Robert Morris v Elite Motors Bodyshop Limited & Anor

Strike out is a draconian remedy and should be used only where the pleading is bound to fail, or where striking it out will materially simplify the proceedings or advance their just disposal. An unfair prejudice petition should not ordinarily be struck out merely because a respondent has made a share purchase offer if the offer does not provide a sufficiently rigorous means of resolving disputed allegations that may affect valuation. The jurisdiction under sections 994–996 of the Companies Act 2006 is wide and flexible. Alternative forms of relief, including company-focused relief, may be pleaded in the same petition where they arise from the same alleged conduct. Delay without demonstrated prejudice will rarely justify striking out the petition entirely.

Robert Morris presented a petition under section 994 of the Companies Act 2006, alleging that the affairs of Elite Motors Bodyshop Limited were conducted in a manner unfairly prejudicial to him by his brother, Julian Morris. The allegations included exclusion from management, unequal dividends, misuse of company assets and diversion of business. Julian applied under CPR 3.4(2)(a) and (b) to strike out the petition or parts of it, relying principally on an earlier offer to purchase Robert’s shares and delay in issuing the petition. The central issues were whether the offer was plainly reasonable, whether delay amounted to an abuse of process, and whether particular heads of relief and factual allegations were legally or procedurally inappropriate.

1. The application was dismissed, save for a limited amendment. The petition and points of claim disclosed arguable grounds and were not bound to fail.
2. Strike out is a last resort. Consistently with Williams & Humbert v WH Trade Marks (Jersey) Limited and Peters v Menzies, the court should generally decline a prolonged strike-out argument unless it is likely to avoid a trial or substantially reduce its burden. The same considerations inform whether partial strike out would be an abuse of process.
3. The Open Offer broadly reflected the criteria identified in O’Neill v Phillips: fair value without a minority discount, expert valuation, expert rather than arbitral determination, shared access to information and equality of arms. However, the petition contained disputed allegations about dividends, diverted business and company expenditure which could affect value. An expert valuer acting as an expert was ill-equipped to conduct the necessary fact-finding. Following CVC/Opportunity Equity Partners Ltd v Demarco, the offer was not plainly reasonable where its reasonableness was open to question.
4. The delay following the ineffective interim injunction application did not breach a rule or undertaking and caused no identified prejudice. Applying the approach in Re Edwardian Group, delay may affect discretionary relief where it causes prejudice, an irretrievable change of position or acquiescence, but it could not justify striking out the petition in its entirety here.
5. The wide and flexible remedy under sections 994–996 permitted alternative claims for dividends, declarations, accounts and relief benefiting the company to remain in the petition. Ntzegkoutanis v Kimionis supported avoiding artificial limitations where the same conduct may constitute unfair prejudice and breach of duty.
6. The claim for both a non-discounted valuation and a marriage-value premium was struck out only to the extent that the alternatives were pleaded cumulatively. Robert was permitted to amend so that the premium would be sought only if a non-discounted valuation were not ordered. Other challenged matters, including protective injunctions, accounts, dividend relief, reservation of rights and the alleged sham redundancy, remained pleaded.
7. The amended petition was to be filed and served within seven days, with directions remade. Costs and any permission-to-appeal application were reserved for agreement or a short hearing.

First-instance decision on an application to strike out an unfair prejudice petition. No appeal history is stated in the judgment.