Andrew Raeburn Bailey v Cherry Hill Skip Hire Limited & Ors.

There is no statutory limitation period for an unfair prejudice petition, and laches does not strictly apply. Delay, acquiescence, resulting prejudice and an irretrievable change of position instead inform the court’s discretion under section 996 of the Companies Act 2006.

A petition may be dismissed before trial for delay only where it is plain and obvious that relief would be refused even if the pleaded allegations were proved. A passive shareholder may ordinarily assume that directors are managing the company properly. Inaction does not necessarily amount to acquiescence in undiscovered mismanagement or the apparent expropriation of shares.

A minority shareholder petitioned under sections 994 to 996 of the Companies Act 2006, alleging that the company’s directors had diverted its money, assets and business, denied him shareholder rights and caused other persons to be recorded as owners of his shares.

The High Court dismissed the entire petition as a preliminary issue because the petitioner had delayed for many years and had acquiesced in the matters complained of. On appeal, the petitioner abandoned complaints about exclusion from management and events before 2001. He proposed to seek a conventional buy-out remedy through a substantially reformulated petition.

The central issue was whether it was inevitable, before disclosure or trial and assuming the remaining allegations were proved, that delay would cause the court to refuse all relief.

1. The appeal was allowed unanimously. The proceedings were stayed pending an application to restore the dissolved company to the register. The petitioner was also to have an opportunity to reformulate and particularise the petition.

2. There is no statutory limitation period for a petition under section 994 of the Companies Act 2006. The equitable doctrine of laches does not strictly apply where the relief sought is not equitable. Delay, its reasons, acquiescence, prejudice and an irretrievable change of position are nevertheless significant when the court exercises its broad remedial discretion under section 996. The court must assess whether the delay makes the requested relief unfair or inappropriate in all the circumstances.

3. On a preliminary determination, disputed facts had to be assumed in the petitioner’s favour. Dismissal for delay was justified only if it was plain and obvious that no reasonable trial judge could grant relief even after all the allegations were proved. That conclusion could not be reached without knowing how the evidence would develop, including what contemporary documents remained available.

4. A distinction existed between long acquiescence in known exclusion from management and the position of a passive shareholder who later discovers diversion of company assets or opportunities and the apparent expropriation of his shares. Unless there is evidence to the contrary, a shareholder may assume that directors are managing the company properly, complying with their duties and observing its constitution. Failure to demand accounts or commence proceedings does not necessarily amount to acquiescence in unknown misconduct or future mismanagement.

5. A personal dispute about the beneficial ownership of shares is not, without more, conduct of the company’s affairs. Procuring the substitution of other names for the true owner in the register of members or information filed at Companies House is, however, an act attributable to the company and may support a section 994 petition.

6. The remaining allegations were old and there was a significant risk that relief might ultimately be refused. That result was not inevitable. The petition required radical amendment, restoration of the company, joinder of a person asserting ownership of the shares and sufficient particulars to survive the outstanding preliminary issue.

1. Court of Appeal (Civil Division): By [2022] EWCA Civ 531, unanimously allowed the appeal against the wholesale dismissal of the petition and stayed proceedings pending restoration of the company.
2. High Court, Business and Property Courts in Manchester: HH Judge Stephen Davies dismissed the petition on the preliminary grounds of delay and acquiescence. He did not decide the preliminary issue concerning inadequate particularisation.