Martin Hague & Anor v David Hague & Ors

This is a first-instance unfair prejudice petition concerning shareholdings in Hague Plant Ltd. The court applied the established rule that allegations of dishonesty must be pleaded with particularity (Belmont Finance v Williams Furniture) and reviewed whether three specific parts of the Petition were sufficiently particularised.

• The allegations in paragraphs 153 and 155 that Hague Plant received undeclared cash payments and that tax was evaded were held to be too general and insufficiently particularised as allegations of dishonesty; the court directed that the Petitioners may not advance that case in the present form.
• Paragraph 98 asserting that the directors acted contrary to legal advice was permitted only in respect of the particular example pleaded (the appeal against Norris J. in the Preliminary Issue); the pleaded use of the word "including" to imply other unspecified instances was disallowed.
• The pleaded allegation (paragraph 185.2.1, read in context) that the directors breached the duty under section 172 of the Companies Act 2006 by acting from personal animus rather than in good faith was held to be sufficiently pleaded and may proceed.

The petitioners, Martin Hague and Jean Hague (mother), are minority shareholders in Hague Plant Ltd and seek an order requiring the majority shareholders, David and Dianne Hague, to acquire their shares. The first day of the liability trial addressed an application by the first respondent, David, supported by Dianne, for directions to limit the Petition to matters sufficiently pleaded.

The application focused on three pleaded areas: (i) paragraphs 153–155 alleging that Hague Plant provided benefits for cash which was not put through company books and that such conduct was dishonest and involved tax evasion; (ii) paragraph 98 alleging that David and Dianne caused Hague Plant to act contrary to legal advice (the pleading used the word "including", giving a specific instance of pursuing an appeal against Norris J.); and (iii) paragraph 185.2.1 alleging breach of the directors' duty under section 172 of the Companies Act 2006, said to arise from a campaign of victimisation and refusal to reinstate trading and directorial relationships.

The court applied the principle that allegations of dishonesty must be pleaded clearly and with particularity (Belmont Finance). On (i) the judge found paragraphs 153 and 155 to be general and lacking specific instances, particulars of involvement, or clear sources for alleged knowledge; witness statements did not fill the gaps as to what happened to cash. The judge concluded that, for reasons of fairness and adequate notice to the respondents, the dishonesty/tax-evasion case based on alleged cash receipts was insufficiently particularised and directed that it could not be advanced in its present form.

On (ii) the court accepted that the pleaded example (pursuit of the appeal against Norris J.) was sufficiently particularised but that the use of "including" to imply other unidentified instances was unsatisfactory; the Petitioners were directed to be limited to the particular example pleaded.

On (iii) the judge took a holistic view of the pleading and concluded that, when read in context, the narrative supports a sufficiently clear allegation that David and Dianne failed to act in good faith for the benefit of the company by acting from personal animus towards Martin; accordingly the section 172 allegation is permitted to proceed.

The order given was therefore a partial grant of the respondents' application: two pleaded topics were restricted, and the section 172 allegation was allowed to stand.

This first-instance application was allowed in part. The court directed that the Petitioners' allegations of dishonest receipt of undeclared cash (paras 153 and 155) are insufficiently particularised and may not be advanced in that form, and that paragraph 98 must be confined to the specifically pleaded example (the appeal against Norris J.). The court refused to strike out or limit the section 172 allegation (para 185.2.1) because, read in context, it amounts to a sufficiently clear allegation that the directors acted from personal animus rather than in good faith.