Andrew James Bridgen v Paul Julian Bridgen & Ors

On a well-founded unfair-prejudice petition, the court has a wide but judicial discretion under Companies Act 2006, section 996. The remedy must be assessed at the hearing, by reference to all relevant circumstances, the reality and practicalities of the parties’ relationship, and the need to cure the prejudice prospectively.

A petitioner’s misconduct may affect the remedy only where it is sufficiently serious and sufficiently connected, directly or indirectly, with the respondent’s unfairly prejudicial conduct. Serious misconduct unconnected with the proved prejudice does not require the petitioner to forfeit or reduce the remedy. A share buyout is commonly appropriate in a serious dispute involving a small private company, particularly where it offers a clean break, but the court must consider alternative orders, proportionality, funding, and the interests of other shareholders and creditors.

The petitioner presented petitions under section 994 of the Companies Act 2006 concerning AB Produce Trading Ltd, Bridgen Investments Ltd and AB Farms Ltd. The earlier liability judgment dismissed the petitions concerning Bridgen Investments Ltd and AB Farms Ltd, and dismissed most of the allegations concerning AB Produce Trading Ltd. It found, however, that certain conduct by Paul Julian Bridgen concerning AB Produce PLC, AB Produce Trading Ltd’s wholly owned subsidiary, was unfairly prejudicial.

The present hearing concerned the appropriate relief under section 996. The principal issues were whether Andrew’s own conduct could affect the remedy, whether compensation or a share purchase was appropriate, which shares should be bought, and how the shares should be valued.

1. Petitioner’s conduct. The court held that the relevant authorities establish no clean-hands requirement under section 996. A petitioner’s conduct may make the respondent’s conduct non-unfair, or may affect relief, but conduct relied upon to affect relief must be sufficiently serious and sufficiently closely connected with the proved unfair prejudice. The petitioner’s conduct in this case, although serious, had no sufficient direct or indirect connection with Paul’s diversion of PLC’s resources and therefore did not justify withholding or reducing relief.
2. Principles governing relief. Relief is discretionary and the burden lies on the petitioner to establish entitlement. The court must assess the remedy at the date of the remedies hearing, consider the whole range of possible orders, and select the order most likely to cure the prejudice and deal fairly with the situation. The remedy must be proportionate. The interests of creditors and other shareholders may be relevant, and the court is not confined to the relief sought.
3. Appropriate remedy. The unfair prejudice was serious and sustained. It caused PLC losses assessed at £451,820.30 and there remained a substantial risk of recurrence. Compensation by Paul to PLC, or future corporate-governance orders, would not provide as effective a clean break as a share transaction. A buyout was not disproportionate.
4. The usual direction that the respondent buys the petitioner’s shares did not determine the result. The court considered funding, the parties’ wishes, the interests of the minority shareholders, and the interrelationship between ABPT, PLC and Bridgen Investments Ltd. Andrew could fund a purchase, whereas there was very little prospect of ABPT funding a buyback of Andrew’s shares.
5. The court therefore decided that Andrew should purchase Paul’s 44.4% shareholding in ABPT. The order was to require Andrew also to offer to purchase the shares of the other ABPT shareholders and the shares of Paul, Mr Ellis, Mr Tomkinson and the SSAS in Bridgen Investments Ltd, at values determined by an independent valuer, in order to provide a realistic opportunity for a clean break.
6. No minority discount was applied. The value of Paul’s shares was to be reduced by 44.4% of PLC’s losses caused by the unfairly prejudicial conduct, namely £200,608.21, producing an estimated value of approximately £3,485,462 pending the experts’ precise calculation.

First-instance decision. The judgment records an earlier liability judgment and subsequent remedies hearing, but no appeal.