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Shah v Shah

Written by Calum Haswell

Thursday, 11 March 2010

[2010] EWHC 313 (Ch), [2010] All ER (D) 307 (Feb) COMPANIES - MEMBER – UNFAIR PREJUDICE TO MEMBER'S INTERESTS – PARTIES DIRECTORS OF COMPANY – PETITIONER CONTENDING THAT HE WAS EXCLUDED FROM COMPANY SO AS TO AMOUNT TO UNFAIR PREJUDICE – PETITIONER CLAIMING THAT HE HAD TRANSFERRED SHARES TO DEFENDANT BY MISTAKE OR AS A RESULT OF MISREPRESENTATION – WHETHER PETITIONER'S INTERESTS UNFAIRLY PREJUDICED – WHETHER SHARE TRANSACTION ENTERED INTO BY MISTAKE OR MISREPRESENTATION – COMPANIES ACT 2006, SS 994, 996

DS, CS and MS were brothers. During the course of a decade a family feud resulted in a succession of litigation. In the 2005 proceedings, among the relief sought by CS as petitioner was an order that DS be required to sell to CS his shareholding in the company at a price to be determined by the Court. That petition was dismissed. On 12 March 2005, DS and another of the company's shareholders wrote a letter to MS informing him that 4,000 shares in the company was being held for him. Stock transfer forms to that effect were signed. Subsequently, DS, as petitioner, sought an order that CS be required to buy his shareholding in the company at a price to be determined by the Court, pursuant to ss 994 and 996 of the Companies Act 2006. Alternatively, DS sought an order that the company be wound up under s 122(1)(g) of the Insolvency Act 1986. DS also claimed that the transfer of 4,000 shares in the company to the MS was void or ineffective.
DS argued that he had signed the stock transfer forms and accompanying letter under a mistake or had acted under the misrepresentation that he was under a legal obligation to transfer the shares. In support of his claims under the 1986 and 2006 Acts, DS submitted, inter alia, that he had been excluded from the company so as to amount to unfair prejudice.

The court ruled:

(1) On the evidence, there had been no misrepresentation to, or mistake on the part of, DS in respect of the transfer of the 4,000 shares. Further, the letter and form amounted to a sufficiently clear and unequivocal intention to create a trust in favour of MS (see [43], [44] and [143] of the judgment).

(2) The winding-up jurisdiction on 'just and equitable grounds' and the jurisdiction to grant relief for 'unfair prejudice' under s 994 of the 2006 Act operated in parallel but were not co-terminous (see [138] of the judgment).
On the evidence, there was no basis to conclude that the company had not been properly managed, however DS had suffered unfair prejudice within the terms of s 994 of the 2006 Act and, accordingly, it was appropriate to grant a remedy in terms of a purchase of his shareholding pursuant to s 996 of that Act (see [132], [139] and [144] of the judgment).