Grewal v Chakraborty

The appellant challenged the trial judge's choice of remedy in unfair prejudice proceedings and contended the judge failed to take proper account of an unpaid sum of £12,500 which the respondent had agreed in a 2007 agreement to pay for her shareholding. The High Court held that the unpaid sum was a personal debt arising from a private contract and did not affect the respondent's status as a 51% shareholder, as that status derived from the allotment of shares and the company register consistent with s.112 of the Companies Act 2006. The court applied the wide remedial discretion under s.996 of the Companies Act 2006 and concluded the trial judge had not ignored a material factor; the chosen remedy (order that the majority shareholder buy out the minority) was open to him in the circumstances, taking into account matters including the welfare of service users and the practicalities of management.

Background and parties. The appellant, Mr Surinder Grewal, was the unsuccessful respondent at trial on the remedies phase of unfair prejudice proceedings arising from the management of Astha Limited, a care services company. The respondent, Ms Sarjit Chakraborty, had been determined by the trial judge to be a 51% shareholder and the trial judge ordered her to buy Mr Grewal's 49% minority shareholding. Permission to appeal on the remedy point was granted on 8 June 2021.

Nature of the application. This was an appeal against the remedy ordered in unfair prejudice proceedings. The appellant argued the trial judge erred by failing to take sufficient account of the fact that the respondent had not paid an agreed £12,500 under a written agreement dated 9 March 2007.

Issues framed.

• Whether the trial judge should have treated the respondent's unpaid obligation under the 2007 agreement as affecting her status as a 51% shareholder and therefore affecting the appropriate remedy.
• Whether the judge erred in exercising his remedial discretion under s.996 of the Companies Act 2006.

Court's reasoning and decision. The court examined the share allotment of 28 April 2006 and the company filings, and held under s.112 of the Companies Act 2006 that the respondent was a member on the company register and thus a 51% shareholder. The 2007 agreement was in substantial part superseded when the appellant did not leave the business, but any unpaid sums under that agreement remained a personal obligation of the respondent to the appellant. That personal debt did not negate her shareholder status or materially affect the fairness of the remedy. The court emphasised the wide discretion afforded by s.996 and concluded the trial judge had not failed to take into account any material factor that would require interference. The appeal was dismissed.

Subsidiary findings included consideration of the welfare of service users, the respondent's role in delivering care, the appellant's health and limited practical ability to act as registered manager, and the risk that giving control to the appellant would lead to distraction by further litigation.

Appeal dismissed. The court concluded the trial judge did not err in ordering the majority shareholder to buy out the minority: the unpaid £12,500 was a personal debt and did not affect the respondent's shareholder status established by allotment and the company register under s.112; the trial judge properly exercised his wide remedial discretion under s.996 and did not fail to take into account a material factor.

Trial decision by HHJ Johns QC (unfair prejudice petition; remedy ordered that the majority shareholder buy out the minority). Permission to appeal granted 8 June 2021. Appeal heard in the High Court (Chancery Division) before Adam Johnson J, reported as [2021] EWHC 3260 (Ch) on 16 November 2021.