Cossac Holdings Limited v Preferred Management Limited & Ors

On an application to amend a petition, the proposed case must be more than merely arguable. It must carry a degree of conviction, be coherent and properly particularised, and be supported by evidence establishing a sufficient factual basis. Amendments cannot re-litigate matters already decided or matters which should have been advanced earlier, absent special circumstances. For an unfair-prejudice petition, conduct must concern the affairs of the company in which the petitioner holds shares. The exercise by that company of rights attached to its shareholding in another company may qualify. The affairs of that other company do not thereby become the petitioner company’s affairs merely because a third party allegedly exercises de facto control over both companies. A winding-up order on just and equitable grounds is a draconian remedy, and the discretionary relief under section 996 may provide a more appropriate remedy.

The petitioner, a one-third shareholder in Preferred Management Limited, sought permission to re-re-amend a petition under section 994 of the Companies Act 2006. The proposed amendments alleged that the affairs of Public JSC Energogarant, in which Preferred Management held a minority shareholding, formed part of Preferred Management’s affairs because Andrey Zernov allegedly exercised de facto control over both companies. Other amendments relied on an alleged temporal limitation on the purpose of Preferred Management and sought to revive a just-and-equitable winding-up claim.

The application followed an earlier trial at which the petitioner’s Additional Points of Claim had been dismissed. The central issues were whether the proposed amendments were precluded by the earlier judgment or abusive, whether they concerned the affairs of the petitioner company, and whether they met the applicable merits and pleading threshold.

Application allowed in part. Permission was refused for the proposed amendments based on an alleged agreement that Preferred Management’s purpose was limited to the period during which the founding shareholders worked together. That issue had been within the scope of the earlier trial and was therefore res judicata. The related incentive allegation was likewise precluded because it had not been supported by evidence at the earlier trial.

1. Following Kawasaki Kisen Kaisha Ltd v James Kemball Ltd [2021] EWCA Civ 33, an amendment must carry some degree of conviction. It must be coherent, properly particularised and supported by evidence establishing a factual basis for the allegations. The proposed allegations concerning wrongdoing in JSCE did not satisfy that threshold where they failed to identify conduct or omissions by PML falling within section 994.
2. The court rejected the contention that JSCE’s affairs became PML’s affairs merely because Mr Zernov allegedly controlled both companies. The authorities concerned relationships involving parent and subsidiary companies or control by the company or its member. No authority supported treating the affairs of a target company as those of its member where the alleged control was exercised by a third party. The complaints therefore concerned Mr Zernov’s or JSCE’s affairs, rather than PML’s affairs.
3. The exercise of PML’s voting rights as a shareholder in JSCE did concern PML’s affairs. Permission was accordingly granted for the amendments concerning PML’s failure to exercise its vote in accordance with the petitioner’s directions.
4. Permission was refused for the remaining amendments, including allegations concerning JSCE’s investigations, dividends, a subsidiary sale, voting restrictions and attempts to obtain information. The proposed revival of the winding-up claim was also refused. The parties were invited to agree consequential directions.