In the matter of Kings Solutions Group Limited

Personal conduct by a shareholder or third party may be pleaded in an unfair prejudice petition only where it is causally connected to an act or omission of the company, or to conduct of the company’s affairs. A common plan, factual association or allegation that the plan harmed the company does not establish that connection.

Pleadings must identify concisely the relevant limb of section 994 of the Companies Act 2006, the conduct of the company’s affairs, the resulting prejudice to members and its unfairness. Parties may not use an unfair prejudice petition to attack binding court orders or relitigate issues which were, or should have been, determined in earlier proceedings.

The appellants were respondents to an unfair prejudice petition concerning Kings Solutions Group Ltd. They appealed against the refusal to strike out allegations about their personal conduct following the petitioners’ discontinuance of earlier misrepresentation proceedings.

The disputed allegations concerned enforcement of an interim costs order, an attempted court-ordered sale of shares, obstruction of a contractual put option and the assessment of litigation costs. The petitioners said those acts formed part of a wider campaign involving the conduct of the company’s affairs and intended to acquire their shares at an undervalue.

A deputy High Court judge refused to strike out the allegations in [2020] EWHC 3130 (Ch). The central questions were whether the alleged personal acts were sufficiently connected to conduct of the company’s affairs for section 994 of the Companies Act 2006, and whether the allegations impermissibly reopened matters determined in other proceedings.

1. The appeal was allowed unanimously. All disputed paragraphs of the Points of Claim were struck out.

2. The majority judgments in Graham v Every required a causal connection between the respondents’ personal acts and an act or omission of the company, or conduct of its affairs, within section 994 of the Companies Act 2006. A merely factual link, common purpose or case-management connection was insufficient. Pleadings should identify the statutory limb relied upon and state concisely the material facts establishing conduct of the company’s affairs, prejudice to the petitioner as a member and unfairness.

3. The allegation of a coordinated “Campaign” did not convert every personal act undertaken as part of it into conduct of the company’s affairs. Nor did general allegations that company money had been spent on the campaign, or that the campaign had harmed the company’s reputation or financial performance, establish which acts caused that harm or constituted conduct of the company’s affairs.

4. The put option was a personal arrangement between a shareholder and Primekings. Alleged obstruction of its exercise was neither conduct of the company’s affairs nor causative of such conduct. Obtaining and enforcing the interim costs order, pursuing charging orders, examinations and an order for sale, and seeking assessment of litigation costs were likewise personal acts undertaken by judgment creditors. A sale pursuant to a fair court-supervised mechanism would have placed the petitioners only in the position to which the law confined them and could not constitute unfair prejudice.

5. The disputed allegations were also abusive. The binding interim costs order could not be attacked collaterally in the petition. The complaint that the Part 8 proceedings sought an unfair sale at an undervalue materially repeated arguments rejected by the court in those proceedings.

6. The final costs certificates conclusively determined the recoverable costs. Allegations of fraudulent inflation could and should have been advanced in the detailed assessments. Having deliberately abandoned them there, the petitioners could not revive them in the petition. A later police report did not alter the statutory analysis, displace the binding civil orders or justify postponing the petition.

1. Court of Appeal (Civil Division): In [2021] EWCA Civ 1943, unanimously allowed the appeal and struck out all disputed paragraphs of the Points of Claim.
2. High Court, Insolvency and Companies List: In [2020] EWHC 3130 (Ch), the deputy judge struck out some allegations but refused to strike out the paragraphs challenged on appeal.