Summary

The court was required to consider the extent to which petitioners needed to adduce evidence to establish unfair prejudice sufficient to found relief under the Companies Act 2006 s.994 against respondents whose points of defence had been struck out.

Facts

In proceedings concerning related unfair prejudice petitions under the Companies Act 2006 s.994, the court had to determine the respondents' applications to strike out references to them in the petitions and points of claim and to consider the extent to which the petitioners needed to adduce evidence of unfair prejudice sufficient to found relief.

The respondents' points of defence had been struck out for failure to comply with unless orders. In the first set of proceedings, the respondent trustee (T) took the position that the petition and points of claim disclosed no arguable claim for relief against it and that it was not responsible for wrongdoing alleged against the settlor. In the third set of proceedings, the first and second respondents (N and C) were nominees for their father against whom unfairly prejudicial conduct was alleged. It was said that N and C, as well as their father, owed fiduciary duties to each company of which the father was a director and that the father acted "with the support" of his sons. The petitioners claimed that, because the points of defence had been struck out, they were entitled to relief under s.996 on the basis that the facts in the petitions and points of claim were not open to challenge. The respondents took the view that the court could not determine the issue of relief simply on the basis of the pleadings and that the petitioners still needed to prove their cases.

Held

Strike-out applications - In the first set of proceedings, the petition and points of claim did not sufficiently plead the petitioner's case against T but merely stated that it held a shareholding as trustee. There was no allegation that it had authorised the settlor's alleged breaches of duty or should have supervised his activities. There was no reasonable prospect of establishing that trustees, merely by virtue of their shareholding in a company, were automatically responsible for a settlor's unfairly prejudicial conduct. An amendment to the petition proposed by the petitioner was rejected for failure to plead that there was no material distinction between T and the settlor. In the third set of proceedings, the petition could not stand as against N and C. A draft amendment would be prepared and a further ruling made on the extent to which N and C would be entitled to serve points of defence if the amendment were allowed (see paras 50-51, 91-92, 112-113 of judgment).

Extent of evidence required: substantive issue - The procedural rules governing s.994 petitions were the Companies (Unfair Prejudice Applications) Proceedings Rules 2009 and the CPR. By r.2(2) of the 2009 Rules, the CPR applied to s.994 proceedings except where inconsistent with the Act and the 2009 Rules. CPR r.3.5, headed "Judgment without trial after striking-out", applied where an unless order had not been complied with. However, procedural rules could not override substantive statutory requirements. Such rules which treated a person as admitting facts which they in reality denied were inconsistent with the scheme of s.994 and s.996, which required the court to be satisfied, as jurisdictional matter, that there was unfairly prejudicial conduct. However, procedural rules which constrained the material and submissions which a respondent might put before the court did not suffer from the same jurisdictional difficulties. Thus, in the instant case, it followed from the striking-out of the defences that the respondents could neither put forward a case which was factually inconsistent with the points of claim, nor adduce any other factual material to support their denial that the conduct complained of amounted to unfairly prejudicial conduct. However, that did not absolve the petitioners from the obligation to present sufficient evidence to establish such conduct (paras 118, 120, 142-144).

Extent of evidence required: procedural issue - It was open to the petitioners to proceed to a trial in the ordinary way. They might seek to do so in order to obtain disclosure of documentary evidence going to the relief sought, although the pleaded facts were not in issue. Although it was also open to the petitioners to seek summary judgment on the unfairly prejudicial conduct issue, it was doubtful whether the court would be satisfied simply on the basis of a statement of truth accompanying the points of claim, pursuant to CPR r.32.6, that there had been such conduct. The petitioners had to bring themselves within one of the rules for obtaining judgment without trial if they were to succeed on their application (paras 145-146).

Relief - Relief was potentially available to the petitioners under s.996, but it was not clear that any order would be made. The petitioners were not absolutely entitled to a judgment. The court might order separate trials relating to unfair prejudice and remedy, in which event the petitioners might rely on CPR r.3.5(5)to obtain judgment on the unfair prejudice issue by way of declaratory relief. However, that was not how their case had been put. Since the claim was not one for specified relief which might or might not be obtained, the appropriate relief could only be established by a trial process. As matters stood, there was no cause of action and no entitlement to relief. Absent some order directing the trial of separate issues, there was no order which could be sought on the petition, and no judgment which could be obtained under r.3.3(5) pursuant to a CPR Pt 23 application (paras 148, 150).

Judgment accordingly