Joy Margaret Griffiths v John Tudor Griffiths & Ors

An unfair prejudice petition must identify conduct of the company’s affairs, or an act or omission of the company, which caused unfair prejudice to the petitioner’s interests as a member. The elements are distinct, although the same facts may support more than one element.

Personal conduct by a respondent or third party may be pleaded where it is causally connected to the relevant conduct of the company’s affairs. In a group of companies, each company must be considered separately, but the wider factual context may be relevant. Summary disposal is inappropriate where material facts remain disputed or the claim depends on equitable restraints arising from a quasi-partnership understanding. A proposed share purchase will not dispose of the petition unless it is a firm, sufficiently concluded offer with an agreed or objectively determinable valuation mechanism.

The petitioner presented two petitions under Companies Act 2006, section 994, concerning T G Builders Merchants Limited and Ellesmere Sand & Gravel Co. Limited. She alleged that the companies’ affairs had been conducted contrary to a family quasi-partnership understanding, causing unfair prejudice through exclusion from management, control of voting rights, charging arrangements, loans, security and inadequate economic returns.

The first respondent applied to strike out the petitions, strike out particular allegations or obtain summary judgment. The applications relied on pleading defects, delay or acquiescence, and an offer to purchase the petitioner’s shares. The central issues were whether the petitions disclosed viable causes of action and whether the disputed matters could fairly be resolved summarily.

1. The applications were substantially refused. The petitions disclosed sufficiently pleaded causes of action in unfair prejudice, although the descriptions of the trust respondents required correction or amendment. The court therefore declined to strike out either petition in its entirety.
2. The statutory elements had to be established distinctly: conduct of the company’s affairs or an act or omission of the company; prejudice to the petitioner’s interests as a shareholder; and unfairness. The requirements were inter-related, but the existence of a quasi-partnership understanding and its alleged breach did not replace the need to identify relevant conduct of each company.
3. Unfairness may arise despite the exercise of strict legal powers where equitable constraints derive from a collateral agreement or understanding between shareholders. Whether such constraints applied was fact-sensitive and could not be determined summarily merely because decisions had been made through majoritarian governance.
4. Personal acts concerning share transactions, trusts or control of other companies could be pleaded where they were alleged to have enabled or caused conduct of the affairs of the company concerned. Each company nevertheless had to be considered separately. The wider group context was not impermissibly irrelevant where the petitions separately alleged conduct of the affairs of each company.
5. The court applied the summary disposal principles identified in Global Asset Capital Inc v Aabar Block SARL and Easyair Ltd (trading as Openair) v Opal Telecom Ltd. It was inappropriate to resolve contested factual matters, including the alleged independence of a trustee, the calculation of head office charges, repayment of loans, or the explanation for delay.
6. Delay and acquiescence could not be determined without a defence and evidence. The court followed the approach in Re Cherry Hill Skip Hire Limited: it was not plain and obvious that equitable relief would necessarily be refused.
7. The proposed purchase of the petitioner’s shares did not justify striking out the petitions. Unlike the concluded arrangement contemplated in O’Neill v Phillips, the proposal remained subject to contract, with valuation issues unresolved and no binding commitment or agreed mechanism. Consequential matters, amendments, case management and costs were left for agreement or further hearing.

First-instance applications in the High Court. No appellate history was stated in the judgment.