural and factual background:

• The dispute followed a 2013 sale and capital investment (the "Transaction") and later litigation including a Misrepresentation Claim which the petitioners discontinued in May 2017; Marcus Smith J made an Interim Costs Order. Charging orders and Part 8 enforcement proceedings followed and the Part 8 Claim attracted multiple Deputy Master judgments. Detailed costs assessments were conducted by Master Whalan and final certificates were issued. The petitioners also issued a separate conspiracy claim that was struck out by Cockerill J ([2021] EWHC 1045 (Comm)).
• The Points of Claim in the petition contained extensive allegations (69 pages) including paragraphs that the Judge below refused to strike out, alleging personal misconduct (for example obstructing a put option, tactical conduct in costs applications, aggressive enforcement and service) and asserting those formed part of a broader Campaign which had damaged the company's business.

Issues framed by the court:

1. Whether personal conduct by respondents, which is not in itself conduct of the company's affairs, may be pleaded and relied upon in a section 994 petition and, if so, on what basis.
2. Whether the disputed paragraphs were an abuse of process by impermissibly re-litigating matters already decided in other proceedings, in particular costs decisions and Part 8 enforcement judgments.

Court's reasoning and conclusions:

• The Court of Appeal adopted the majority approach in Graham v Every: personal acts may be pleaded only where there is an appropriate causal connection between the personal act and an act or omission that properly constitutes conduct of the company's affairs within section 994. The court emphasised established pleading principles: statements of case must be concise and plead material facts necessary to the cause of action.
• The court held that alleging a broad "Campaign" and asserting general company harm did not supply the necessary causal connection. Even if some parts of a campaign involved company funds or company acts, that did not mean every alleged personal act within the Campaign amounted to conduct of the company's affairs or was causative of such conduct.

The court therefore allowed the appeal and ordered that the disputed paragraphs be struck out, observing that unfair prejudice petitions must be reasonably limited in scope and managed so as to avoid extensive collateral fishing expeditions.

Appeal allowed. The Court of Appeal held that personal conduct can be pleaded in a section 994 petition only where those personal acts are causally connected to an act or omission constituting conduct of the company's affairs; the disputed paragraphs failed to show such a causal connection and, in part, sought to re-litigate final costs decisions and were an abuse of process, so they were struck out.

Interlocutory appeal to the Court of Appeal from the judgment of Tom Leech QC (sitting as Deputy High Court Judge) in the Business and Property Courts (Insolvency and Companies List) [2020] EWHC 3130 (Ch). Underlying litigation included the Misrepresentation Claim tried before Marcus Smith J (discontinued May 2017), charging orders and Part 8 enforcement decisions by Deputy Master Cousins (March, May and August 2018), detailed assessment decisions by Master Whalan (December 2019 and final costs certificates issued November 2020), and a separate Conspiracy Claim struck out by Cockerill J ([2021] EWHC 1045 (Comm)), with refusal of permission to appeal that strike-out by Males LJ (26 July 2021). The present appeal was heard in the Court of Appeal and allowed on 17 December 2021 ([2021] EWCA Civ 1943).