‘Reasonable Offers’ As a Defence to Unfair Prejudice Petitions: Prescott v Potamianos
| Date | 01 March 2020 |
| Published date | 01 March 2020 |
| Author | Anthony Pavlovich |
| DOI | http://doi.org/10.1111/1468-2230.12505 |
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Modern Law Review
DOI: 10.1111/1468-2230.12505
‘Reasonable Offers’ As a Defence to Unfair Prejudice
Petitions: Prescott vPotamianos
Anthony Pavlovich∗
It is long established that a ‘reasonable offer’ for a petitioner’s shares can defeat an unfair-
prejudice petition. Lord Hoffmann gave guidance about such offers in O’Neill vPhillips.Now,
in Prescott vPotamianos, the Court of Appeal has set out three factors that help to determine in
general whether an offer is ‘reasonable’. Those factors are: the value offered; the likelihood of
implementation; and the proximity to the unfairly prejudicial conduct. The Court’s guidance
is useful for lawyers and their clients, as well as being broadly favourable for petitioners. But
the Court emphasised that the unfair-prejudice jurisdiction is based on fair ness and so requires
a considerable degree of flexibility. Such flexibility impairs the certainty that Lord Hoffmann
was seeking to promote, and may create difficulties for parties making or receiving offers.
In Prescott vPotamianos1(Prescott), the Court of Appeal explored an important
but under-developed aspect of the unfair-prejudice jurisdiction provided by
sections 994 and 996 of the Companies Act 2006. The question was: when
will an offer made by one shareholder to another suffice to resolve an unfair-
prejudice dispute between them? An offer that is sufficient in this way is termed
‘reasonable’, and the offeree will have his remedy through the offer and not
in court. Usually, the offer is to buy the offeree’s shares as an alternative to
unfair-prejudice proceedings brought for the same or similar relief.
The judgments in Prescott are the first occasion since the leading case of
O’Neill vPhillips2(O’Neill) on which the principle relating to ‘reasonable
offers’ has received extensive judicial consideration. This note begins with
an overview of the principle and sets out its origin and development. After
explaining the Court of Appeal’s approach, the note offers some observations
as to the benefits and difficulties of applying that approach in future cases.
OVERVIEW OF THE PRINCIPLE
Section 994 of the Companies Act 2006 allows a shareholder to petition the
court on the ground that the conduct of the company’s affairs is unfairly
prejudicial to (at least) the petitioner. Then, by section 996, the court may give
∗Barrister, 3 Verulam Buildings. The author appeared for Dr Potamianosin the case discussed in this
note. The author wishes to thank Adam Kramer, who reviewed a first draft of this note, as well as an
anonymous referee. All errors and infelicities remain his own.
1Prescott vPotamianos [2019] EWCA Civ 932.
2O’Neill vPhillips [1999] 1 WLR 1092 (HL).
C2020The Author. The Modern Law Review C2020 The Modern Law Review Limited. (2020) 83(2) MLR 443–450
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