Paul Wanderi Ndungu v SPG Limited (formerly known as Sportpesa Global Holdings Limited) & Ors

A company must comply strictly with statutory pre-emption requirements when offering new shares. Electronic communication requires both agreement to electronic communication and specification of the address to be used. A breach does not itself establish compensable loss: the claimant must prove that, absent the breach, they could and would have subscribed.

For compensation under section 563 of the Companies Act 2006, causation must be pleaded and proved. Directors are liable only where they knowingly authorised or permitted the contravention. Unfair prejudice requires prejudice suffered in the petitioner’s capacity as a member. Procedural or constitutional breaches will not suffice without proof of relevant prejudice.

The claimant was a shareholder and former director of SPG Limited. Three capital raises reduced his recorded shareholding from 17% to 0.85%. He brought a statutory claim for compensation alleging breaches of the pre-emption provisions in sections 561 and 562 of the Companies Act 2006, and an unfair prejudice petition under section 994.

The first offer was sent electronically to a company email address which the claimant had not specified for that purpose, and the hard-copy delivery was misaddressed and late. The defendants conceded a further breach concerning the second allotment. The issues included statutory breach, directors’ knowledge, causation, pleading, mitigation and whether the conduct was unfairly prejudicial.

1. The company breached sections 561 and 562 of the Companies Act 2006 in relation to the first allotment. The hard-copy offer was not validly sent to the claimant’s registered address and did not allow the required 14-day acceptance period. Electronic communication was permissible in principle because the claimant had agreed generally to receive company communications electronically. It was nevertheless invalid because he had not specified the Sportpesa.com address for that purpose. The company also breached section 561 in relation to the second allotment by calculating the offer on the basis of the already diluted shareholding.
2. Under section 563, causation was essential. The claimant had to establish that, without the breaches, he could and would have subscribed. He failed on both limbs. The evidence showed that he would not have invested because of his longstanding distrust of the business’s management, and he had not proved that he had the financial ability to subscribe.
3. The second and third defendants had not knowingly authorised or permitted the breaches. They knew the offers were being sent, but did not know the facts which made the communications invalid. The statutory compensation claim therefore failed against them as well as substantively against the company.
4. The causation case had not been pleaded. Correspondence and evidence could not replace the required pleading of what would have happened absent the breach. The claim was therefore also liable to be struck out under CPR 3.4(2)(a), although the precise order was reserved for further submissions.
5. The directors had breached article 9(3) and section 171(a) by failing validly to communicate notice of two board meetings. There was no breach of section 172, 174 or 175. The capital raises were financially justified, the directors acted in good faith, and the failures were inadvertent.
6. The company’s breaches and the exclusion of the claimant from relevant management decisions did not establish unfair prejudice. The claimant could not show member-capacity prejudice because he would not and could not have subscribed even if given the opportunity. The section 994 claim was dismissed.

First instance decision. No appellate history was stated in the judgment.