CR-2022-BRS-000101 - [2025] EWHC 2291 (Ch)

I turn now to the objections to the amendments on the grounds that they are outside the scope of a petition under section 994. Again, the substantive law relating to this question has already been discussed above. The amendments which I have identified as objected to on this basis are now contained in (9 May 2025 petition) paragraphs [28], [28](b), [28](c), [28](l), [28](n), [28](o), [28](p), [28](s), [28](x), [28](y), [28](bb), and [30](a). Again, I set out each in turn.

In paragraph 28 of the petition it is alleged that

“the affairs of Oriental and/or also R8 in the case of P4, have been conducted by R1 and/or R2 and/or R3 and/or R4 and/or R5, so as to cause the Petitioners and each of them to sustain unfair prejudice, including … (b) by deliberate subjugation taking the form of demotion of company officer status and/or role and/or job title”.

The active respondents say that paragraph (b) involves merely a kind of employment dispute allegation. I disagree. There is an express reference to the conduct of the affairs of the companies, and to acts of demotion carried out on behalf of those companies. Moreover, the particulars under this paragraph go on to supply more detail. I do not think that I can simply treat paragraph (b) as outside the scope of section 994.

I deal with the next two paragraphs together. In paragraph 28(b) of the petition it is alleged that

“The 2017 agreement required P5 (by P1 and under its previous name of Hong) to start preparatory work, including but not limited to, the registration of Oriental, opening the company bank account, site selection, project budgeting, design, decoration, and staff recruitment. The site selection and internal and external decoration plan were to be the sole responsibility of P5 (by P1), who had to report to R1. R1 was to be responsible for providing a manual, core product production standards and the supply of the main raw materials such as soup powder and stir-fry ingredients … ”

In paragraph 28(c) of the petition it is alleged that

“The 2017 agreement provided that R1 would not be responsible for the direct operation of the project; P1 (or P5) would be responsible for UK operations … ”

The objection by the active respondents to paragraphs 28(b) and 28(c), under this heading, at least, is that they do not plead any basis for the “employment style entitlements” about which complaint is made. I do not think that either of these paragraphs can be objected to on that basis. These paragraphs attribute the “entitlements” referred to to the 2017 agreement. On the other hand, there is no pleading that the affairs of the companies are being conducted in a manner unfairly prejudicial to the petitioners. The reality is that these paragraphs are just introductory to allegations thereafter, such as in paragraph 28(l) (below), and their relevance depends on those allegations.

In paragraph 28(l) of the petition it is alleged that

“The plainly unfavourable 2018 agreement of P1 and P5 to that diminution, was procured by way of pressure by R2 and R4. They threatened P1 in oral discourse on dates that cannot now be recalled specifically that they would close down Oriental and abandon the proposal to establish restaurants with P1 (and P5), if P1 did not agree to the 2018 proposals and sign the further co-operation agreement. P1 thereby signed under economic duress. The pressure tactics, whilst not averred herein to be per se actionable, were manifestly unfairly prejudicial conduct on the part of R2 and/or R4. Reliance will be placed on the witness statement of P1 dated 16 October 2023 (paras 64-69) … ”

The active respondents’ objection is that this does not refer to the conduct of the affairs of the companies or to any act or omission of the companies. It refers instead to the entering of a shareholders’ agreement by way of economic duress on the petitioners, thus potentially rendering that agreement void or voidable. I agree that it does that. But it also alleges that the affairs of the sixth respondent would be conducted (by closing its business down) to the unfair prejudice of the petitioners. In my judgment, this allegation does not fall outside the scope of a section 994 petition, and therefore neither do those in 28(b) and (c).

In paragraph 28(n) of the petition it is alleged that

“As at October 2018, P1 was employed by Oriental as a ‘Director/Executive Director’ on a salary of £42,000 per annum. From about 1 July 2019, P1’s salary with Oriental was reduced by R4 arbitrarily and for no stated reason, from £42,000 to £36,000 per annum and she was demoted by R3 and/or R4 to finance manager and a waitress from her position as an ‘executive director’. These were acts of intentional humiliation and capricious subjugation … ”

The active respondents say that this is simply an allegation of part of an employment dispute, and outside the scope of a section 994 petition. In the way that it is pleaded here, I agree. On its own, there is no sufficient allegation as to the conduct of the affairs of the companies or any act or omission of the companies. But I remind myself that this is in a paragraph of particulars under paragraph 28, which does refer to conducting the affairs of the companies in a manner causing unfair prejudice to the petitioners. So, it is not just an employment dispute, and I can give permission for it if it is otherwise appropriate.

In paragraph 28(o) of the petition it is alleged that

“In November 2019, P1’s job title was downgraded to ‘cashier’ and her salary was further arbitrarily reduced by R4 and/or R3 from £3,000 per month to £1,000 per month, again without any justification … ”

Again, the active respondents say that this is simply an allegation of part of an employment dispute, and outside the scope of a section 994 petition. My response is the same as under paragraph 28(n).

In paragraph 28(p) of the petition it is alleged that

“In or about January 2020, Oriental by R3 and R4 arbitrarily stopped paying P1’s salary altogether, proposed that P5’s shares in Oriental be reduced to 0% and that P1 should resign as a director (with P5 or P1 being granted a shareholding of 5%) … ”

Once again, the active respondents say that this is simply an allegation of part of an employment dispute, and outside the scope of a section 994 petition. My response is once again the same as under paragraph 28(n).

In paragraph 28(s) of the petition it is alleged that

“On or about 22 January 2020, P1 felt compelled to resign from her position as a director and employee of Oriental in light of the aforesaid exploitation and humiliation of her by or on behalf of the Respondents, whether by action or mere acquiescence as the case may be … ”

Once more, the active respondents say that this is simply an allegation of part of an employment dispute, and outside the scope of a section 994 petition. My response is once more the same as under paragraph 28(n).

In paragraph 28(x) of the petition it is alleged that

“Initially, P2 was not provided with a written employment contract. It was signed later and backdated to 1 October 2018. In it, P2’s day-to-day role was described as “Restaurant Manager”. In that role, P2 was paid a salary of £36,000 … ”

Similarly, the active respondents say that this is simply an allegation of part of an employment dispute, and outside the scope of a section 994 petition. Again, my response is the same as under paragraph 28(n).

In paragraph 28(y) of the petition it is alleged that

“In or about April 2018, P2 was arbitrarily removed by R4 and/or R1 (by its CFO, Mr Jianhai Wang) as a director of Oriental. This was done without his agreement, nor was it even discussed with him. No reasons were given. This was a capricious and intentionally demeaning decision taken in the conduct of the affairs of Oriental by R4 and R1. The consequential loss of management control, influence and status by P2, despite his capital investment, is relied on as a discrete head of unfair prejudice … ”

The active respondents again say that this is simply an allegation of part of an employment dispute, and outside the scope of a section 994 petition. Again, my response is the same as under paragraph 28(n).

In paragraph 28(bb) of the petition it is alleged that

“In or about October 2019, P2 was made by R3 and/or R4 and/or R5 to give up his role as ‘Restaurant Manager’ for Oriental. Thereafter, he was demoted by them and required by them to work as a waiter and maintenance man without pay. Subsequently, P2 was employed fitting out a restaurant in Birmingham, before being replaced even in that role. In addition, P2 was also required by R3 and/or R4 to work on Friday, Saturday and Sunday nights as a waiter for Oriental and not permitted by them to manage any staff in the restaurant. It is to be inferred that P2’s dramatic and rapid demotion from being a valued co-founder, investor and director, was, (as in the case of P1, P2’s close colleague) driven by a desire intentionally to manipulate, sideline and humiliate him. This constituted the conduct of the affairs of Oriental in a way that was unfairly prejudicial to P2 … ”

Once more, the active respondents say that this is simply an allegation of part of an employment dispute, and outside the scope of a section 994 petition. Once more, my response is the same as under paragraph 28(n).

In paragraph 30(a) of the petition, it is alleged that

“substantial monies have on dates unknown been transferred from Oriental to R1 as to £312,719.11 and to R4 and R2 as to £426,205.94 and £38,407.92 respectively, as well as £506,926.10 transferred to law firms: Jackson Lyon and R&H. Absent good reason for these payments and proof of repayment, these sums must be repaid pending any valuation of Oriental or otherwise brought into account on valuation. If and insofar as payments out of Oriental may be irregular asset-stripping, they have caused P1/P5, P2, P3 and P4 further and obvious unfair prejudice. It is claimed these were payments made on behalf of and at the direction of those Respondents who had previously made loans to Oriental. But this is mere assertion and it is not made by anyone acting solely for the company. On any view they were large payments by the company to pay the legal fees of the Respondents, which is impermissible”.

The active respondents complain that this is “not an allegation of unfair prejudice and so has no prospects of success in an unfair prejudice petition anyway”. I do not agree. In my judgment it is an allegation of acts by the company that are unfairly prejudicial to the interests of the petitioners as members, and therefore within the scope of the petition.

Overall under this heading, none of the allegations complained of falls outside the scope of section 994 petition, and I can give permission for their inclusion in the amended petition if I consider it otherwise appropriate.