Kohli v Lit and Others: ChD 13 Nov 2009

The claimant asserted that the other shareholders had acted in a manner unfairly prejudicial to her within the company.
Held: The claimant was allowed to bring in without prejudice correspondence to contradict evidence by the defendant which amounted to an implied waiver of the rule. Considering the evidence some elements of unfair prejudice had been shown, and orders were made for the purchase of the claimant’s shares at an undiscounted value.
Purle QC said: ‘There must be both prejudice and unfairness. Prejudice will most often be established by reference to conduct having a depressive effect (actual or threatened) on the value of the petitioner’s shareholding, which will in most cases be a minority holding, typically in a private company with restrictions on transfer. Unfairness, in turn, most often connotes some breach of the articles, statute, or general principles of company law. However, the operation of the section is not necessarily limited to such cases. The test is an objective one. There may be mutual understandings between shareholders giving rise to special rights of a quasi-partnership kind. Even without that, the conduct of the company’s directors may, whether by reason of malevolence, crass stupidity, or something in between, fall so far short of the standards to be expected of them as to lead to the conclusion that the petitioning shareholder cannot reasonably be expected to have the minimum of trust and confidence in the integrity or basic competence of the board that any shareholder is entitled ordinarily to expect. This is so irrespective of any impact on the value of his or her shares, and irrespective of whether any specific breach of the articles, statute, or the general principles of company law is involved.’

Purle QC
[2009] EWHC 2893 (Ch)
Companies Act 2006 994, Companies Act 1985 320
England and Wales
CitedIn re Saul D Harrison and Sons plc CA 1995
The ‘legitimate expectations’ of a party were a label for the ‘correlative right’ to which a relationship between company members may give rise when, on equitable principles, it would be regarded as unfair for a majority to exercise a power . .
CitedO’Neill and Another v Phillips and Others; In re a Company (No 00709 of 1992) HL 20-May-1999
The House considered a petition by a holder of 25 of the 100 issued shares in the company against the majority shareholder. The petitioner, an ex-employee, had been taken into management and then given his shares and permitted to take 50% of the . .
CitedMuller and Another v Linsley and Mortimer (A Firm) CA 8-Dec-1994
The plaintiff sued his former solicitors for professional negligence. The damages he sought to recover related to loss he suffered when dismissed as a director of a private company leading to a forced sale of his shares in the company. The plaintiff . .
CitedIn re a Company ChD 1985
While a section 75 petition proceeded it is of great importance to preserve the status quo, to hold the ring, to ensure that the assets remained undiluted, undiverted and properly administered; so that, if the court came to the conclusion, as it . .
CitedMutual Life Insurance Co of New York v Rank Organisation Ltd 1985
The duty of loyalty of a director to his company is the ‘time-honoured’ rule. The directors are under a duty to act fairly as between different shareholders. This applies not just where there were different classes of shareholder but also where . .
CitedOfulue and Another v Bossert HL 11-Mar-2009
The parties disputed ownership of land, one claiming adverse possession. In the course of negotations, the possessor made a without prejudice offer to purchase the paper owner’s title. The paper owner claimed that this was an acknowledgement under . .
CitedRe a Company (No 007623 of 1986) 1986
A petition sought relief for prejudicial conduct of the company by majority shareholders, where further shares had been issued and the petitioner had been unable to purchase them.
Held: The petition was dismissed. Hoffmann J said: . .
CitedRe McCarthy Surfacing Ltd ChD 2009
The court found that certain bonus payments, and the non-declaration of dividends, amounted to an unfair prejudice. The bonus payments had deprived shareholders of 81% of net profits estimated at andpound;1.4million. The directors had acted in . .
CitedFisher v Cadman and Others ChD 14-Jun-2005
The trial was concluded and the judgment had been given, but before the order was handed down, the defendants applied to be allowed to provide further evidence.
Held: The standards of Ladd v Marshall might be applied in such a situation, but . .
CitedAbacus Trust Company (Isle of Man) Colyb Limited v Barr, Barr, and Barr ChD 6-Feb-2003
The court considered the Rule in Hastings-Bass, and specifically (1) whether the trustee’s decision is open to challenge when the failure to take a consideration into account is not attributable to a breach of fiduciary duty on the part of the . .
CitedEx parte Glossop; Re a Company (No 00370 or 1987) ChD 1988
The court heard a complaint as to the non payment of dividends. Harman J said: ‘It is, in my judgment, vital to remember that actions of boards of directors cannot simply be justified by invoking the incantation ‘a decision taken bona fide in the . .
CitedRe BSB Holdings Ltd (No 2) ChD 1996
Arden J considered a submission that there could be no breach of duty by the directors unless the substantial purpose of their acts was to discriminate improperly against a group of shareholders. In rejecting that submission she commented as . .
CitedHoward Smith Limited v Ampol Petroleum Limited PC 14-Feb-1974
(New South Wales) The court considered the use by directors of their fiduciary power of allotment of shares for a different purpose than that for which it was granted, and so as to dilute the voting power of the majority shareholding of issued . .
CitedIn re Cumana Ltd CA 1986
The court considered the date at which shares are to be valued in a possible order for one set of shareholders to buy the shares of another.
Held: The choice was a matter of the judge’s discretion. Where a minority shareholder has a petition . .
CitedHunter v Senate Support Services Ltd and others ChD 2005
The court set aside a forfeiture of shares for non-payment of a call. The decisions of the directors to forfeit the shares and to transfer the forfeited shares to the group holding company were flawed, though not improperly motivated, because the . .
Citedin Re Kenyon Swansea Ltd ChD 1987
Vinelott J said: ‘There is . . one matter that has given me considerable concern. At a meeting of the board of directors of the company . . it was resolved to instruct solicitors to act on behalf of the company. In reliance on that resolution . .
CitedWest Coast Capital (Lios) Ltd, Re an Order Under Section 994 of the Companies Act 2006 SCS 15-May-2008
‘Thus, it is at least possible that a decision of the board to seek approval for a share issue could be regarded as unfair prejudice, even though the offer could be taken up pro rata by existing shareholders, if it were shown that the board or the . .
CitedHale v Waldock: re Metropolis Motorcycles Ltd ChD 6-Mar-2006
Complaint of unfairly prejudicial conduct of management of a company. . .
CitedSieff v Fox ChD 23-Jun-2005
The advisers to trustees wrongly advised the trustees about the tax consequences of exercising a power of appointment in a certain way. As a result a large unforeseen Capital Gains Tax liability arose. The trustees sought to set aside the . .
CitedGuinness plc v Saunders HL 8-Feb-1990
Director – no claim for payment without authority
A committee of the board of Guinness had authorised payment of remuneration to Mr Ward, who was a director. However, the articles of association did not give authority to a committee of the board (as opposed to the full board) to authorise such a . .

Lists of cited by and citing cases may be incomplete.

Company, Litigation Practice

Updated: 10 November 2021; Ref: scu.377911