Karen Elizabeth Mcilroy v Deon Minaar & Ors

In a petition under Companies Act 2006, section 994, unfair prejudice requires proof that the conduct concerned the company’s affairs, caused prejudice to a member’s interests, and was unfair. A director’s statutory and common-law right is to inspect company books and records so as to perform directorial duties. It does not generally include an individual right to operate the company’s bank account or compel narrative answers. Company powers are ordinarily exercised collectively. A director’s good-faith judgment is assessed subjectively, and informed shareholder agreement may authorise conduct. The petitioner must first establish an unauthorised profit before requiring an account. The petition was dismissed because the alleged conduct was authorised, honestly undertaken in the company’s interests, or not proved, and no unfair prejudice was established.

This was a first-instance petition under Companies Act 2006, section 994. The petitioner held 50% of the shares in an IT consultancy as nominee for her husband, while the first respondent was the other shareholder and a director. She alleged failures to provide access to records and bank accounts, unauthorised payments to the first respondent and connected companies, diversion of margins and consultants, and payments to Couture PR without services being provided.

The court examined the parties’ changing business arrangements, the first respondent’s transfer of consultant contracts to 7 Principles GmbH, the alleged payments, and the evidence concerning the company’s value. The central issues were whether the conduct was authorised, honestly undertaken in the company’s interests, or otherwise unfairly prejudicial, and what relief should follow.

Petition dismissed. The petitioner bore the burden of proof, and the civil standard was the balance of probabilities. The court gave substantial weight to contemporaneous documents when assessing memory. It applied the approach in Royal Mail Group Ltd v Efobi [2021] 1 WLR 3893 and declined to draw an adverse inference from the absence of consultants or client witnesses because the petitioner identified neither the additional evidence nor the inference sought.

1. Access and control. Under section 388(1)(b) of the Companies Act 2006, and at common law, a director may inspect the company’s books and accounting records to perform directorial duties. That right does not generally require directors to provide a narrative account of the documents or confer an individual right to operate the company’s bank account. Management and exercise of company powers are ordinarily collective, subject to the articles or a shareholders’ agreement. The petitioner was a bank signatory and had access to transaction information; she was not entitled to require that payments be made only with her consent.
2. Duties and authority. The first respondent’s duties included acting in good faith in the company’s interests and avoiding conflicts. The good-faith inquiry was subjective. A claimant alleging unauthorised profits must first prove the breach; the mere fact of payments to a director was insufficient. The court applied the Duomatic principle [1969] 2 Ch 365 and found that the parties had agreed that each could retain margins from their own contracts. The payments and work undertaken by the first respondent were therefore not shown to be unauthorised.
3. Conduct complained of. The first respondent honestly believed that restricting access to payment facilities and moving consultant contracts protected the company’s funds, creditors and reputation. The evidence did not establish that he acted for an improper purpose, paid himself for work not undertaken, or paid Couture PR for services not provided.
4. Statutory test and relief. The petitioner failed to establish conduct causing unfair prejudice under section 994. Relief under section 996 was considered only contingently. If relief had been justified, a proportionate buy-out would have been valued at £22,000, without a minority discount. No order was made because the petition was dismissed.