Intermedia Productions Ltd v Vijendra Sharad Patel
| Jurisdiction | England & Wales |
| Judge | Mark Cawson |
| Judgment Date | 04 March 2020 |
| Neutral Citation | [2020] EWHC 473 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2017-007995 |
| Date | 04 March 2020 |
[2020] EWHC 473 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Rolls Building, New Fetter Lane
London, EC4 1NL
Mark Cawson QC
Sitting as a Deputy Judge of the High Court
Case No: CR-2017-007995
Richard Colbey (instructed by Singhania & Co) for the Petitioners
Stephen Schaw Miller (instructed by Keystone Law) for the First to Fourth Respondents
Hearing dates: 22–25, 27 and 29 January 2020
APPROVED JUDGMENT
Mark Cawson QC
Introduction
By a petition presented on 1 November 2017 (“ the Petition”), the petitioners, Intermedia Productions Ltd (“ Intermedia”) and Sharad Chandra Patel (“ Mr Patel”) (together “ the Petitioners”) seek relief pursuant to s. 994 of the Companies Act 2006 (“ the 2006 Act”), alleging that the affairs of the above company, Ashia Centur Ltd (“ the Company”), have been conducted in a manner unfairly prejudicial to them.
The Petition is actively opposed by the first to fourth Respondents, who I shall refer to as “ the Respondents”. The other Respondents have played no active part in the proceedings, and seemingly have not even been formally served.
The essence of the Petitioners' case is that the Company was, from 2007, properly to be regarded as a quasi-partnership in consequence of the close familial relations of the relevant parties and/or understandings that it is alleged had been reached between the relevant parties in or about 2007 (“ the 2007 Understandings”), so as to give rise to equitable considerations which the Court is required to have regard in considering whether the affairs of the Company have been conducted in an unfairly prejudicial manner.
It is then alleged that the first to fourth Respondents acted contrary to those equitable considerations and/or in breach of their duties as directors of the Company in a number of respects, and in particular:
4.1. By taking steps in 2009 and 2010 that purported to deprive the Petitioners of some of their shares, and to wrongly appropriate those shares;
4.2. By purporting to appoint the second, third, and fourth Respondents as directors of the Company in January 2015;
4.3. By purporting, in February 2017, to remove Mr Patel as a director; and
4.4. In failing to provide the Petitioners with information about the Company's affairs.
However, it is common ground between the Petitioners and the Respondents that the key underlying issue between the parties is as to who is entitled to the issued share capital of the Company, and thus as to who is entitled to control of it.
The Petition seeks a declaration that the shareholdings in the Company are as set out in paragraph 22 of the Petition, reflecting the position as set out in an annual return submitted to Companies House on 17 December 2007. In their Points of Defence, the Respondents contended for the position as set out in an annual return submitted on 5 January 2011. It is apparent from the statements of case that the parties have based their respective pleaded positions upon what they respectively contend was the last agreed position between certain of the relevant the parties, as reflected in annual returns.
However, in the course of submissions, Richard Colbey who appeared for the Petitioners, and Stephen Schaw Miller who appeared for the Respondents, each recognised that this was not the correct approach to determining share ownership, and that the starting point was that the Company's register of members, when last updated in 1992, showed only two issued shares, one held by Mr Patel and the other by the fifth Respondent, Ibhadevi Devchand Shah (“ Ms Shah”), and that true entitlement to shares would depend upon the validity, or deemed validity in the event of there being unanimous shareholder assent, of procedural steps purported to have been taken thereafter with regard to the issue and transfer of shares.
The Petitioners' primary position thus became that Mr Patel held one share and Ms Shah one share, and that subsequent allotments of shares were invalid, but that if subsequent allotments and transfers were valid, then the 2007 position originally contended for by the Petitioners prevailed, but Mr Colbey did not advance with any enthusiasm a reasoned case as to how one got to that latter position. On behalf of the Respondents, Mr Schaw Miller contended that the correct position was as reflected following an allotment of shares in 2003, and that the subsequent representations as to the position in a number of annual returns were not reflective of any subsequent valid or effective transactions.
It is fair to say that Mr Colbey and Mr Schaw Miller, to whom I am grateful for their helpful written and oral submissions, did not draft the statements of case and were both instructed very late in the day.
The fact that on the Petitioners' own case they, or one of them (Mr Patel, possibly together with Ms Shah, who is a close friend of Mr Patel), are entitled to exercise control and that the Respondents are not, does, as Mr Colbey recognised, raise a fundamental difficulty in seeking relief pursuant to s. 994 of the 2006 Act to which I shall return. For this reason Mr Colbey invites me, at this stage, simply to make an appropriate declaration as to share ownership, an approach that Mr Schaw Miller contends is misconceived, Mr Schaw Miller contending that the Petition ought simply to be dismissed without the making of any declaration as to share ownership.
It will be apparent therefore that the background to the case is complicated by the failure of the Company to maintain a register of members after 1992, and the practice of making annual returns recording allotments of shares for which there is no evidence of the necessary formalities for the issue of shares being carried out, and transfers of shares for which there is no evidence of the relevant transfers actually having been made. This lack of formality is somewhat surprising bearing in mind that the Company is the owner of underdeveloped land adjacent to the North Circular Road in London (“ the Wembley Land”) that may be worth significantly in excess of £100m.
The position is further complicated by the involvement of the parties with various family trusts established in Jersey, business entities in Kenya, and various offshore companies, some of which themselves raise disputed questions of ownership that cannot be resolved on the evidence before the Court.
The Petitioners
Mr Patel, who now 82 years old, describes himself as a successful film producer, director and businessman, especially in property development. It is clear that the Patel family's involvement in the film industry has generated significant income over the years, that has led to the use of the Jersey trusts and the offshore companies that I have mentioned. There is an issue, to which I will return, as to whether Mr Patel is properly to be regarded as the sole effective generator of this income as he sought to maintain in the course of his evidence, or whether, as the Respondents maintain, the involvement in the film industry was very much more of a family affair, with the various members of Mr Patel's family playing a significant part, in particular, Mr Patel's late son, Rajendra Patel (“ Rajendra”), who was himself a film producer based in Hollywood.
Intermedia was incorporated in the Cayman Islands on 25 October 1976. The entire issue share capital of Intermedia is in Mr Patel's name, but there is an issue as to whether the shares are held for himself beneficially, or, alternatively, for the benefit of Rajendra's estate and/or the first Respondent, Vijendra Sharad Patel (“ Vijendra”) as an asset of one of the family trusts, as the Respondents maintain.
There is no doubt that Mr Patel has locus standi to petition under s. 994 as a “member”, within the definition in s. 112(2) of the 2006 Act, being a person who had agreed to become a member and whose name has been entered on the register of members. However, the same cannot be said of Intermedia whose name does not appear on the register of members, nor is locus standi conferred on Intermedia by s. 994(2) of the 2006 Act. Even if, contrary to the Petitioners' own now primary case, and the Respondents' case, Intermedia was entitled to have the register rectified to show it as a member, the register would require to be formally rectified before locus standi could be conferred to present a petition under s. 994, cf. Re Starlight Developers Ltd [2007] BCC 929. However, nothing probably turns on this given that one of the Petitioners, Mr Patel, plainly does have locus standi in any event.
The Respondents
The first to third Respondents, Vijendra, Urvesh Sharad Patel (“ Urvesh”), and Hasmita Sharad Patel (“ Hasmita”) are Mr Patel's surviving children.
The fourth Respondent, Lalitaben Shard Patel (“ Mrs Patel”), is Mr Patel's estranged wife, and the mother of Vajendra, Urvesh and Hasmita.
The fifth Respondent, Ms Shah, is a close friend of Mr Patel's who lives in Kenya. Whilst she may have been notified of the proceedings, they have not been formally served on her, and she was not represented before me.
The sixth Respondent, Dimple Patel (“ Dimple”), is the widow of Mr and Mrs Patel's late son, Rajendra Patel (“ Rajendra”), who died in October 2005. Dimple lives in Mumbai. There is no evidence of any grant of probate or letters of administration, or of alternative foreign probate procedure having been initiated to as to constitute anybody as Rajendra's personal representative. Further, the...
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...Lightman referred me to the judgment of Mark Cawson QC (Sitting as a Deputy High Court Judge) in Intermedia Productions Ltd v Patel [2020] EWHC (Ch) 473, on the trial of an unfair prejudice petition brought by two petitioners, and in particular to [15] of the judgment, where the Deputy Jud......