Case No. CL-2019-000290

[1999] BCC 547, it fell to Peter Gibson LJ to consider an application to strike out an unfair prejudice petition (advanced under s.459 of the Companies Act 1985) brought by the holders of 75% of the shares in a company seeking to force a buy-out of the 25% shareholder. The petitioners complained that the minority shareholder – Mr Hateley – had failed to perform his duties, leading to his dismissal, and that the majority shareholders’ legitimate expectation that he would contribute to the business was not being fulfilled. Peter Gibson LJ noted at p.551: “As Oliver LJ said in Re Bird Precision Bellows Ltd (1985) 1 BCC 99,467 at p.99,471 … the very wide discretion conferred on the court to do what is considered fair and equitable is `in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of other shareholders of the company’. If the matters complained of have been put right and cured and cannot recur, it is hard to see how the court could properly give relief”. He continued: “The court on an application to strike out a s.459 petition can look at the realities of the case. It is entitled to take the pragmatic view that the petition should not be allowed to proceed where the likelihood of the trial judge exercising his discretion to grant the claimed relief is so remote that the case can be described as perfectly hopeless”. 69.Peter Gibson LJ further noted at p.552: i)That prejudice will not be unfair to the petitioner’s interests “where the petitioner has available to him a method of bringing that prejudicial state of affairs to an end”. ii)The prejudice caused by Mr Hateley’s conduct could not be said to be continuing simply because he remained a shareholder because “the retention of those shares is not conduct of the company’s affairs or an act or omission of the company”. iii)That “if the remedying of the unfairness was carried out in such a way that the objectionable conduct could not reoccur, then there is no scope for giving relief under s.461 in respect of the matters complained of”. 70.In my view, the points made by Peter Gibson LJ are fatal to Mr Morpuss QC’s argument, and show that this is indeed one of those cases where “the likelihood of the trial judge exercising his discretion to grant the claimed relief is so remote that the case can be described as perfectly hopeless”. Throughout the period to which the Disputed Payments relate, EIGL was in control of Heritage and in a position to ensure that Heritage pursued whatever claims were open to it. That remains the position now, at a point in time when the unfair prejudice petition has yet to be commenced. Neither Mr Buckingham or Mr Atherton has any ongoing role in the management company as a result of the agreements which EIGL chose to enter into in January 2018, or, in the case of Mr Atherton, his resignation some three years ago. 71.Mr Morpuss QC advanced two responses to this argument. 72.The first was to contend (as I accept) that there are cases in which a majority shareholder can bring an unfair prejudice petition, pointing to the decision of Rose J in Cool Seas (Seafoods) Limited v. Interfish Limited [2018] 2038 (Ch). However, that was a case in which the minority shareholder’s stake was sufficient, under the company’s Articles of Association, to prevent the company from bringing claims against its former directors for breach of fiduciary duty: [151]-[153]. By contrast, Heritage has always been able to and can still pursue such claims, if so advised. EIGL has throughout its period as a shareholder in Heritage been in a position to cause Heritage to pursue those claims, and there is no legal impediment to Heritage or EIGL taking this course. In so far as Mr Morpuss QC relied in his skeleton on the possibility that Heritage’s claims had been waived by clause 7 of the SpA, (a) I have resolved this issue in his favour; and (b) in any event, it could not be an appropriate use of s.994 to allow a shareholder to recover in respect of breaches of fiduciary duty owed to the company simply because the company (and in this case the petitioning shareholder as well) had chosen to settle those claims: Sikorski v Sikorski and another [2012] EWHC 1613 (Ch). 73.Mr Morpuss QC’s second argument was that the loss alleged here – the fact that EIGL had paid more when purchasing the 20% shares than if it had been able to deploy the potential claims against Albion as, in effect “negotiating leverage” – was a different loss from that which Heritage could recover by reason of the Disputed Payments. However, there are a number of reasons why I have concluded that this argument does not have a realistic prospect of success. 74.First, it is necessary to test the “leverage” which EIGL claims it would have had when the price for its 20% share was being negotiated. There could be no question, prior to the sale of the 20% being concluded, of EIGL having a putative unfair prejudice petition in respect of the price it had paid for its interest. At best it (or more properly, Heritage) had claims to recover the Disputed Payments and any loss it had suffered resulting from them. Heritage (and EIGL through its control of Heritage) retains those rights. The suggestion that EIGL might somehow have negotiated a greater reduction in the purchase price than the value of the putative claims to be used as leverage is inherently improbable, and wholly speculative. Indeed in circumstances in which EIGL now has a 100% interest in Heritage, rather than the 80% interest it had at the time it claims it could have used the Disputed Payments as leverage, it is particularly hard to see a credible basis for EIGL contending it has suffered some prejudice over and above the claims open to Heritage at the time the SpA was under negotiation. 75.Second, it is necessary for EIGL to establish a realistic case that it has been prejudiced in its interests as shareholder. I accept that this requirement is not to be too narrowly or technically construed (Lord Hoffmann in O’Neill v Phillips [1999] 1 WLR 1092, 1105). However, the prejudice in question must be “bound up with [EIGL’s] position as a member” (Cool Seas at [113(7)]) or be prejudice to EIGL in its capacity as a shareholder (Re Blackwood Hodge plc [1997] 2 BCLC 650, 673 per Jonathan Parker J). It is not enough that there is conduct which prejudices the interests of persons who happen to be members of a company: Re a Company [1983] Ch 178 at p. 189E and Re a Company No. 00477 of 1986 (1986) 2 B.C.C. 99,171 at p. 99,174. EIGL’s complaint that it paid more than it might have done for the 20% is not damage which is bound up with its position as a member, but, at best, prejudice to its interests when it happens to be a member of a company by reason of its purchase of different shares some three and a half years previously. 76.In response to this point, Mr Morpuss QC referred to the fact that EIGL held an 80% interest in Heritage when the additional 20% was purchased. However, he accepted that there was no link between the damage for which he was contending EIGL could secure compensation for unfair prejudice, and the size of its existing shareholding. EIGL’s complaint that it would have paid less for the 20% had it known “the true position” (as the matter is put in its witness evidence and in correspondence) is a complaint which would ordinarily sound in misrepresentation or actionable nondisclosure in relation to the sale, or not at all. Those are risks which well-advised buyers and sellers are careful to allocate through the terms in their sale contract, as they did so here through very limited warranties in clause 5 and an extensive “entire agreement” clause in clause 9. The risk of “paying too much” in a share acquisition in circumstances in which there has been no breach of contract or tortious conduct by the vendor is not prejudice of a kind which the unfair prejudice jurisdiction exists to remedy. Mr Morpuss QC accepted that if there had been no carve out for claims arising from the Alvarez investigation, then it would not have been possible to bring a complaint premised on EIGL having paid more for the 20% than it would have done with knowledge of the Disputed Payments, by way of an unfair prejudice petition. However, it is difficult to see why the fact that Heritage has retained its ability to bring claims in respect of the Disputed Payments can leave EIGL in a better position so far as petitioning for unfair prejudice is concerned than if it had not. 77.Third, in circumstances in which (as I explain below), it is clear that EIGL had substantial knowledge about the Disputed Payments before the SpA was signed, and it chose notwithstanding that knowledge to purchase the shares at the agreed price but preserve such claims as already existed from matters arising from the Alvarez investigation, there can be nothing unfair in EIGL being limited to such benefit as it can now derive from those preserved causes of action. As Peter Gibson LJ noted in Re Legal Costs Negotiators Ltd at p.552, quoting Knox J in