Shareholder Dispute in UK Law

It cannot make any difference that William managed to commence the Chancery action four days before the section 459 proceedings were commenced.

That principle clearly applies to participation by a company in section 459 proceedings brought by a member. However, there is no case where it has been applied in a duly authorised corporate action. As Mr Kosmin submitted, it is difficult to see how it can apply to such an action unless it is said that the action was brought under the authority of directors who were motivated not by the company's interests but by a desire to further the interests of shareholders.

In the present case Mr Hollington has not, in my judgment, shown that the Chancery action is in substance part and parcel of the shareholders' dispute. There is almost total overlap in the factual material but separate relief is claimed in favour of Incasep on the grounds of breach of duty to it. The situation might have been very different if the Chancery action had clearly been brought in response to section 459 proceedings.

The statutory provisions about unfair prejudice contained in s.994 give to a shareholder an optional right to invoke the assistance of the court in cases of unfair prejudice. The only restriction placed upon the arbitrator is in respect of the kind of relief which can be granted.

In those cases the arbitration agreement would operate as an agreement not to present a winding-up petition unless and until the underlying dispute had been determined in the arbitration. But the arbitrator could, I think legitimately, decide whether the complaint of unfair prejudice was made out and whether it would be appropriate for winding-up proceedings to take place or whether the complainant should be limited to some lesser remedy.

The vast majority of petitions to wind up a company are creditors' petitions. The Companies Court procedure on such petitions is ill-equipped to deal with the resolution of disputes of fact. There are no pleadings, there is no discovery and there is no oral evidence normally tolerated on such petitions, even though no doubt pleadings and discovery could be ordered and oral evidence received, and the Companies Court like any other court is perfectly capable of determining such disputes.

Prejudice will certainly encompass damage to the financial position of a member. The prejudice may be damage to the value of his shares but may also extend to other financial damage which in the circumstances of the case is bound up with his position as a member. A disregard of the rights of a member as such, without any financial consequences, may amount to prejudice falling within the section.