Peter Charles Willoughby v Eric Martin Cole & Anor

The court considered an application to strike out parts of the respondents' Defence and/or for summary judgment on portions of that Defence in proceedings under section 994 of the Companies Act 2006 alleging unfairly prejudicial conduct. The court applied the principles governing summary judgment (CPR r.24(2) and authorities such as EasyAir) and strike-out (CPR r.3.4 and Practice Direction 3A), and considered authorities on the test of unfairness and the circumstances in which a petitioner’s misconduct can justify exclusion without a fair offer (including O'Neill v Phillips, Waldron v Waldron and Re Edwardian Group).

The judge held that a series of historic and more serious allegations (the "Old Allegations" — including alleged pre‑2016 misrepresentations and alleged breaches of directors' duties arising from earlier disputes and regulatory incidents) were not pleaded or evidenced as having formed part of the contemporaneous reasons for removal in 2023, were historic, and disclosed no reasonable grounds for being relevant to whether the petitioner’s removal was objectively fair. Those Old Allegations and related parts of the Defence were struck out. The remaining more recent allegations about time‑keeping and poor performance (the "New Allegations") were held not to be sufficiently serious, on the pleadings and available material, to justify removal without a fair offer; the court gave summary judgment for the petitioner on the defendants' justification defence (the Justification Issue). Certain pleaded breaches of duty were also struck out as incoherent or inadequately particularised.

Background and nature of the proceedings:

• This is a first instance hearing of interlocutory applications in a petition under section 994 of the Companies Act 2006 brought by the petitioner, the founder of Simply Naturals Limited, who alleged that he had been excluded from management and removed as a director on 28 July 2023 without any fair offer for his shares.
• The respondents, former colleagues and directors, denied unfairly prejudicial conduct and relied on alleged misconduct by the petitioner as justification for his exclusion and removal.

Relief sought:

• Strike out parts of the respondents' Points of Defence and/or summary judgment against particular pleaded matters; and an order that failure to reply to a CPR Part 18 request would lead to strike out and judgment.

Issues framed by the court:

1. Whether the particular paragraphs of the Defence (paras 5(c), 5(h), 5(i), 5(j), 10(c), 11(b) and 12) disclosed reasonable grounds for defending the Petition or were liable to be struck out.
2. Whether any of those paragraphs formed a distinct "issue" for summary judgment under CPR r.24(2), and if not, whether the court should determine whether the respondents had a real prospect of establishing that the petitioner’s removal was objectively justified (the "Justification Issue").
3. Whether historic allegations of misrepresentation and earlier alleged misconduct (the Old Allegations) were relevant to the fairness of the 2023 removal, and whether the more recent allegations (the New Allegations) were sufficiently serious to justify removal without a fair offer.

Court’s reasoning and outcome:

• The court analysed the applicable summary judgment and strike‑out principles (including EasyAir, Swain v Hillman and authorities on strike‑out and abuse of process) and the company law authorities on unfair prejudice and justification for exclusion (notably O'Neill v Phillips, Waldron v Waldron, Re Edwardian Group and related authority). The judge emphasised that the fairness assessment under s.994 is objective and that misconduct relied on to justify exclusion must amount to serious misconduct in the company's affairs to permit exclusion without a fair offer.
• On the material before the court the contemporaneous documentary evidence (minutes of a May 2023 meeting and a solicitors' letter of 14 July 2023) showed that the respondents' stated reasons at the time of removal related to time‑keeping, attendance and poor performance. The Old Allegations were historic, largely pre‑2016, were not relied on contemporaneously and were not pleaded with particulars as having been reasons for removal. The Misrepresentation Claim was pleaded as background and not as conduct in the company's affairs; attempts to expand that case in the Part 18 reply were not properly pleaded and disclosed no reasonable grounds.
• The judge struck out the Old Allegations (and parts of the Defence relating to them) as irrelevant and likely to obstruct the just disposal of the proceedings, struck out particular allegations that were vague and incoherent (including failure to identify any client to whom an alleged false representation was made), and struck out incoherent particulars of breaches of duty. The New Allegations, even if proved as pleaded, were held not to be of sufficient gravity to objectively justify exclusion without a fair offer, and summary judgment was entered for the petitioner on the Justification Issue. The court left open that the New Allegations might be considered on the question of relief if the petitioner succeeds on the unfairness claim.

This is a first instance disposal. The court struck out the Old Allegations in paragraphs 5(c), 5(h), 5(i)(i)–(iii), 5(j) (insofar as they related to the Old Allegations), 10(c), and parts of paragraphs 11(b) and 12 as disclosing no reasonable grounds and being irrelevant to the objective fairness assessment under section 994 CA 2006. The court struck out particular allegations in paragraph 5(i)(ii) as vague and incoherent and struck out certain pleaded breaches of duty in paragraph 5(j)(ii), 5(j)(iv) and 5(j)(v) as incoherent or unsupported. On the remaining New Allegations the court concluded there was no real prospect that they alone would objectively justify removal without a fair offer and therefore entered summary judgment for the petitioner on the respondents’ justification defence (the Justification Issue). Rationale: the Old Allegations were historic, not relied upon contemporaneously, inadequately pleaded and irrelevant to the contemporaneous reasons for removal; the New Allegations were insufficiently serious to justify exclusion without a fair offer on the material before the court.