Dec 12
The petitioner, a shareholder and director of a company, presented an unfair prejudice petition under Part 30 of the Companies Act 2006 alleging that the first respondent, his fellow director, had conducted the company’s affairs in a manner that was unfairly prejudicial to its members’ interests. The main relief sought was for (i) the first respondent to sell his shares in the company to the petitioner, (ii) the respondents to account to the company in respect of their gains and the company’s losses resulting from the conduct complained of and (iii) declarations of constructive trust in favour of the company. The first respondent made an application for the paragraphs of the petition seeking relief under heads (ii) and (iii) to be struck out as an abuse of process on the basis that the relief sought in favour of the company ought to have been pursued by way of a derivative claim under Part 11 of the 2006 Act and that by claiming that relief in the petition, the petitioner had sought impermissibly to bypass the statutory filters applying to derivative claims. The judge acceded to that application.
On appeal by the petitioner—
Held, appeal allowed. Where an unfair prejudice petition sought both relief in favour of the company and relief that would not be available in a pure derivative claim, and the petitioner appeared to be genuinely interested in obtaining the latter relief, it would not ordinarily be appropriate to strike out either the petition or any part of the relief sought. It was not difficult to conceive of a situation in which it would make sense for a petitioner to include in an unfair prejudice petition a claim for an order for a respondent to buy or sell shares and an order for a payment to be made to the company on the basis of a breach of duty by a respondent. In such a case, it would not be practical to insist that the claim for relief in favour of the company be the subject of a separate claim form. It was not the case that it would only be in exceptional and rare cases that the court would permit a petitioner to proceed by way of an unfair prejudice petition when he could otherwise have proceeded by way of a derivative claim, nor that the court ought only to permit the case for that relief to proceed by way of an unfair prejudice petition if, at the earliest stage of the proceedings, the court was satisfied that that relief could be conveniently adjudicated on as part of the unfair prejudice petition proceedings. However, a petition could be struck out as an abuse of process if, although it included a claim for relief which was available only in unfair prejudice proceedings (such as an order for the purchase of shares), it could be discerned that the petitioner was not genuinely interested in obtaining such relief and was, instead, trying to bypass the filter for derivative claims provided for by Part 11 of the Companies Act 2006. In the present case there was no reason to believe that the petitioner was not genuinely interested in obtaining an order allowing him to buy the respondent’s shares but was, instead, attempting to bypass the filter for which Part 11 of the 2006 Act provided. Accordingly, the relevant paragraphs of the petition were not abusive and the application to strike them out would be dismissed (paras 55–59, 60, 76).
Per curiam. Where in unfair prejudice proceedings a petitioner asks for relief in favour of the company as well as relief that could only be granted on an unfair prejudice basis, case management issues should be addressed. The best course may be for all the issues to be dealt with at the same time, in a single hearing. Sometimes, however, it could be desirable for matters relating to a claim for relief in favour of the company to be deferred either entirely or in part (para 55).
James Mather (instructed by Enyo Law LLP) for the petitioner.
Stephen Robins KC (instructed by DAC Beachcroft LLP) for the first respondent.