JAMIE MARTIN v HOCHANDA LIMITED

This judgment decided a preliminary factual issue on the balance of probabilities in an amended unfair prejudice petition: whether the respondents effectively prevented the petitioner from selling his shares in April 2018. The court held that the company's Articles (notably the pre-emption regime in Article 10) provided an existing contractual route for transfer and that the respondents had, instead, offered a voluntary alternative method of sale on specified conditions (expressed in contemporaneous emails).

The judge found that the Hart email of 25 April 2018 did not operate to prevent sale but offered conditional assistance (including a temporary refusal to disclose management accounts and a proposal that any subscription for additional shares be at not less than the recent issue price of 25p). When the broker, Mr Lloyd Thomas, declined to proceed on that basis, the voluntary alternative fell away. The petitioner had not pursued the contractual Article 10 route and took no reasonable steps to find purchasers thereafter. There was no pleaded or established waiver or estoppel in the circumstances. On those grounds the court answered the preliminary issue in the negative.

The petition concerned an amended unfair prejudice claim presented against Hochanda Limited and two majority shareholders. The court was asked to determine a single preliminary factual issue: "Did the Respondents effectively prevent the Petitioner from selling his shares in Hochanda Limited in April 2018?" The issue was to be decided on the balance of probabilities.

The background facts were that the petitioner was a minority shareholder (10 million A shares and a small holding of C shares) and former CEO who sought to sell in early 2018 through a broker, Athene Capital / Mr Lloyd Thomas. The company operated under Articles of Association containing pre-emption rights (Article 10) which set out a valuation and offer process for transfers. The petitioner did not invoke Article 10 and accepted in evidence that he had not read the Articles before the proceedings.

The matter turned on contemporaneous emails: (i) a 25 April 2018 email from the petitioner's broker requesting confirmation that the company/major shareholders would not "prevent, impede, pre-empt or insist on co-sale" and seeking six months' management accounts (to be shared with prospective purchasers but not with the petitioner), and (ii) a 25 April 2018 reply from Mr Adam Hart (on instructions of the majority shareholders) which (a) confirmed that the majority would not invoke pre-emption rights for the time being but reserved the right depending on the identity of any purchaser, (b) refused management accounts "for the time being", and (c) said any subscription for additional shares by a purchaser would be at not less than the prior issue price of 25p. A 27 April 2018 email recorded that the broker would not act because he could not obtain the information or terms he required.

The court framed the issues as: (i) the legal effect of the Hart email in the context of Article 10; (ii) whether the respondents' conduct amounted to effective prevention of sale; and (iii) whether any equitable cause (waiver, estoppel) arose. The judge reasoned that the Hart email, read against Article 10, amounted to a voluntary alternative route to a sale on specified conditions rather than an act of prevention. When the broker withdrew, that voluntary route collapsed; that did not amount to the respondents preventing sale under Article 10 or by other binding means. The petitioner had not attempted to follow Article 10, had not shown attempts to find purchasers or that third parties refused to engage for lack of accounts, and had not established waiver or estoppel. The court therefore answered the preliminary issue "no." The judge observed that this determination may not dispose of the petition in its entirety.

This first-instance determination answers the preliminary factual issue: the respondents did not effectively prevent the petitioner from selling his shares in April 2018. Reason: the Articles (Article 10) provided the contractual pre-emption route which the petitioner did not invoke; the contemporaneous Hart email offered a voluntary, conditional alternative (including temporary refusal of management accounts and reservation depending on purchaser identity); when the broker declined to act that voluntary alternative fell away; there was no estoppel or waiver established and the petitioner also failed to take reasonable steps to pursue sale through the contractual route or otherwise.