Robert Morris v Elite Motors Bodyshop Limited & Anor

This case concerned an application to strike out an unfair prejudice petition presented under section 994 of the Companies Act 2006. The court applied the strike-out principles in CPR 3.4 and the established approach from authorities such as Williams & Humbert, asking whether the petition disclosed reasonable grounds or was an abuse of process. The respondent relied on an "Open Offer" to buy the petitioner’s shares at a fair value (without a minority discount) and on alleged delay in issuing proceedings; the court held that the offer left important disputed factual matters unresolved and so was not plainly reasonable, and that the delay did not justify striking out the petition. The court dismissed the strike-out application in its entirety except for a narrow amendment ordering repleading of the claim for a marriage-value premium so that it is clearly pleaded as an alternative to a non-discounted buyout.

Background and parties. The petitioner, Robert, and the second respondent, Julian, are equal shareholders and directors of Elite Motors Bodyshop Limited (the Company). Robert presented a petition under section 994 of the Companies Act 2006 alleging quasi-partnership unfair prejudice arising from exclusion from management, diversion of company assets, unequal dividends and other mismanagement. Julian applied to strike out the petition in whole or in part under CPR 3.4, relying principally on an open offer to buy the petitioner’s shares and on delay in issuing proceedings.

Relief sought. The petition sought, among other things, a buyout of the petitioner’s 50% shareholding at fair value (without a minority discount and alternatively with a premium to reflect marriage value), injunctive relief restoring access to premises, accounts and documents, an account of dividends and other payments, declarations concerning entitlement to dividends and, alternatively, payment of accrued but unpaid dividends.

Issues for decision.

• Whether the petition disclosed no reasonable grounds or was an abuse of process so as to justify strike out under CPR 3.4, in particular whether the Open Offer was plainly reasonable and thus justified striking out;
• Whether delay in issuing proceedings, after an earlier interim application, justified strike out;
• Whether specific pleaded remedies or heads of claim (including the claim for a marriage-value premium, injunctive relief, an account and declarations concerning dividends, reservation of derivative claims, and the allegation concerning the dismissal of the petitioner’s son) should be struck out in part.

Court’s reasoning and conclusions. The judge applied the established strike-out threshold: strike out is appropriate only in a plain and obvious case where a statement of case discloses no reasonable grounds or is an abuse of process. On the Open Offer, while its form broadly followed the characteristics described in O'Neill v Phillips for an acceptable buyout offer (pro rata valuation, expert determination, equality of arms), the judge concluded that many of the petitioner’s allegations (dividends, alleged diversion of business and company expenditure for personal benefit, and other disputed factual matters) required fact-finding which a single expert acting purely as valuer would be ill-equipped to undertake; therefore the reasonableness of the offer was open to question and could not found strike out. On delay, the judge found the delay was months only, explained by health and counsel availability, caused no identified prejudice and did not warrant the draconian remedy of strike out. On the various parts of the pleading, most complaints of the respondent were rejected: the claim for both a non-discounted buyout and a marriage-value premium was ordered to be repleaded as alternatives; other heads of relief (injunctive relief, account, money claims and declarations, reservation of derivative rights, and the redundancy allegation concerning the petitioner’s son) were not struck out because they potentially formed part of the wide range of remedies available under sections 994-996 and might be relevant at trial.

Procedure following judgment. The strike-out application was dismissed save that the claim asserting both a non-discounted buyout and a marriage-value premium must be repleaded as alternatives. The petitioner was directed to file an amended petition and the automatic directions remade to progress the petition to a case management conference, with costs of the strike-out application to be dealt with subsequently if not agreed.

The strike-out application is dismissed in its entirety except that the paragraph seeking a buyout without a minority discount together with a marriage-value premium is struck out and permission is given to replead those heads as alternatives. Rationale: (i) the Open Offer was not plainly reasonable because disputed factual issues relevant to valuation required proper fact-finding beyond the scope of a single expert valuer acting as proposed; (ii) delay in issuing proceedings did not cause identifiable prejudice nor justify dismissal; (iii) most of the other pleaded heads of relief could properly be pursued in an unfair-prejudice petition given the wide remedial scope of sections 994-996 and were not plainly unsustainable or abusive.