Magic Investments SA v Ralph Thierry Broadbent & Anor [2026] EWCA Civ 711

[2026] EWCA Civ 711Case No CA-2025-002542
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2025] EWHC 1898 (Ch)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY APPEALS (ChD)
Mr Justice Marcus Smith
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 05/06/2026
Before
LORD JUSTICE NEWEYLADY JUSTICE ASPLINLADY JUSTICE MAY
Between
MAGIC INVESTMENTS SAPetitioner/(1) RALPH THIERRY BROADBENTRespondents(2) THE GREATER GOOD FRESH BREWING CO LIMITEDRespondent
Tony Beswetherick KC and Adrian Pay (instructed by Mishcon de Reya LLP) for AppellantNigel Dougherty and Olivia Tolson (instructed by DWF LLP) for First Respondent for The Second Respondent was not represented.Hearing Hearing date: 13 May 2026
Approved JudgmentThis judgment was handed down remotely at 10.30am on 5 June 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................
[1]This appeal relates to an “unfair prejudice” petition presented by Magic Investments SA (“Magic”) under section 994 of the Companies Act 2006 (“the 2006 Act”). ICC Judge Agnello KC (then as a Deputy) (“the ICC Judge”) concluded that the petition should be struck out, and Marcus Smith J (“the Judge”) upheld that decision. Magic now appeals to this Court.

Basic facts

[2]The Greater Good Fresh Brewing Co Limited (“the Company”), the second respondent, is a start-up business selling an innovative home-brewing kit. The Company was founded by Mr Ralph Broadbent, the first respondent, and Mr Alex Dixon. Both are directors and, when the petition was presented, each held between 25% and 50% of the Company’s shares. During the period when the events relevant to the petition took place, Mr Broadbent was also the Company’s chief executive officer.[3]Magic, a Luxembourg company, holds investments on behalf of the RAM Group (“RAM”), a South African courier enterprise. In March 2021, Magic invested in the Company, subscribing for 103 shares at a total price of £996,131.54 (equivalent to £9,671.18 per share) pursuant to a subscription agreement dated 26 March 2021 (replacing one of 24 March 2021). There was reference in the subscription agreement to loans to the Company by Mr Broadbent (of £1,251,603) and Mr Dixon (of £633,601) not being repaid prior to a “Qualified Transaction” such as an IPO.[4]Magic also obtained from the Company a letter dated 25 March 2021 which was stated to be written in respect of Magic’s investment. Paragraph 2 of this (“the Nomination Agreement”) read:
“MI [i.e. Magic] will be entitled to nominate someone to the board.”
According to Magic’s evidence, South African exchange control regulations required it to have a seat on the board where it invested in an overseas company and it made clear to the investment bank representing the Company in advance of its subscription that it therefore had to have a seat on the Company’s board.[5]Magic initially put forward Mr Chris Meyer to be a director of the Company and he appears to have acted as such. There is an issue between the parties as to whether he ever formally became a director, but it does not matter. By July 2021, Mr Meyer had decided that he was not in a position to be a director.[6]In an email of 18 October 2021, Mr David Lazarus, the chairman of Magic, raised with Mr Broadbent the “question of how the Magic Board seat will be dealt with following our last discussion”. Replying the same day, Mr Broadbent said:
“In terms of the board seat, I was up for you appointing Chris because I felt there was tremendous value-add to the company and it was a relationship that could work. I think the absolute priority for the business is to have a board that can help the company develop as it meets the many challenges we face ahead. I’m nervous about offering another appointment because we only have 4 precious seats and I want to make sure that we have the right blend of expertise for 2022. It might well be that we could agree on a common appointment that both brings the right blend of skills and also some reassurance for you but I think it’s likely that the perfect person that meets both needs will be difficult to find. I think understanding what’s important from the board seat might also help better structure things to meet your needs. For example, it might well be that there’s someone already in place that can deliver independent updates.”
[7]Mr Lazarus responded as follows on 19 October 2021:
“When we invested at the time it was a clear request and agreement that we would have the seat at the time occupied by Chris. No independent Director is acceptable as this is a requirement from the Fiscus in SA for the overseas investment at the time.”
[8]On 24 October 2021, there was an exchange of emails between Mr Broadbent and Mr Alan Da Costa, a director of Magic and the group general counsel of RAM. Mr Da Costa referred Mr Broadbent to the Nomination Agreement “confirming Magic is entitled to nominate someone to the board”. In his reply, Mr Broadbent said:
“I don’t think there’s any question that you were able to nominate someone, the issue is that I think you now want a second nomination. I always try very hard to make sure I keep my investors well informed and look after their interests. The make of the board is an important part of that and the most important thing the board can do, is to make sure the business is well run and meets its goals. When I’m choosing the board, I’m trying to find the very best people and Chris Meyer was a great appointment as it was good for the business and also gave you comfort. What is more tricky for me is to agree to an appointment that doesn’t fit into the wider context of the board - each seat should offer skills that complement the others to give optimum value add. Ideally I can find a board make-up that you’re happy with but I really think the priority needs to be the best possible board to give the business the best chance of success - rather than allowing shareholders to make ongoing appointments indefinitely.”
[9]Writing to Mr Lazarus again on 25 October 2021, Mr Broadbent said:
“I’ve been looking back over the correspondence we had around the board seat. I’m very keen to try and find a solution that works with everyone as well as get to the bottom of what was originally intended. To my mind, appointing the best possible board is a win for everyone but for now, I will set out what I can see from the previous correspondence on this. The letter provided by Alan shows that we agreed Magic would have the right to nominate someone to the board - in your most recent emails, you are now suggesting that you then have the ongoing right to a board seat which I don’t think the original letter provides for. A board nomination isn’t an appointment and I can’t see any reference to that leading to a second nomination after the first one. Looking back to try and better understand the background, you had specifically asked me to write the email below to you to set out my intentions. In it, I set out that we would look to appoint Chris to the board. There is no mention of alternative candidates and that was never discussed. The email was accepted as the plan.”
[10]Mr Lazarus and Mr Da Costa both emailed Mr Broadbent again on 26 October 2021. Mr Lazarus said:
“when we invested it was made clear that we required min 10% of a company and a Board seat as this was a EXCON [i.e. exchange control] requirements [from] the SA Gov. We all were aware we were not buying the 10% so we applied for relaxation of the 10% which was approved.”
For his part, Mr Da Costa said:
“As mentioned by David, we really need to firm up the board seat because our application was approved on the basis that we would have a board seat For ease of reference I refer you to paragraph 4.3.5 of the attached application We certainly do not want to run foul of the Exchange Control Regulations.”
For ease of reference I refer you to paragraph 4.3.5 of the attached application We certainly do not want to run foul of the Exchange Control Regulations.”

For ease of reference I refer you to paragraph 4.3.5 of the attached application

[11]In March of the following year, Mr Broadbent reported to, among others, Mr Lazarus and Mr Da Costa that there had been an approach from Brewdog. He explained that the proposal would involve Brewdog acquiring 40% of the Company’s shares at once and the balance over three to five years. With regard to the initial 40%, Mr Broadbent said:
“We’ll get an uplift in value because they’re paying in shares not cash. My target for this would be to get £100m valuation. They will definitely do at least £56m, we just need to negotiate which we haven’t got into.”
[12]It seems that, shortly after this, the Company had to make a product recall. The Company had launched a product which proved not to work. The result, Mr Broadbent has said in a witness statement, was that the Company “was in an incredibly weak position”.[13]On 17 June 2022, Mr Broadbent sent out an “Important shareholder update” in which he outlined a proposal designed to take the Company “to a cash positive position so at all times we’re operating from a position of strength”. By way of background, Mr Broadbent said:
“Since March we have been talking with Brewdog about them making a major investment in Pinter. Their original intention was to do the deal in 4-8 weeks but progress has been painfully slow. Brewdog have sent us their final legally drafted detailed heads of terms which we are reviewing. However, we must be realistic that if we carry on down the current path there is still a material risk the deal will not complete (as is the case with any transaction). More importantly, our advisors (Investec) are of the view that this deal would only likely complete some time between the end of July and September. Since we entered conversations with Brewdog we hit the major speed bump of Project Easter which left us with no Pinter [i.e product] sales revenue for 2 months. The context of the Brewdog deal also made it an awkward time to fundraise from new investors because of the certainty around what the Brewdog deal would look like (we clearly have to declare that). We now find ourselves in a position where we have 4 weeks cash runway and we need to make sure we secure our future.”
Turning to what was proposed, Mr Broadbent said:
“The system we’re putting forward … is akin to a rights issue. We provide strong incentives for investors to follow on with their investment. The balance we’ve tried to strike is that we understand some people won’t want to or be able to follow on and we’re still trying to look after those investors under difficult circumstances. The mechanism to achieve what I’ve set out above is: 1. … A share issue of £6m shares at a £6m pre money valuation. 2. … Investors have the right to buy shares in proportion to their shareholding 3. … Investors that take up this right have their % shareholding preserved 4. … Where investors don’t participate, shares are effectively diluted to 50% of previous shareholding as a % of shares in issue - this is because we’ve doubled the amount of shares in issue. A £6m share issue at a £6m valuation means you’ve issued the same number of shares that already exist, again. 5. … Investors have the opportunity to buy additional shares for cash at the rights issue price of £1.04 per share where other investors haven’t followed their rights and there are a surplus of available shares …. I want to stress that we are not saying that this is what the company is worth (indeed the Brewdog HoT place the valuation at £56m) - this is a mechanism to encourage as many shareholders as possible to participate in this round. These shares are only available to existing investors and is a mechanism to get the company back in the driving seat. As part of this raise there is a total of £2m possible debt conversion leaving a total cash inflow of £4m. The board believes that £4m cash is the minimum cash that we need to see the business through to positive EBITDA. On this basis, this is an all or nothing proposal whereby we will only accept commitments if and when we have reached the £4m threshold of committed cash.”

The mechanism to achieve what I’ve set out above is:

[14]Magic objected to what was proposed. It complained in particular about the “£2m possible debt conversion”. This was to involve the loans which Mr Broadbent and Mr Dixon had made to the Company being converted into equity. In an email to Mr Broadbent of 24 June 2022, Mr Da Costa said, among other things, “Even on your own version the proposed transaction does not bring in £6 Million”, “We are being requested to follow our rights while the ‘Loan Shareholders’ are in fact not bringing anything to this new round other than the conversion of their loan” and “By attempting to convert the loans to equity in this round is not only in breach of your undertaking given by you in the Magic Letter but is in complete bad faith given that according to your proposed scheme, shareholders not following their rights will be diluted 50%”. Mr Da Costa concluded that the scheme “is both discriminatory and unfairly prejudicial to ourselves and other minority shareholders”.[15]The Company nevertheless proceeded with the share issue. Magic did not participate.[16]On 5 December 2022, Magic presented a petition pursuant to section 994 of the 2006 Act in which it alleged that the Company’s affairs had been conducted in a manner that was unfairly prejudicial to the interests of members, including itself. It asked for an order requiring Mr Broadbent to buy its shares in the Company and “Such further or alternative order as the Court thinks fit”.[17]Mr Broadbent served points of defence dated 27 February 2023 and, on 31 May 2023, Magic provided its response to a request by Mr Broadbent for further information. By this stage, the parties had also been agreeing a disclosure review document, case summary and list of issues. A costs and case management conference had been held, too, on 5 May 2023.[18]In a letter dated 31 July 2023, Mr Broadbent through his solicitors made an offer to buy Magic’s shares. I shall have to return to this offer later in this judgment.[19]The petition was listed to come on for trial on 13 May 2024 with a time estimate of five days. However, on 20 December 2023 Mr Broadbent applied for the petition to be struck out or for summary judgment in his favour. The application came before the ICC Judge on 12 April 2024 and she gave judgment in Mr Broadbent’s favour on 19 April (“the ICC Judgment”). Magic appealed, but without success. In a judgment dated 25 July 2025 (“the Judgment”), the Judge concluded that the appeal should be dismissed.[20]Magic now challenges the decisions of the Judge and the ICC Judge in this Court.[21]The issues to which the appeal gives rise can be addressed under the following headings: i) The board seat allegation; ii) The undervalue allegation; iii) Relief; iv) The offer.

The board seat allegation

[22]It is Magic’s case that the Nomination Agreement entitled it to have its nominee appointed to the board of the Company yet Mr Broadbent has denied that it has that right.[23]The ICC Judge and the Judge agreed with Mr Broadbent. The ICC Judge considered there to be “a difference between an entitlement to nominate someone to act as a director and an entitlement to appoint someone as a director” and concluded that Magic had merely the former (see paragraphs 22 and 24 of the ICC Judgment). She further took the view that being deprived of an opportunity to have a person appointed to the board would not anyway constitute unfair prejudice since all directors owe the same duties (see paragraphs 40 and 43 of the ICC Judgment). The Judge agreed, but went further. He held that the Nomination Agreement “simply recorded a right that Magic would have had in any event, namely to nominate a director whose name … would receive serious consideration from the Company for the purposes of appointment” and that the Nomination Agreement “was at most a one-off ability to nominate with (possibly - and in the circumstances it does not matter) an obligation on the Company to consider that nomination but not guarantee the appointment” (paragraph 42 of the Judgment).[24]The first question which arises in relation to this part of the case is as to the correct construction of the Nomination Agreement. Did it give Magic no more than a right to have a candidate considered for appointment as a director of the Company? Or was Magic to be entitled to have its nominee placed on the board? And was the right a “one-off” one?[25]Like the Judge, Mr Nigel Dougherty, who appeared for Mr Broadbent with Ms Olivia Tolson, distinguished between “nomination” and “appointment”. “Nomination”, he argued, is the proposal of a person to occupy a position whereas “appointment” is the culmination of a process that may begin with a “nomination” but involves the actual selection of the person and attainment of the position. In the present context, the appointment of a director was a matter for members, the existing board or (under a shareholders’ agreement dated 5 September 2018) Mr Broadbent and Mr Dixon. Magic could suggest that a person be appointed as a director and the relevant corporate organs might be expected to have regard to its wishes, but the Company was under no obligation to give effect to them. The Nomination Agreement reflected the right that any shareholder would have to put forward a name.[26]It is true, of course, that “nomination” can potentially be distinguished from “appointment”. However, the word “nominate”, as used in the Nomination Agreement, has to be construed in its context. When construing a contract, regard can be had not only to dictionary definitions but to the relationship of a word to others in the document, to the factual matrix and to business common sense. “Textualism” and “contextualism” can both be used as “tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement” (Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173, at paragraph 13, per Lord Hodge).[27]In my view, the Nomination Agreement gave Magic the right to have a person of its choosing placed on the Company’s board. My reasons are as follows: i) The definitions of “nominate” given by the Oxford English Dictionary include both “To propose or formally enter as a candidate for election or for an honour, award, etc.” and “To appoint (a person) by name to hold an office or discharge a duty”; ii) The Nomination Agreement says that Magic will be entitled to “nominate someone to the board”, not merely to nominate someone to be considered for appointment; iii) On the Judge’s construction of the Nomination Agreement, it would have given Magic nothing of real value. As Mr Dougherty said, Magic would be in no different a position to any other shareholder. To adapt words of Steven Chong JA (giving the judgment of the Singapore Court of Appeal) in The Wellness Group Pte Ltd v Paris Investment Pte Ltd [2018] SGCA 47, at paragraph 34, the Nomination Agreement would be “redundant” unless it conferred “more than a mere right to nominate with no corresponding duty to appoint”; and iv) The factual matrix points strongly towards Magic having been intended to have the right to have someone of its choosing on the Company’s board rather than just an ability to suggest someone. As it had explained, Magic needed to have a seat on the Company’s board to satisfy South African exchange control regulations.[28]Further, contrary to the Judge’s view, it seems to me that Magic’s entitlement was a continuing one. Its right to select a board member was not, as it seems to me, to come to an end when, say, the person died or resigned. Its ability to ensure that there was someone it had chosen on the board would then have been dependent on matters outside its control and it would have been exposed to the risk of offending South African exchange control requirements at any time.[29]It is fair to say, as Mr Dougherty did, that the actual appointment of a person put forward had to be effected by Mr Broadbent and Mr Dixon, the Company’s existing board or its members. However, that will not have prevented the Company from becoming bound to procure an appointment to its board, and it appears to me that it did undertake such an obligation.[30]Mr Dougherty further argued that what matters is whether there has been unfair prejudice, not whether Magic has a contractual right such as it alleges; that Magic never in fact nominated anyone other than Mr Meyer; and that Magic’s complaint is trivial. He relied in support of his submissions on Re Saul D Harrison & Sons plc [1995] 1 BCLC 14, where at 18 Hoffmann LJ observed that “trivial or technical infringements of the articles were not intended to give rise to petitions under s 459 [i.e. the then equivalent to section 994 of the 2006 Act]”.[31]On the other hand: i) While Magic did not get to the point of putting forward any name other than that of Mr Meyer, it can be seen from the correspondence quoted in paragraphs 6-10 above that Mr Broadbent’s position was that it had no right to have anyone else on the Company’s board; and ii) The importance of a shareholder’s entitlement to management participation was recognised in In re A & BC Chewing Gum Ltd [1975] 1 WLR 579, at 591. That is the more so since “an appointed director, without being in breach of his duties to the company, may take the interests of his nominator into account, provided that his decisions as a director are in what he genuinely considers to be the best interests of the company” (Re Neath Rugby Ltd [2009] EWCA Civ 291, [2010] BCC 597, at paragraph 33, per Stanley Burnton LJ); iii) Accordingly, it seems to me that denial of a shareholder’s entitlement to have a person of its choice on the company’s board is capable of amounting to unfair prejudice rather than being “trivial or technical”.[32]Mr Dougherty, however, maintained that Magic had not pleaded such a case. What was alleged in the petition, he argued, was entitlement to “nominate” as distinct from entitlement to “appoint”. He observed that the distinction can be seen in the use of both words in paragraph 23 of the petition and the complaint in paragraph 24 that the Company “has failed and refused to permit the Petitioner to nominate any other individual to act as a director of the Company”.[33]In my view, there is nothing in this point. The wording of the petition was apt to encompass an allegation that the Company was not prepared to appoint a person of Magic’s choosing. The Company had not denied Magic’s ability just to put forward a name, and it would have made no sense for Magic to petition on that basis. A reasonable reader would have understood Magic’s complaint to go beyond that, to make the point that it was being denied the seat on the board to which it was entitled.[34]In short, I take a different view from the Judge and the ICC Judge. It seems to me that the Nomination Agreement conferred on Magic a right to have a person chosen by it on the Company’s board; that Mr Broadbent’s denial of that entitlement is capable of amounting to unfair prejudice; and that Magic’s case to that effect is not to be disregarded on pleading grounds.[35]For completeness, I should mention that the respondent’s notice which Mr Broadbent filed included the contention that the effect of entry into a deed of release signed on behalf of Magic on 28 October 2021 and the adoption of new articles of association on 1 November 2021 was to supersede, and to bring to an end, the Nomination Agreement. The point was not developed to any real extent in Mr Broadbent’s skeleton argument, and I did not understand it to feature at all in Mr Dougherty’s oral submissions. The Judge thought it “well-arguable” that the Nomination Agreement survived the deed of release and new articles of association. I agree.

The undervalue allegation

[36]The other allegation which Magic wishes to pursue is that, when shares in the Company were issued in the summer of 2022, that was at an undervalue and so to its prejudice. In this respect, the evidence to which we were taken by Mr Tony Beswetherick KC, who appeared for Magic with Mr Adrian Pay, included the following: i) Mr Broadbent said in the “Important shareholder update” of 17 June 2022 that he was “not saying that this is what the company is worth (indeed the Brewdog HoT place the valuation at £56m) - this is a mechanism to encourage as many shareholders as possible to participate in this round” and that Brewdog had “sent … their final legally drafted detailed heads of terms”; and ii) Mr Simon Haslam, the Company’s chairman, explained in a witness statement that the board concluded that the share issue “should be at a discount to what was perceived to be the ‘market price’ of the Company to provide an incentive to all shareholders to participate in the funding round”, that this route “balanced a commercial opportunity (buying shares at a price below the level indicated by the discussions with the major commercial enterprise), and the needs of the Company for a stronger balance sheet with the threat of dilution for investors who chose not to invest” and that his experience and that of other board members was that “the balance of carrot and stick could be very effective in closing a funding round”.[37]In terms of authority, Mr Beswetherick cited Lowry v Consolidated African Selection Trust Ltd [1940] AC 648 (“Lowry”), Shearer v Bercain Ltd [1980] 3 All ER 295 (“Shearer”) and Pettie v Thomson Pettie Tube Products Ltd 2000 SC 431 (“Pettie”). In Lowry, Lord Wright (dissenting, but not in this respect) said at 679:
“The power to issue further capital is only a potentiality. But the fact of issue makes it actual capital, and creates the fasciculus of rights and liabilities between the company and the shareholder which flow from the share when issued. If the share stands at a premium, the directors prima facie owe a duty to the company to obtain for it the full value which they are able to get. It is true that it is within their powers under the Companies Acts to issue it at par, even in such a case, but their duty to the company is not to do so unless for good reason.”
In Shearer, Walton J, after quoting the “classic passage” from Lord Wright’s speech in Lowry, said at 308:
“It is, in normal circumstances, the duty of the company to issue its shares at the highest premium it can command for them, but for good reason it may issue them for any less amount, obviously not less than par.”
In Pettie, the issue by a company of shares at less than their true value was held to constitute unfair prejudice. While recognising in paragraph 31 that, “in order to ensure an adequate take-up of a rights issue, directors may properly consider that some discount on the value of the shares is desirable”, Lord Eassie referred in paragraph 21 to “the practice of issuing shares at an undervalue [being] seen as being prima facie a breach of the director’s fiduciary duties” and concluded in paragraph 24 that “the disputed allotment was … prejudicial to the petitioners, who did not subscribe for the new shares, by reason of its having the effect of materially reducing the value of their holdings, to the corresponding advantage of the respondents who bought the new shares at a price below their proper value”. Lord Eassie explained in paragraph 28 that it had been argued on behalf of the respondents that “the disputed allotment was not unfair since the petitioners had been treated equally with the other shareholders in that they had also been invited to subscribe for the new shares at par” and that “[t]he prejudice suffered by the petitioners arose because the petitioners had chosen not to accept that invitation”. Lord Eassie rejected that, saying in paragraph 30:
“Where, as here, the minority contest the allotment of new shares at a significant undervalue, an insistence on the part of the directors and the majority on proceeding with that course rather than, say, offering new shares at a price reasonably reflective of their true value, amounts effectively to a course of coercing the provision of further funds under the threat of that minority’s being penalised by suffering a substantive relative diminution in the capital value of their holdings.”
In paragraph 34, Lord Eassie concluded:
“In the present case, the disputed allotment occasioned prejudice to the petitioners in the respect that the issue of new shares at an undervalue caused the value of their shareholdings to be reduced. I have examined the various contentions put forward by the respondents in purported justification of proceeding, in face of protest, with that allotment of shares. None of those contentions, if proved, would in my view amount to a proper justification for inflicting a reduction in the value of the petitioners’ shareholdings. I conclude therefore that counsel for the petitioners is correct in his submission that no relevant answer has been put forward respecting the petitioners’ contention that they have been the subject of unfairly prejudicial conduct.”
[38]In the circumstances, the possibility that the Company’s share issue in the summer of 2022 involved unfair prejudice cannot, I think, be dismissed. There is evidence suggesting that the shares may knowingly have been issued at a discount to what was perceived to be, and actually was, their market value. Mr Haslam has himself spoken of the board adopting a “carrot and stick” approach, drawing on “the threat of dilution for investors who chose not to invest”. Arguably, that is akin to the “course of coercing the provision of further funds under the threat of that minority’s being penalised by suffering a substantive relative diminution in the capital value of their holdings” with which Lord Eassie took issue in Pettie. Further, Magic’s complaint is not obviously “trivial or technical” (to use the words of Hoffmann LJ in Re Saul D Harrison & Sons plc).[39]The Judge considered “the fact that the favourable terms for the acquisition of the new shares were offered to all shareholders” to be “fatal to Magic’s argument”: see paragraph 36 of the Judgment.

The Judge went on:

“Magic had exactly the same rights to participate as all the other shareholders, and simply declined to avail itself of the opportunity. It cannot be the case that Magic’s failure to take up the offer is of any weight at all: were material weight to be attached to a failure to take up an offer that could have been accepted on non-discriminatory terms, then that would give every individual shareholder an effective veto. That proposition only has to be stated to be rejected, and I do so reject it.”
[40]I do not agree. In my view, the fact that Magic did not take up the offer is not a knock-out blow to its case. Pettie provides a potential analogy.[41]That is by no means to say that the Company’s share issue did in fact either involve any breach of fiduciary duty or amount to unfair prejudice. I am certainly not rejecting the possibility that the Company’s circumstances at the time justified the issue of the shares at the price at which they were issued. What matters for present purposes is that Magic’s allegation is not bound to fail at a trial.[42]Once again, and with more reason, Mr Dougherty contended that Magic is seeking to advance an allegation which is not to be found in the petition. In this connection, Mr Dougherty relied on a number of authorities to show the importance of what is pleaded in a petition. Thus i) Rule 3(2) of the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 states that the petition “shall specify the grounds on which it is presented and the nature of the relief which is sought by the petitioner”; ii) In Re Tecnion Investments Ltd [1985] BCLC 434, Dillon LJ, with whom Sir John Megaw agreed, said at 441: “It is very important that the allegations which are being relied on in a petition of this nature should be properly set out in the petition itself and not merely collected from various places in voluminous affidavit evidence. For my part, I would emphatically endorse the comments and citations of Megarry J in Re Fildes Bros Ltd [1970] 1 All ER 923 at 927, [1970] 1 WLR 592 at 597–598. He there referred to statements by Plowman J in Re Lundie Bros Ltd [1965] 2 All ER 692 at 699, [1965] 1 WLR 1051 at 1058: ‘It was suggested in the course of argument that it was really the evidence and not the allegations in the petition which was of importance in this matter. I entirely dissent from that proposition. It seems to me that it would be wrong for the court to travel outside the allegations in the petition, particularly in a case of this sort where the petition is based on the proposition that the respondents to it have been guilty of some oppression or some lack of probity’”; and ‘It was suggested in the course of argument that it was really the evidence and not the allegations in the petition which was of importance in this matter. I entirely dissent from that proposition. It seems to me that it would be wrong for the court to travel outside the allegations in the petition, particularly in a case of this sort where the petition is based on the proposition that the respondents to it have been guilty of some oppression or some lack of probity’”; and iii) In In re G & G Properties Ltd [2019] EWCA Civ 2046, [2020] Bus LR 762, in paragraph 35, David Richards LJ, with whom Etherton MR and I agreed, “fully endorse[d]” cases “emphasising the importance of a proper pleading of the petitioner’s case in a claim under section 994 or for a winding-up order under the just and equitable ground”, adding that “[t]he breadth of the court’s jurisdiction in such cases makes this essential, both so that the respondents know the case they have to meet and so that the court can keep the proceedings within manageable bounds”.[43]Mr Beswetherick argued that the petition does include the undervalue allegation. He pointed out that paragraph 19 of the petition quotes Mr Broadbent explaining “we are not saying that this is what the company is worth … - this is a mechanism to encourage as many shareholders as possible to participate in this round”; that paragraph 25 alleges that the Company’s affairs have been conducted in an unfairly prejudicial manner by reason of, among other things, the 2022 share issue; and that paragraph 26 refers to Mr Broadbent recognising that the price per share was less than market value and to Magic’s shareholding having been diluted. However, the petition does not in terms assert that the issue of the shares was unfairly prejudicial just because it was made at an undervalue. The focus both in paragraphs 17-22 and in paragraph 26 is on the repayment of the loans from Mr Broadbent and Mr Dixon. Paragraphs 17-22 are headed “Repayment of the Principal Founder Loans” and paragraph 26 begins, “In particular, the effect of the repayment of the Principal Founder Loans is …”.[44]The position was similar at the hearing before the ICC Judge. Magic’s then counsel complained about the repayment of Mr Broadbent’s and Mr Dixon’s loans. He did not argue that the share issue was unfairly prejudicial simply on the basis that it took place at an undervalue and served to dilute Magic’s interest.[45]Things had changed by the time the matter reached the Judge. Citing Lowry, Shearer and Pettie, Magic argued in its skeleton argument for the appeal from the ICC Judge’s decision that the 2022 share issue was “by its very nature, unfairly prejudicial to members, in particular members like [Magic] who did not want to commit further funds to the [Company]”. In his skeleton argument in response, Mr Broadbent described Magic’s “case on a supposed ‘undervalue’” as “purely speculative”, unsupported by evidence and “not really pursued … below”, but he did not challenge Magic’s right to run it. Similarly, at the hearing before the Judge Mr Dougherty attacked Magic’s case on its merits rather than challenging its right to advance it. Moreover, when Magic pointed out to the Judge that the draft judgment which he had circulated did not address the contention that “the offer of shares at an undervalue was inherently prejudicial to Magic”, Mr Dougherty accepted that such a contention had been put forward at the hearing and, while rehearsing what was said in the petition at some length, principally stressed how little was said about Mr Broadbent’s role, having observed that, “Putting the matter at its highest, the Company’s entry into the ‘June Transaction’, with the alleged consequence in the second half of Paragraph 26(1) [i.e. issue at less than market value], is said to be ‘unfairly prejudicial’ conduct of the Company’s affairs”. Once again, it was not suggested that the Judge should not even entertain the contention that shares had been issued at an undervalue to the prejudice of Magic.[46]It would, I think, be as well if Magic amended its petition to spell out in plain terms the allegation that shares were issued in a way that was unfairly prejudicial to it. It would also make sense for the parties to have an opportunity, should they wish, to serve further evidence in relation to that allegation and for the adequacy of the disclosure which the parties have given to be checked.[47]However, I do not consider that either any problem with the petition or the fact that the undervalue allegation was not advanced before the ICC Judge should prevent Magic from pursuing the allegation at trial. As Tugendhat J said in Kim v Park [2011] EWHC 1781 (QB), at paragraph 40, “where the court holds that there is a defect in a pleading, it is normal for the court to refrain from striking out that pleading unless the court has given the party concerned an opportunity of putting right the defect, provided that there is reason to believe that he will be in a position to put the defect right”. In the present case, Magic can readily clarify the petition and, if the matter is anyway to go to trial in relation to board seat allegation, there will be plenty of time both to effect the amendment and to review the evidence and disclosure. I do not think it would be just to shut Magic out from pursuing the case it now advances in respect of the share issue if(a) that case has a real prospect of success,(b) the matter is as yet at a strike-out stage and(c) it is possible to ensure that the issue will be ready for determination at a trial which will take place in any event. That is especially so given how matters proceeded in relation to the appeal from the ICC Judge’s decision. As I have mentioned, the merits of Magic’s dilution complaint were addressed at that stage in Magic’s skeleton argument, in oral submissions and in the Judgment. Further, Mr Broadbent did not challenge Magic’s right to run the argument.

Relief

[48]Mr Dougherty argued that it was right to strike out the petition because the primary relief sought in it is an order requiring Mr Broadbent to buy Magic’s shares, yet the petition says little about him and it could not be just or proportionate to grant such an order.[49]The circumstances in which a person can be the subject of an order on an unfair prejudice petition were discussed in F & C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2011] EWHC 1731 (Ch), [2012] Ch 613 (“F & C”) and Apex Global Ltd v Fi Call Ltd [2013] EWHC 1652 (Ch), [2014] BCC 286 (“Fi Call”). In F & C, having noted in paragraph 1094 that “the parties were not in agreement as to what the relevant test of attribution of unfairly prejudicial conduct to a defendant in a section 994 claim should be”, Sales J said:
“1095. Where relevant conduct is carried out by a person himself or by his agent, there is no difficulty of attribution of responsibility for that conduct for the purposes of section 994, since the ordinary (and strict) standards of attribution of responsibility applicable under the general law will have been satisfied …. 1096. What is the relevant test of attribution of responsibility beyond the narrow class of case where an agency relationship exists? In my judgment, the test is whether the defendant in a section 994 claim is so connected to the unfairly prejudicial conduct in question that it would be just, in the context of the statutory regime contained in sections 994 to 996, to grant a remedy against that defendant in relation to that conduct. The standard of justice to be applied reflects the requirements of fair commercial dealing inherent in the statutory regime. This is to state the test at a high level of abstraction. In practice, everything will depend upon the facts of a particular case and the court’s assessment whether what was done involved unfairness in which the relevant defendant was sufficiently implicated to warrant relief being granted against him.”
In Fi Call, Vos J said in paragraph 125:
“In my judgment, these authorities all speak with one voice. They show that ss.994–996 provide a wide and flexible remedy where the affairs of a company have been conducted in a manner that is unfairly prejudicial to the interests of some or all of its members. A s.994 petition is appropriate where, for whatever reasons, the trust and confidence of the parties to a quasi-partnership has broken down. Relief can be granted to remedy wrongs done to the company, and in such a situation the alleged wrongdoers must be made parties to the petition. Non-members of a company who are alleged to have been responsible for such conduct can be joined as respondents, and, in an appropriate case, such non-members can be made primarily or secondarily liable to buy the petitioners’ shares. Artificial limitations should not be introduced to reduce the effective nature of the remedy introduced by ss.994–996.”
[50]In the present case, Mr Broadbent was a founder of the Company, a director of it, its chief executive officer and a major shareholder, with 2,222,000 shares representing between 25% and 50% of its issued capital. Each of those facts is, moreover, recorded in the petition. The petition also refers to correspondence in which Mr Broadbent was involved and, while he might be said to have been writing on behalf of the Company, there is good reason to think that he had a personal role in the matters which are alleged to have given rise to unfair prejudice. In the circumstances, there is a real prospect of Magic persuading the Court that Mr Broadbent was “sufficiently implicated” in the matters of which Magic complains that it would be appropriate to grant relief against him were unfair prejudice to be established.

The offer

[51]As I have mentioned, Mr Broadbent, through his solicitors, made an offer to buy Magic’s shares in the Company. The offer provided for Mr Broadbent to purchase, or procure the purchase, of the shares at a price determined by an independent expert valuer. It was stated that acceptance of the offer would be in full and final settlement of any extant claim by any party, including as to costs. Further, the expert’s fees and any costs incurred by him in arriving at his determination were to be borne by Magic and Mr Broadbent in equal shares unless the expert saw fit to direct otherwise.[52]In O’Neill v Phillips [1999] 1 WLR 1092, Lord Hoffmann, with whom Lords Jauncey, Clyde, Hutton and Hobhouse agreed, explained that the fact that the respondent to an unfair prejudice petition has offered to buy the petitioner’s shares can potentially justify the striking out of the petition. As Lord Hoffmann said at 1108, “the unfairness does not usually consist merely in the fact of the breakdown but in failure to make a suitable offer”.[53]Lord Hoffmann addressed the ingredients of a reasonable offer at 1107-1108. He said this as regards the “question of costs”:
“In the present case, when the offer was made after nearly three years of litigation, it could not serve as an independent ground for dismissing the petition, on the assumption that it was otherwise well founded, without an offer of costs. But this does not mean that payment of costs need always be offered. If there is a breakdown in relations between the parties, the majority shareholder should be given a reasonable opportunity to make an offer (which may include time to explore the question of how to raise finance) before he becomes obliged to pay costs …. And the majority shareholder should have a reasonable time to make the offer before his conduct is treated as unfair. The mere fact that the petitioner has presented his petition before the offer does not mean that the respondent must offer to pay the costs if he was not given a reasonable time.”
[54]The guidance as to the contents of an appropriate offer given by Lord Hoffmann “does not have the status of legislation” (Harborne Road Nominees Ltd v Karvaski [2011] EWHC 2214 (Ch), [2012] 2 BCLC 420, at paragraph 26, per His Honour Judge David Cooke; see also Re Sprintroom Ltd [2019] EWCA Civ 932, [2019] BCC 1031, at paragraph 129). Lord Hoffmann’s observations nonetheless indicate what a reasonable offer is likely to involve.[55]Mr Dougherty argued that Magic’s petition is bound to fail because Mr Broadbent’s offer was reasonable. However, Mr Broadbent did not offer to bear Magic’s costs although(a) his offer was not made until nearly eight months after the petition had been presented,(b) there is no suggestion that he had not had a reasonable opportunity to make an offer in advance of presentation and(c) Magic will have incurred significant costs by the time the offer was made. In the circumstances, I cannot see how the offer can justify the striking out of the petition.

Conclusion

[56]I would allow the appeal, dismiss the application for striking out or summary judgment and invite the parties to propose (and, if possible, to agree) directions for the further progress of the proceedings.[57]I agree.[58]I also agree.