Jagit Singh Gill v Amarjeet Signh Gill & Ors

The court found that Micrologic Property Holdings Limited was operated as a quasi-partnership between the three brothers and that the petitioner (Jack) was unlawfully deprived of his agreed role as a director. The removal of the petitioner was procedurally ineffective and amounted to conduct in breach of the parties' informal agreement constituting unfairly prejudicial conduct under section 994 Companies Act 2006. The court rejected the petitioner’s alternative application for a just and equitable winding up as unnecessary where a full-value buy-out is available under section 996. The appropriate relief was a share purchase order: the respondents were ordered to buy the petitioner’s shares at the agreed valuation date (29 March 2022) with interest at 5%, reimbursement of identified sums, compensation for lost director drawings for the period February 2021 to March 2022, and an indemnity in relation to the 38 Waltham Avenue guarantee where release cannot be procured.

Background and parties:

• The petitioner and the first and second respondents are three brothers who were the only directors and equal shareholders in Micrologic Property Holdings Limited (the Company). The brothers earlier operated a trading company (Micrologic Computer Services Limited) and then used the Company as a vehicle for a property portfolio.
• Longstanding personal and commercial disagreements culminated in the petitioner being removed as a director by the other two brothers in early 2020 and again by shareholder resolution in January 2021. The petitioner brought proceedings under section 994 Companies Act 2006 seeking relief for unfairly prejudicial conduct, alternatively a just and equitable winding up under the Insolvency Act 1986.

Procedural posture: First-instance trial in the Insolvency and Companies List (Chancery Division). The parties had agreed expert valuation evidence which was produced on a stated basis and held to be binding in the proceedings.

Relief sought (i): A winding-up order or, alternatively, relief under section 996 by way of a share purchase order and related monetary relief (including unpaid remuneration, alleged withheld dividends, interest and a share of development profit).

Issues framed by the court (ii):

• Whether the Company was a quasi-partnership and the petitioner therefore had an enforceable expectation of equal participation in management.
• Whether the petitioner’s removal as a director complied with the articles and statute and, if not, whether that conduct was unfairly prejudicial under section 994.
• What relief was appropriate: winding up or a buy-out, and if a buy-out, the valuation date and components of compensation (share value, unpaid remuneration, alleged entitlement to development profit, interest and indemnity as to guarantees).

Court’s reasoning and conclusions (iii):

• The evidence established a quasi-partnership between the brothers in respect of the Company. The controversial removal of the petitioner was procedurally defective (non-compliance with section 168 Companies Act 2006 and the company’s articles) and therefore unlawful; it constituted substantial unfair prejudice to the petitioner in his capacity as a member and director.
• The petitioner suffered substantial prejudice by loss of oversight and management rights, removal of access to company accounts and email, loss of director drawings from February 2021, and exposure under a lender’s position pending release from guarantees. The court rejected several broad and unparticularised allegations of further misconduct and, in particular, rejected the petitioner’s discrete claim to a share of future development profits or a separate uplift for so-called developer’s profit because the experts’ valuation methodology and the agreed valuation date already captured present and prospective value.
• The parties had agreed that a single joint valuer would act as expert and produce binding valuations. The court adopted the parties’ agreed valuation metric: a non-discounted going-concern valuation at 29 March 2022. The court held that a buy-out was the appropriate remedy rather than winding-up because a full-value purchase order was available and winding-up would be disproportionate under section 125(2) Insolvency Act 1986.
• The court ordered the respondents to purchase the petitioner’s shares at £656,000 (value as at 29 March 2022) and to pay specified additional sums: reimbursement of one-third of certain improper legal disbursements (£12,234) and one-third of an identified probate payment (£500), and to make a compensatory payment for the petitioner’s missing director drawings for February 2021–March 2022 (to be quantified). Interest was ordered at 5% on the purchase price and the identified sums from the dates they fell due until payment. The court also required provision for the petitioner to be indemnified by the respondents in respect of his personal guarantee regarding 38 Waltham Avenue if release could not be procured.

Other notable procedural and evidential matters: the court declined to order winding-up because the agreed valuation process and valuer reports made a buy-out practicable; experts’ reports were binding; a Scott Schedule of many minor company expenditures was withdrawn as irrelevant; some pleaded heads of unfair prejudice were struck out as insufficiently particularised.

The petition under section 994 was well founded and the court ordered relief by way of a purchase of the petitioner’s shares rather than winding-up. The respondents were ordered to purchase the petitioner’s entire shareholding as at 29 March 2022 for £656,000, together with specified reimbursements (£12,234 and £500) and a compensatory payment for lost director drawings for February 2021 to March 2022 (to be quantified), with interest at 5% on each sum from the dates due, and provision for indemnity as to the 38 Waltham Avenue guarantee if release cannot be procured. Rationale: the Company was a quasi-partnership, the petitioner’s removal was procedurally ineffective and unfairly prejudicial, a buy-out provided full value and was proportionate, and the experts’ binding valuations capture present and future value so separate claims to development profit were rejected.