In re Cherry Hill Skip Hire Ltd

The Court of Appeal allowed an appeal against a High Court dismissal of a petition under section 994 of the Companies Act 2006 for unfairly prejudicial conduct. The judge below had dismissed the petition at a preliminary stage on grounds of long delay and acquiescence. The Court of Appeal held that, insofar as the petitioner sought to pursue complaints confined to conduct in or after 2001 (and subject to reformulation and particularisation), it was not plain and obvious that delay made relief inevitably unavailable.

The court observed that s.994 petitions attract the court's discretionary relief under s.996 and that unjustified delay, prejudice and acquiescence are relevant factors in exercising that discretion but do not create a fixed statutory limitation. The appeal was allowed and the proceedings were stayed to permit restoration of the struck-off company and re‑pleading of the petition so that the merits could be investigated at trial.

Background and parties. The petition concerned Cherry Hill Skip Hire Ltd (the Company) and arose from a long-standing family dispute. On incorporation in 1982 Andrew held 49% and Norma 51% of the shares. Andrew alleged that, in and after 2001, the Company’s affairs were conducted so as to be unfairly prejudicial to him, including diversion of business and assets and improper payments to related companies; he also alleged the apparent substitution of other persons on the register and an ultimately unlawful strike-off. The Company and its parent company had been struck off and dissolved after the petition was issued.

Procedural posture. The petition was issued on 1 July 2020 and amended on 20 November 2020. The respondents applied to strike out the petition on the basis of delay and lack of particularity. HH Judge Stephen Davies dismissed the petition on preliminary issues, concluding that delay and acquiescence by the petitioner made relief inappropriate in respect of the matters pleaded. The petitioner appealed to the Court of Appeal.

Nature of the claim and relief sought. The petition was brought under section 994 of the Companies Act 2006 for unfairly prejudicial conduct. The operative petition sought conversion of the petitioner’s shares into a shareholding in another group company and various direct payments alleged to represent misapplied company assets; during the appeal the petitioner indicated that, if permitted to amend, he would seek the customary buy‑out relief under s.996 rather than direct payments to himself.

Issues before the Court of Appeal.

• Whether the High Court was right to dismiss the petition in its entirety at a preliminary stage on grounds of long delay and acquiescence.
• Whether delay made it inequitable as a matter of law for the petitioner to obtain relief under s.996, taking into account the need to restore a struck-off company before a petition can proceed.
• Practical consequences of the Company and parent being dissolved and the need for restoration to provide standing.

Reasoning and conclusions. The Court of Appeal reviewed authority on delay in unfair prejudice petitions and treated delay and acquiescence as factors to be weighed in the court's discretion under s.996 rather than as creating a fixed bar. The court drew a distinction between historic complaints of exclusion from management (longstanding) and later complaints based on post‑2001 conduct or on later discovered facts such as an apparent transfer in 2007. It held that a shareholder may reasonably assume proper management unless and until clear grounds for complaint emerge, and that it was not plain and obvious on the pleaded case that delay would inevitably deprive the petitioner of all relief. Given the Company had been struck off, the appeal was allowed and the proceedings were stayed to permit restoration and re‑pleading; the court recommended mediation and noted that any amended petition would require substantial particularisation and might realistically seek buy‑out relief on valuation assumptions incorporating any proved wrongful extractions.

Appeal allowed. The Court of Appeal held that the High Court was wrong to dismiss the petition in its entirety at the preliminary stage on grounds of delay and acquiescence insofar as the petitioner sought to pursue complaints confined to conduct in or after 2001. Delay and acquiescence are relevant to the court's discretion under s.996 but do not automatically bar relief; the petition should be re‑formulated, the dissolved company restored before the petition proceeds, and the parties given an opportunity to consider settlement or mediation.

Petition under s.994 issued 1 July 2020 (amended 20 November 2020). Preliminary issues directed by HHJ Hodge QC (17 February 2021). HH Judge Stephen Davies (High Court, Business & Property Courts, Manchester; CR-2020-MAN-000684) dismissed the petition on 25 March 2021 on grounds of delay and acquiescence. Appeal heard in the Court of Appeal and allowed [2022] EWCA Civ 531 (27 April 2022).