Kevin Chave v Adam Farnsworth & Ors

Relief under Companies Act 2006, s.996 is statutory, although equitable principles may inform the assessment of unfairness and fairness. The court has a wide discretion to select the remedy and valuation date that best cures the unfair prejudice. Ordinarily shares are valued when the order is made, but an earlier date is appropriate where the respondent’s conduct has diminished the company’s value. A purchase at that earlier value may itself compensate the petitioner. Further compensation should not be awarded where it would duplicate the compensatory element already included in the valuation.

Kevin Chave and Adam Farnsworth were equal voting shareholders and directors of Essex and East London Van Services Ltd, operated as a quasi-partnership. After Adam excluded Kevin and transferred the company’s business and tangible assets to Van Extras Ltd, each petitioned under s.994 of the Companies Act 2006, alleging unfair prejudice by the other.

The central issues were whether either party had established unfair prejudice and, if Kevin succeeded, the appropriate relief under s.996, including the valuation date and whether additional compensation was justified.

1. Kevin’s petition succeeded. Adam’s cross-petition failed. Adam’s response to Aaron’s departure and the creation of Kent Van Solutions Ltd was unreasonable and objectively unfair. The evidence did not establish any conspiracy involving Kevin, nor any material wrongdoing by him against EELVS.
2. Adam’s exclusion of Kevin, the allegations made against him, and the transfer of EELVS’s business, staff, premises and tangible assets to Van Extras Ltd were unjustified. The conduct substantially diminished the value of Kevin’s shareholding and therefore constituted unfair prejudice.
3. Relief under s.996 is statutory rather than equitable. The court nevertheless applies the statutory discretion by reference to fairness, rational principles and all the relevant circumstances. The discretion is exceptionally wide. Relevant considerations include the present state of affairs, proportionality, the petitioner’s conduct and the range of available remedies. This approach was informed by THG Plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6, O’Neill v Phillips [1999] 1 WLR 1092 and Re Bird Precision Bellows Ltd [1986] Ch 658.
4. An order requiring the respondent to purchase the petitioner’s shares is usual, but the valuation date need not be the date of judgment. Where the respondent’s conduct has already depressed the company’s value, an earlier valuation may be required to provide fair relief. The reasoning in Grace v Bagioli [2005] EWCA Civ 1222, Profinance Trust SA v Gladstone [2002] 1 WLR 1024, Scottish Co-operative Wholesale Society v Meyer [1959] AC 324 and Re Cumana Ltd [1986] BCLC 430 supported that approach.
5. Adam was ordered to purchase Kevin’s shares at their fair value as at 1 May 2023, before the unfair prejudice occurred. That value was £294,785. The earlier valuation incorporated a compensatory element, including the value of future dividends. A further award for lost salary and other benefits would create substantial double recovery and was not fair, particularly as Kevin had done no work for EELVS or Van Extras Ltd after his exclusion.
6. The parties were directed to agree an order. If unable to do so, the matter was to return for a consequentials hearing within six weeks.

First-instance petitions under s.994 of the Companies Act 2006. No earlier appellate decision is stated.