Maggie Otto & Ors v Inner Mongolia Happy Lamb Catering Management Company Limited

The petition under section 994 of the Companies Act 2006 alleged unfairly prejudicial conduct in relation to three companies. The court permitted the respondents to withdraw admissions in their points of defence that certain petitioners were registered members because the petitioners bear the legal burden of proving standing and the contemporaneous company register undermined those admissions. The court applied the CPR 14.5 factors in deciding that the withdrawal of admissions was justified.

The court refused the petitioners' late application to amend the petition to add a claim for declaration and rectification of the registers of members. Primary reasons were that the proposed amendment was inadequately particularised and in parts contradicted the petitioners' own evidence; legal title to the shares depended on multiple transfers for which no executed stock transfer forms exist (and which may give rise to stamp duty consequences); necessary parties (including the registered holder In Touch) would need to be restored and joined; and, as a practical and case management matter, the rectification claim could not sensibly be resolved at the trial stage.

The petitioners (Ms Otto, Mr Xu, IC UK Holdings Limited and Ms Kwok) sued under s.994 of the Companies Act 2006 alleging that the affairs of HLHP Oriental Food Limited and HLHP Bayswater Limited had been conducted in a manner unfairly prejudicial to them. The petitioners later abandoned claims in respect of HLHP Birmingham Limited and some petitioners abandoned claims in respect of Bayswater. On the first day of trial two interlocutory applications were before the court: (1) by the respondents to amend their points of defence to withdraw previous admissions that the petitioners were registered members of Oriental and Bayswater; and (2) by the petitioners to amend the petition to add claims for a declaration of the legal shareholders and for rectification of the registers of members of Oriental and Bayswater.

The court analysed the legal framework relevant to standing under s.994 and the definition of "member" in s.112, the requirement under s.770 for a proper instrument of transfer, and the remedies and procedure under s.125 for rectification of the register. The respondents relied on a contemporaneous share register (disclosed by the petitioners) showing different registered holders and on the absence of stock transfer forms. The court applied the CPR 14.5 factors to the respondents' application to withdraw admissions and concluded that withdrawal should be permitted because the petitioners bear the burden of proving standing and the documentary register established that the petitioners were not registered shareholders.

The court refused permission to amend to plead declarations and rectification. The reasons included: (i) the proposed rectification depended on establishing multiple historic transfers without executed transfer forms; (ii) the pleaded basis for some claimed holdings (notably Ms Otto's) was inconsistent with the proposed rectification; (iii) necessary third parties (including the registered holder In Touch) would need to be restored and joined and that process would delay resolution; (iv) the proposed amendment was inadequately particularised; and (v) case management considerations and practical impossibility of resolving the rectification application at the trial. The court noted authority bearing on the scope of s.125 (Re Hoicrest Ltd and the contrasting Privy Council decision in Nilon) but observed that it was bound by Court of Appeal authority. The judge concluded the rectification application could not be introduced at that stage and refused permission to amend.

Nature of relief sought: permission to withdraw admissions (granted) and permission to amend petition to add declarations and rectification (refused).

Issues framed by the court: (1) whether respondents should be allowed to withdraw admissions in the points of defence under CPR 14.5; (2) whether the petition should be amended to add claims for declaration and rectification under s.125 Companies Act 2006; and (3) related case management questions including joinder and restoration of a dissolved registered holder.

Reasoning in brief: the court allowed withdrawal of admissions because petitioners must prove standing and the register and absence of transfer documents undermined their title; the court refused rectification amendment for reasons of inadequate pleading, factual contradiction, procedural and practical obstacles (including need to restore and join the dissolved registered holder) and case management considerations.

The court allowed the respondents' application to withdraw admissions in respect of the petitioners' alleged shareholdings in Oriental and Bayswater because the petitioners bear the burden of proving standing and the disclosed share register and lack of transfer documentation showed they could not rely on the admissions. The court refused the petitioners' application to amend the petition to plead declarations and rectification of the registers of members because the proposed amendment was inadequately particularised and partially contradicted existing evidence, required restoration and joinder of a dissolved registered holder (In Touch), depended on unexecuted transfers and stamp duty questions, and, on case management grounds, could not sensibly proceed at the trial.