Idrees Hashmi v Paul Lorimer-Wing & Ors

The petitioner sought a buy-out order under section 994 of the Companies Act 2006 alleging that the company's affairs had been conducted in a manner unfairly prejudicial to his interests as a shareholder and director. The court found that the respondent director had effected the petitioner's exclusion and purported removal without complying with the company constitution (Model Articles 9 and 10 and Bespoke Article 14.1), so that any resolution to remove the petitioner was invalid.

The judge held that exclusion from management, denial of access to company systems and records, and termination of the consultancy arrangement without observing contractual or constitutional procedure amounted to unfair prejudice. The court rejected the respondent's factual accounts that the petitioner had resigned or abandoned his role, and drew adverse inferences where appropriate. The petition therefore succeeded; further submissions were to be heard as to the appropriate consequential relief.

Background and parties. The petitioner, an early investor, director and consultant to Fore Fitness Investments Holdings Limited, applied under section 994 of the Companies Act 2006 claiming unfair prejudice following his alleged removal as director on 26 February 2021 and the termination of his consultancy arrangements. The first respondent, a fellow director and controlling officer of the company, defended the removal as valid under the company's bespoke articles and contended the petitioner had effectively stepped back from the business.

Nature of the application. The application was a first instance petition under s.994 seeking relief for unfairly prejudicial conduct which included a buy-out order; the court was asked to determine whether the petitioner's removal and exclusion were lawful and whether the conduct amounted to unfair prejudice.

Issues framed by the court.

• Whether the petitioner remained a director at the time of the events complained of.
• Whether the purported removal complied with the company constitution, including Bespoke Article 14.1 and Model Articles 9 and 10.
• Whether the acts and omissions complained of amounted to unfairly prejudicial conduct under s.994.
• Whether the petitioner suffered prejudice and, if so, whether it was unfair.

Evidence and factual findings. The judge analysed contemporaneous documents (emails, WhatsApp messages and Companies House filings) and oral evidence. The court rejected the respondent's account that the petitioner had resigned or abandoned his role, found no properly convened or notified directors' meeting on 26 February 2021 and concluded there was no valid board resolution removing the petitioner. The respondent had pasted part of legal advice into a witness statement but failed to disclose the advice itself; the court gave that partial material no evidential weight. The court preferred the petitioner's account where contemporaneous documents supported his position and drew an adverse inference that the respondent had not notified the petitioner of the meeting to avoid opposition.

Legal reasoning and conclusion. Applying the principles in O'Neill v Phillips and related authorities, the court asked whether the exercise of powers or actions departed from the parties' agreements and whether prejudice was unfair. The judge found breaches of the articles and of the parties' understanding: the petitioner was unlawfully excluded from management, denied access to systems and records, and had his consultancy terminated in breach of process. The judge also found an intention on the respondent's part to obtain the petitioner's shares at the lower “bad leaver” valuation and that this added to the unfairness. The petition succeeded and a consequential hearing was ordered to determine remedy.

The petition succeeds. The court held that the purported removal and exclusion of the petitioner were invalid because the directors' meeting and resolution did not comply with the company's constitution (Model Articles 9 and 10 and Bespoke Article 14.1). The respondent's contention that the petitioner had resigned or abandoned his role was rejected on the evidence. The exclusion from management, denial of access to records and termination of consultancy without proper process amounted to unfairly prejudicial conduct under section 994 of the Companies Act 2006. The court ordered a consequential hearing for submissions on relief.