Dilip Kaneria (Petitioner) v Prakash Keshavlal Kaneria and Others

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Nugee
Judgment Date15 April 2014
Neutral Citation[2014] EWHC 1165 (Ch)
Date15 April 2014
Docket NumberCase No: 4027 of 2013

[2014] EWHC 1165 (Ch)






Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL


Mr Justice Nugee

Case No: 4027 of 2013

Dilip Kaneria
(1) Prakash Keshavlal Kaneria
(2) Ranjan Prakash Kaneria
(3) Kiranchandra Keshavlal Kaneria
(4) Champa Kiranchandra Kaneria
(5) Keserben Keshavlal Patel
(6) Guidezone Limited

Nigel Jones QC & Colm Nugent (instructed by AR Legal) for the Petitioner

Patrick Harty (instructed by Charles Fussell & Co LLP) for the First to Fourth Respondents

Clive Wolman (instructed on a direct access basis) for the Fifth Respondent

Hearing date: 25 March 2014

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Nugee Mr Justice Nugee

This is another case which concerns the practical implications of the changes to the CPR as a result of the reforms recommended by Sir Rupert Jackson ( "the Jackson reforms"), and the "new more robust approach" laid down by the Court of Appeal in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537 (" Mitchell").


The claim is an unfair prejudice petition brought under s. 994 of the Companies Act 2006 in relation to the affairs of the Sixth Respondent ( "the Company"). The other Respondents (who I will refer to as "the Respondents" since the Company takes no active role in the proceedings) apply for an extension of time for service of their Defences. The Petitioner not only opposes that, but by cross-application seeks an order that the Respondents be debarred from defending.



It is not necessary to say much about the underlying claim. The Respondents are the registered holders of the shares in the Company, and are all members of the same family. The First and Third Respondents and the Petitioner ( "Prakash", "Kiran" and "Dilip") are brothers, and three of the children of the late Mr Keshavlal Patel (who died in 1999) and his wife, the Fifth Respondent ( "Mrs Patel"); the Second and Fourth Respondents are the wives of Prakash and Kiran respectively.


The Company was acquired by the family in 1983 and runs a hotel business. Dilip was formerly the managing director of the Company and ran the hotel but in the light of differences between him and his brothers resigned that position in January 2010. Lengthy correspondence ensued between December 2010 and January 2013 but it did not resolve matters, and on 5 June 2013 Dilip issued the Petition. His complaints, primarily directed at his brothers Prakash and Kiran, can be summarised as being (i) that although he is the registered legal owner of certain shares in the Company he claims to have an entitlement in equity to further shares from various of the Respondents as a result of an agreement made in 1992 (called "the 10% Shareholding Agreement" in the Petition) under which it is said that all the family members agreed he should have a 10% shareholding in the Company; (ii) that it was also agreed that he would derive the same total income from the Company or other family businesses as his father and brothers (this being called "the Equal Total Income Policy" in the Petition); (iii) that in breach of those agreements he has neither received the extra shares he claims, nor the same income as Prakash and Kiran; and (iv) that on the contrary he has been excluded by them from management of the Company, and dividends on his shares have been withheld. He seeks a variety of relief, including an order that Prakash and Kiran purchase his shares.


Even before issue of the Petition, Prakash and Kiran had made an open offer that they, or the Company, should purchase his shares at a fair value without discount for a minority shareholding, such value to be determined by an independent expert if not agreed, the intention being that this would be a complete answer to the allegations of unfair prejudice in accordance with the principles set out by Lord Hoffmann in O'Neill v Phillips [1999] 1 WLR 1092 at 1107–8. Dilip however complains that this proposal ignores his claim to further shares under the 10% Shareholding Agreement. I should add that the Respondents do not deny the agreement as such, but deny it was a legally binding and enforceable contract, and in any event say that it has been fully satisfied by Mrs Patel transferring half her shares to Dilip so that he does indeed already own more than 10% of the Company.


In these circumstances the First to Fourth Respondents, who are separately represented from Mrs Patel, on 24 July 2013 applied, among other things, for the issue whether Dilip was entitled to any further shares in the Company to be tried as a preliminary issue, the hope being that if they succeeded on that issue, it would then be possible to have the Petition as a whole struck out or dismissed.


That application was heard by Mr Murray Rosen QC sitting as a Deputy High Court Judge. On 13 December 2013 he made an Order duly directing the trial of preliminary issues as to whether the Respondents were subject to an obligation to recognise and give effect to an entitlement by Dilip to receive the shares which he claimed, and various consequential matters designed to resolve whether, if so, the failure to recognise his entitlement was itself unfairly prejudicial conduct or might be taken into account in granting relief in the event that the affairs of the Company had otherwise been conducted in an unfairly prejudicial manner.


He also gave directions for the trial of those issues, as follows:

(1) Paragraph 2(a) provided that Dilip was to serve by 27 December 2013 a document identifying the paragraphs of the Petition on which relied.

(2) Paragraph 2(b) provided:

"The First to Fifth Respondents shall by 14 February 2014 serve and file a Defence in relation to the preliminary issues."

(3) Dilip was to serve a Reply if so advised by 28 March 2014.

(4) A CMC was to be fixed for the first convenient date after 11 April 2014 (at which further directions might be given).

(5) The trial itself, with an estimate of 10 days, was to take place in a 3 month window starting on 1 January 2015.


On 20 December 2013 Dilip served a document in compliance with paragraph 2(a) of Mr Rosen's Order. This was a one-page document simply identifying the paragraphs on which he relied. The Petition extended to 125 paragraphs over 45 pages, and this document identified paragraphs 1–45, 53–74, 78–90 and 116–120 as relied on, a total of 85 out of the 125. The effect was to include a substantial amount of background leading up to the 10% Shareholding Agreement in 1992, starting with a (brief) reference to a business run by Mr Patel in Mombasa from 1952 to 1972 and tracing the development of various informal partnerships between him and one or more of his sons from 1972 onwards. The omitted paragraphs are largely those that deal with the failure to implement the Equal Total Income Policy, the non-payment of dividends, the events leading up to the resignation of Dilip as managing director, and his complaints of exclusion.


Under paragraph 2(b) of Mr Rosen's Order the Respondents' Defences were due on 14 February 2014. On 29 January 2014 the solicitors acting for the First to Fourth Respondents, Charles Fussell & Co ( "CF"), sent a letter by e-mail to Dilip's solicitors, AR Legal ( "AR"), and to Hasu Kaneria ( "Hasu"), another brother who holds a power of attorney from his mother Mrs Patel and is assisting her in the litigation, explaining that their counsel had been heavily engaged on another matter and would not be able to deal with the Defence until after the deadline. They asked for a 14-day extension to 28 February 2014. On 30 January 2014 Hasu wrote to AR and CF saying that because of Mrs Patel's need to keep her costs under control she needed to change counsel and was now represented by Mr Clive Wolman. He was unavailable due to another matter due to be heard between 3 and 14 February and asked for a 28-day extension for Mrs Patel's Defence to 14 March 2014.


AR did not reply.


On 5 February 2014 CF followed up with a further letter saying that although Hasu had confirmed his consent to their request they had not had a response from AR. They also suggested that it would be sensible for all Defences to be served together and therefore suggested an extension for the First to Fourth Respondents' Defences to 14 March as well. They enclosed a draft consent order providing for an extension to 14 March for the Respondents' Defences (and a consequential extension of time for the service of Dilip's Reply from 28 March to 25 April).


On 10 February 2014 AR replied to both requests. In the letter to CF they said that the Respondents had already caused various delays during the course of proceedings and that Dilip would therefore not agree to an extension. In the letter to Mr Wolman they simply said that Dilip would not consent to an extension.


CF issued an application the next day, 11 February. Although issued only by the First to Fourth Respondents, it sought an order in the same form as the draft consent order, that is providing for an extension of time for Mrs Patel's Defence as well as their own to 14 March 2014; and Mrs Patel has associated herself with the relief sought. The parties have therefore treated it as if it were an application by all the Respondents, which seems to me sensible, and I will therefore refer to it as the Respondents' application.


In a letter to AR of the same day, CF said they were most disappointed to see that after delaying for almost two weeks before responding, Dilip had refused consent. They added:

"Had you refused...

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