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

The jurisdiction of the court under section 994 is limited. It concerns either (a) conduct of the company’s affairs in a manner which is unfairly prejudicial to the interests of members generally or some part of the members, including the petitioner, or (b) an actual or proposed act or omission of the company (or on its behalf) which is or would be so prejudicial. These limits have long been recognised. In Re Unisoft Group Limited (No3) [1994] 1 BCLC 609, Harman J said (at 610):

“The [words of section 459 of the Companies Act 2006, now section 994 of the 2006 Act] … are, on the face of them, extraordinarily wide and general. They allow, on the face of them, every sort and kind of conduct which has taken place over an almost unlimited – certainly upwards of 20 years – periods of time in the management of a company's business to be dug up and gone over. The words are, however, limited by the reference to 'the company's affairs' in respect of which the conduct must be alleged.

The section also enables a member to apply to the court on the ground that 'any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial’. Again the words are wide and anything that the company does or fails to do can be relied upon. But wide as the category of acts may be it is necessary that the act or omission is done or left undone by the company itself or on its behalf …

The acts of the members themselves are not acts of the company nor are they part of the conduct of the affairs of the company and cannot found a petition under section 459 [now section 994]”.

The significance of these limits is clear. In Re Coroin Ltd [2014] BCC 14, Arden LJ pointed out that:

“13.

The requirements relevant to this appeal are that: (1) there is an act or omission on the part of the company; and (2) that act or omission is unfairly prejudicial to [the petitioner].

14.

These requirements are cumulative. If the court concludes that the first requirement is not satisfied, the second requirement does not arise … ”

It is therefore important that the facts pleaded in an unfair prejudice petition are restricted to matters which fall within the court’s jurisdiction under section 994. In Graham v Every [2014] EWCA Civ 191, Arden LJ (with whom McCombe and Vos LJJ agreed) said:

“37.

The requirement in section 994 for an ‘act or omission of the company’ means that the petitioner must identify something which the company does or fails to do. The alternative requirement – that "the company's affairs are being or have been conducted in a manner that is unfairly prejudicial" to members or the petitioner – does not contain the same stipulation. [The petitioner] can rely on the actions of some other persons, including his fellow shareholders. But the actions must still amount to the conduct of the company's affairs.”

The meaning of “the company’s affairs” for this purpose has been the subject of judicial explanation. In Re Neath Rugby Club Ltd [2009] EWCA Civ 291, [50], Stanley Burnton LJ (with whom Moore-Bick LJ and Blackburne J agreed) said:

“The judge [in the court below] cited the observations of Powell J in Re Dernacourt Investments Pty Ltd (1990) 2 ACSR 553:

The words ‘affairs of a company’ are extremely wide and should be construed liberally: (a) in determining the ambit of the ‘affairs’ of a parent company for the purposes of s 320, the court looks at the business realities of a situation and does not confine them to a narrow legalistic view; (b) ‘affairs’ of a company encompass all matters which may come before its board for consideration; (c) conduct of the ‘affairs’ of a parent company includes refraining from procuring a subsidiary to do something or condoning by inaction an act of a subsidiary, particularly when the directors of the parent and the subsidiary are the same …

I would accept these propositions, but with some qualification. (b) may extend to matters which are capable of coming before the board for its consideration, and may not be limited to those that actually come before the board: I do not accept that matters that are not considered by the board are not capable of being part of its affairs. Nonetheless, like the judge, I am unable to see how it can be said that the affairs of Neath and of Osprey were so intermingled that all of the affairs of the latter were the affairs of the former. It would, for example, be quite irrational to suggest that Mr Blyth, when acting as a director of Osprey, was conducting the affairs of Neath.”

And, in Re Charterhouse Capital Ltd [2015] EWCA Civ 536, Sir Terence Etherton C (with whom Lewison and McCombe LJJ agreed) said:

“45.

The expression ‘the company’s affairs’ in subs 1(a) is of wide ambit and plainly covers all matters decided by the board of directors. Equally plainly, it does not extend to matters which are neither effected by the company nor on its behalf but, for example, concern activities of shareholders solely in that personal capacity and as between themselves. Accordingly, actions or omissions in compliance or contravention of the articles of association of a company may or may not constitute the conduct of the company’s affairs within s 994(1) depending on the precise facts … ”

More recently, in Primekings Holding Ltd v King [2022] Bus LR 184, Snowden LJ, with whom Green and Nugee LJJ agreed, said:

“63.

The principle that statements of case should only set out the facts that go to make up each essential element of the cause of action relied upon is particularly relevant to pleadings in unfair prejudice petitions. There has, from the early days of the unfair prejudice jurisdiction, been a clear tendency for petitions and pleadings in such cases to seek to raise myriad grievances and complaints of diverse forms of misconduct against the respondents to the petition. This experience has been especially prevalent in cases in which it is alleged that the company is a quasi-partnership so that equitable considerations are in play. Such wide-ranging allegations are often then said to require extensive disclosure and a lengthy trial at which the entire history of the formation and breakdown of the relationship between the parties is gone through in enormous detail.

[ … ]

66.

… neither section 459 of the Companies Act 1985 nor Section 994 were drafted on the basis that a shareholder could simply complain, for example, that ‘a course of conduct in relation to the company’ had unfairly prejudiced his interests. The potential breadth of what is now Section 994 has been limited and kept within manageable bounds by the express statutory requirements that the acts complained of must either (i) be an act or omission of the company, or (ii) be conduct of the company's affairs rather than acts done in the conduct of a shareholder's personal affairs.”

Thus, for example, the personal action of a shareholder or third party cannot by itself amount to a matter falling within section 994. It must be pleaded (and proved at trial) that there was a causal connection between that action and the act or omission of the company constituting the affairs of the company: see Primekings, [61].

It is also necessary to bear in mind that the unfair prejudice has to be to the petitioner as a member of the company, although that is not to be narrowly construed. Thus, as Falk J (with whom Bean and Nugee LJJ agreed) said in Loveridge v Loveridge[2022] 2 BCLC 340,

“68.

… In the context of ss 994-996 it is clear that the conduct must be unfairly prejudicial to the interests of one or more members as members, but in O'Neill v Phillips Lord Hoffmann stated at p.1105, by reference to R & H Electrical Ltd v Haden Bill Electrical Ltd [1995] 2 BCLC 280 (‘R & H Electrical’), that ‘the requirement that prejudice must be suffered as a member should not be too narrowly or technically construed’. As discussed further below, in R & H Electrical account was taken of the interest of a loan creditor that was controlled by the relevant shareholder. A more recent example is Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26; [2007] BCC 272 (‘Gamlestaden’), where account was taken of the benefit that could be obtained from the relief sought by an unfair prejudice petition by a joint venturer in its capacity as a loan creditor of an insolvent joint venture company.”