“By an Order of the High Court dated15 June 2018 (and with immediate effect), the second Petitioner was appointed as joint personal representative in place of Mr Weaver.”
“(1) A member of a company may apply to the court by petition for an order under this Part on the ground– (a) that the company´s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or (b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial. (2) The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company. [ … ].”
“it is never my fault that things have gone wrong, but always someone else’s”
“Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings.”
“70. That is not of course to say that directors’ decisions on dividends are immune from challenge. The court must consider whether the directors did genuinely take a decision on the payment of dividends, and must consider whether the reasons now advanced for not having done so were genuinely the rationale for the decision at the time.”
“On that basis, … it is, in my judgment, right to say that directors have a duty to consider how much they can properly distribute to members. They have a duty, as I see it, to remember that the members are the owners of the company, that the profits belong to the members, and that, subject to the proper needs of the company to ensure that it is not trading in a risky manner and that there are adequate reserves for commercial purposes, by and large the trading profits ought to be distributed by way of dividends. No doubt in practical terms shareholders will have a difficult case to make if directors, not considering their own personal pocket, not benefiting themselves in some capacity (e.g. by paying out to themselves remuneration in excess of that which should legitimately be paid so that their remuneration is limited to that which would be paid to ordinary people in the market performing those functions), simply pile up profits in the company and do not distribute them by way of dividend. Nonetheless members can, in my view, if those facts were adequately proved, make the company the subject of a petition for a just and equitable winding up; because the proper and legitimate expectations of members have not been applied, but have been defeated.” 139.And later the judge added this (1077A-B): “If it were to be proved that directors resolved to exercise their powers to recommend dividends to a general meeting, and thereby prevent the company in general meeting declaring any dividend greater than recommended, with intent to keep moneys in the company so as to build a larger company in the future and without regard to the right of members to have profits distributed so far as was commercially possible, I am of opinion that the directors' decision would be open to challenge.”
“59. … Obviously, prejudice which directly or indirectly arises because of a course of conduct to which a member or class of members of a company has consented is by definition not relevantly unfair and cannot be relied on.”
“30. In support of her submission, Miss Reed took me to Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (20th ed.). This explains (in paragraph 54-69): “[C]o-executors, however numerous, are regarded in law as an individual person. The same principle applies under a joint grant of administration. Thus, as a general rule, the act of one of joint representatives is regarded as the act of all and is binding unless the case falls within one of the exceptions considered later in this section.” 31. The principle that “the act of one of joint representatives is regarded as the act of all and is binding” was recognised in, for example, Fountain Forestry Ltd v Edwards[1975] Ch 1 , in which there was extensive discussion of the case law. Implicit acknowledgment of it is also to be found in theAdministration of Estates Act 1925, section 2(2) of which provides that, “[w]here as respects real estate there are two or more personal representatives, a conveyance of real estate devolving under this Part of this Act or a contract for such a conveyance shall not be made without the concurrence therein of all such representatives or an order of the court”
“Notwithstanding his interest ‘in auter droit’, a representative is not to be treated for all purposes as if he were subject to a ‘cleavage of personality’ between him in his representative capacity and him in his individual capacity, as if he were two distinct persons. Nor is his interest in the property of the deceased so different from the interest of the beneficial owner that the normal doctrines of notice will cease to apply. Thus, where A, one of the executors of B, had notice of a transaction because of his partnership with one G, it was held that he was unable to sever his character of executor of his character as partner. As a result, the executors of B where taken to have had notice of the transaction in question. They could not, therefore, claim as bone fide purchasers for value without notice and were therefore bound by it…”
“In my judgment the judge came to the wrong conclusion. He concluded that the defence of acquiescence should succeed because of delay in complaint. That, I believe, can be seen from the passage in the judgment that I have read relating to his finding that acquiescence had been established, when compared with the passage that I have read in which he rejected the defence of acquiescence in respect of the fence. In the latter passage, to reject the defence, he relied upon Mr. Stones's assumption as to his right so that he was not encouraged by Mr. and Mrs. Jones standing by in any way, whereas he made no such finding in respect of the flower pots. In my view the correct approach was to consider whether Mr. Stones had established that he had relied on any action or inaction of Mr. and Mrs. Jones. That he had not so established upon the evidence. Further, Mr. Stones did not establish that he had suffered any detriment by being allowed to maintain the flower pots on the wall owned by Mr. and Mrs. Jones. In the circumstances none of the essential elements needed to establish a defence of acquiescence was made out. Delay was not sufficient.”
“… where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be.”
“(1) This section applies to the ratification by a company of conduct by a director amounting to negligence, default, breach of duty or breach of trust in relation to the company. (2) the decision of the company to ratify such conduct must be made by resolution of the members of the company. [ … ] (4) where the resolution is proposed at a meeting, it is passed only if the necessary majority is obtained disregarding votes in favour of the resolution by the director (if a member of the company) and any member connected with him…”
“(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of. (2). Without prejudice to the generality of subsection (1), the court's order may– (a) regulate the conduct of the company's affairs in the future; (b) require the company– (i) to refrain from doing or continuing an act complained of, or (ii) to do an act that the petitioner has complained it has omitted to do; (c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct; (d) require the company not to make any, or any specified, alterations in its articles without the leave of the court; (e) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company's capital accordingly.”
“75. In most cases, the usual order to make will be the one requiring the Respondents to buy out the petitioning shareholder at a price to be fixed by the court. This is normally the most appropriate order to deal with intra company disputes involving small private companies. This is the relief which Mr Grace says that the judge should have granted and which he seeks on this appeal. The reasons for making such an order are in most cases obvious. It will free the petitioner from the company and enable him to extract his share of the value of its business and assets in return for foregoing any future right to dividends. The company and its business will be preserved for the benefit of the respondent shareholders, free from his claims and the possibility of future difficulties between shareholders will be removed. In cases of serious prejudice and conflict between shareholders, it is unlikely that any regime or safeguards which the court can impose, will be as effective to preserve the peace and to safeguard the rights of the minority. Although, as Lord Hoffmann emphasised in O'Neill v Phillips, there is no room within this jurisdiction for the equivalent of no-fault divorce, nothing less than a clean break is likely in most cases of proven fault to satisfy the objectives of the court's power to intervene.”
“It seems to me that the whole framework of the section, and of such of the authorities as we have seen, which seem to me to support this, is to confer on the court a very wide discretion to do what is considered fair and equitable in all the circumstances of the case, in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company; and I find myself quite unable to accept that that discretion in some way stops short when it comes to the terms of the order for purchase in the manner in which the price is to be assessed.”
“17. The burden of the dispute between the parties on this appeal is as to the basis of valuation in the buy-out order. Shares are generally ordered to be purchased on the basis of their valuation on a non-discounted basis where the party against whom the order is made has acted in breach of the obligation of good faith applicable to the parties’ relationship by analogy with partnership law, that is to say where a ‘quasi-partnership’ relationship has been found to exist. It is difficult to conceive of circumstances in which a non-discounted basis of valuation would be appropriate where there was unfair prejudice for the purposes of the 1985 Act but such a relationship did not exist. However, on this appeal I need not express a final view on what those circumstances might be.”
"A minority shareholding, even one where the extent of the minority is as slight as in this case, is to be valued for what it is, a minority shareholding, unless there is some good reason to attribute to it a pro rata share of the overall value of the company. Short of a quasi partnership or some other exceptional circumstance, there is no reason to accord to it a quality which it lacks."
“295. That there is no inflexible rule is amply confirmed by the decision, both at first instance and in the Court of Appeal, in Bird Precision Bellows Ltd[1984] 1 Ch 419 (Nourse J);[1986] Ch 658 (CA) concerning a predecessor section. That was a quasi-partnership case, but the comments at both levels were of wider import.”
“301. Another relevant factor in any given case may be to consider whether the facts would, apart from section 994, justify a winding-up on the “just and equitable” ground, in which event each shareholder would receive a rateable proportion of the realised assets. A minority in those circumstances should not ordinarily be worse off than in a winding-up...”
“302. In the winding-up context, the ‘just and equitable’ ground is not limited to cases of quasi-partnership...” “302. In the winding-up context, the ‘just and equitable’ ground is not limited to cases of quasi-partnership...”
“23. In my view it is reasonably clear that the distinction that Nourse J was drawing between the two categories of case for the purpose of his exposition of the underlying principle, i.e. as to whether or not a discount for a minority shareholding was applicable, was a distinction between the general case where it was unfair to treat the wronged petitioner as a willing seller and therefore for the price to be fixed on a discounted basis, and the exceptional case where it was fair to do so because (for example) he had acquired his shares at a discounted price. In other words, the emphasis in his exposition of the underlying principle lay in the unfairness in treating a successful petitioner as a willing seller. Nourse J was not drawing a distinction between a quasi-partnership and a non quasi-partnership, because it would have been easy for him to express himself to that effect and he did not. For the purposes of his exposition of the underlying principle, the quasipartnership case was the case where typically the wronged petitioner could not be treated as a willing seller (to the contrary where he had deserved his exclusion) or as having acquired his shares at a discounted price.”202.The deputy judge went on to say: “26. … the whole purpose of the unfair prejudice remedy is to grant the oppressed minority a remedy which it would not otherwise have. It would substantially defeat the purpose of the new remedy if the oppressing majority were routinely rewarded by the application of a discount for a minority shareholding.”
“In the first place, the offer must be to purchase the shares at a fair value. This will ordinarily be a value representing an equivalent proportion of the total issued share capital, that is, without a discount for its being a minority holding. The Law Commission (paragraphs 3.57-62) has recommended a statutory presumption that in cases to which the presumption of unfairly prejudicial conduct applies, the fair value of the shares should be determined on a pro rata basis. This too reflects the existing practice. This is not to say that there may not be cases in which it will be fair to take a discounted value. But such cases will be based upon special circumstances and it will seldom be possible for the court to say that an offer to buy on a discounted basis is plainly reasonable, so that the petition should be struck out.”
“29. Lord Hoffmann’s remarks may have been obiter but they had clearly been carefully thought through and were fully reasoned. I regard them as binding on me and in any event entirely in keeping with the judgment of Oliver LJ in Re Bird Precision Bellows on this issue, which is also binding on me.”
“644. The Respondents’ case is that the shares should be ordered to be purchased at their market value: that is, at whatever price the shares would actually command if sold as a minority shareholding in the market on the valuation date, subject to the articles of association. That, they say, is the true value of the shares, and that is all the Petitioners are entitled to. 645. In my judgment, the Respondents’ argument is too simplistic and ultimately wrong, for the following reasons. First, the shares in question are not being sold on the open market, subject to the restrictions (such as they are) in the articles. They will be sold privately to JS or (at their election) to the Jasminder trusts, or to the Company, by virtue of the court order. As such, market forces will not come into play, nor will the pre-emption rights in the articles that would apply on a sale in the open market. The price for the shares should not be suppressed on that account. 646. Second, the shares are not being purchased by an unconnected investor in the market but by JS, the Jasminder trusts or the Company. The shares are very much more valuable to each of them than they are to investors in the market. A purchase by JS or the Jasminder trusts will have the effect of raising their combined shareholding above 75%. Any purchase by the Company at a price below the pro rata value of the shares will have the effect of increasing the value of the other shares in the Company, which will principally benefit JS and the Jasminder trusts. Those are considerations that do not exist on an open market sale. 647. Third, a purchase of the shares by JS or the Company at their open market value would create a very substantial windfall to JS or the existing shareholders. It would therefore have the surprising effect of enabling JS to benefit significantly in financial terms from the unfairly prejudicial conduct that has given rise to the relief against JS and the Company. That outcome cannot be just, certainly not on the facts of this case where the shares of HS and Estera will inevitably have a much higher value to JS and the Jasminder trusts than their market value.”
“648. What I have to determine is a basis for a fair price for JS (or the Company) to pay HS and Estera for their shares, in circumstances where a share purchase is appropriate and necessary to relieve HS/Estera against unfair prejudicial conduct that they have suffered as shareholders. That question is not, in my judgment, a simple choice between a pro rata share of the Company’s overall value and the market value of the shares. Those are, as it were, the two extremes of price that could be ordered to be paid, but between them there are various possibilities for specifying a basis of valuation that results in a fair price as between these minority shareholders and the Respondents against whom relief is granted. I do not read Arden LJ’s obiter dictum as implying that market value is the only alternative in cases where a non-discounted valuation is inappropriate.”
“101. It seems to me that there is force in what Mr Chivers is saying here, because a simple order for valuation on a discounted basis will result in the respondents, in a sense benefiting from the failure to consider declaring dividends. I also agree with Mr Chivers that the broad discretion which the court has over the question of remedies for unfair prejudice would extend to making an order of the sort he is asking for in an appropriate case. I am, however, conscious, that an exercise to determine the amount of dividends that the board ought to have declared if they had properly applied their minds to the question may be a difficult one. I have, however, decided that some provision should be made in the order to ensure that the petitioners are compensated for, as it were, the loss of opportunity of having dividends declared.”