Queensgate Place Limited v Solid Star Limited (in liquidation) & Ors

Under section 996 of the Companies Act 2006, the court has a wide but judicial discretion to grant relief for unfair prejudice. A share purchase order may be made even where the company has become insolvent, provided that the order fairly compensates the petitioner rather than punishes the respondents.

The remedy must be proportionate to the prejudice and must reflect each respondent’s involvement. A counterfactual valuation may be used to identify the assets that would have been available absent the prejudicial conduct. The court may take delay and financial means into account, but neither necessarily prevents a share purchase order. Interest and appropriate credits for recoveries from the company’s liquidation may be included.

In an earlier liability judgment, the court found that Queensgate Place Ltd had suffered unfair prejudice in the affairs of Solid Star Ltd. The prejudice involved unequal repayment of shareholder loans, transfers of properties to Property X1 Ltd without proper payment, misuse of further funds introduced by Queensgate, and Solid Star’s involvement in an unrelated development.

Queensgate sought an order requiring Viking World Investments SA, Prakash Bhundia and Minesh Bhundia to purchase its shares. Minesh disputed the extent of his responsibility. Issues included the effect of Solid Star’s insolvency, limitation, valuation date, the appropriate counterfactual, allocation of liability and corporation tax.

1. Remedy. The court ordered a buy-out of Queensgate’s shares by Viking, Prakash and Minesh. Section 996 of the Companies Act 2006 confers a wide discretion, but it must be exercised judicially and rationally. Relief is compensatory and proportionate, not punitive.
2. Insolvency and means. A share purchase order could properly be made notwithstanding Solid Star’s subsequent insolvency. The petition had been issued when insolvency was not immediately apparent, and the order represented compensation for assets that would otherwise have been available to the members. The respondents’ means were relevant but only as one factor in the discretionary assessment.
3. Valuation. The appropriate valuation date was 29 October 2020, the date of the final transfers to Property X1. The court adopted a counterfactual in which the six properties had been sold on the open market, liabilities properly attributable to Solid Star had been paid, shareholder loans had been equalised, and the surplus distributed between the members. The resulting value of Queensgate’s shares was £7,081,468, subject to credits for distributions from the liquidation and simple interest at 1% above the Bank of England base rate.
4. Limitation. Following THG Plc v Zedra Trust Company (Jersey) Limited, limitation may apply to section 994 claims depending on the relief sought. Minesh could not raise a limitation defence to liability for the first time at the remedies stage, but delay could still be considered when fashioning relief. It did not alter the remedy because the unequal loan repayment was not an effective cause of the substantive loss identified on the counterfactual analysis.
5. Allocation. Viking and Prakash were jointly and severally liable for 54.3% of the purchase price, while all three respondents were jointly and severally liable for 45.7%. As between the respondents, responsibility was assessed at 90% for Prakash and Viking and 10% for Minesh.
6. The share transfer was to remain unexecuted until payment of the full price or the liquidators’ final distribution. The parties were given an opportunity to make submissions on any corporation tax adjustment.

The judgment followed an earlier liability judgment in the same proceedings, in which the court found unfair prejudice: [2023] EWHC 2277 (Ch). The present judgment determined the appropriate remedy.