Martin Hague & Anor v David Hague & Ors
[2024] EWHC 1469 (Ch)
Mohammed Saleem Khawaja v Stela Stefanova
18 July 2024
[2024] EWHC 1858 (Ch)
High Court
A shareholder sued his business partner for stealing money and ruining the company. Even though the partner clearly did wrong, the judge didn't make a quick decision because the case was complicated and involved many issues. The judge did say that the partner had to repay the money stolen. The case continues.
Key Facts
- •Mohammed Saleem Khawaja petitioned under section 994 of the Companies Act 2006 against Stela Stefanova, BiotechnologiesUK Limited, and Dermamed Solutions Limited for unfair prejudice.
- •Khawaja and Stefanova had an oral agreement for Khawaja to be a 50% shareholder and director of Dermamed.
- •Stefanova misappropriated company funds and diverted Dermamed's business to BiotechnologiesUK Limited.
- •Stefanova was found guilty of contempt of court for failing to comply with disclosure orders.
- •Khawaja sought summary judgment on various issues related to the petition.
Legal Principles
Principles for unfair prejudice petitions under section 994 of the Companies Act 2006, including the requirements of unfairness and prejudice, broad interpretation of 'interests of members', and flexible application.
Grace v Bagioli [2006] 2 BCLC 70 at [61]
Principles for summary judgment applications, including realistic prospect of success, avoiding mini-trials, considering potential evidence at trial, and deciding short points of law.
EasyAir Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]
Summary judgment may be appropriate in section 994 petitions on issues of liability or factual issues in rare cases.
Dalby v Boddily [2005] BCC 6327
Tension exists between the broad jurisdiction under s.994 and the rule in Foss v Harbottle regarding relief for minority shareholders versus the company.
Foss v Harbottle (implied)
Outcomes
Summary judgment was refused.
The court found that granting summary judgment on all issues would be inappropriate given the complexity of the case and the wide discretion afforded under section 996 of the Companies Act 2006. While Stefanova's conduct was clearly problematic, some issues required further investigation to avoid a 'mini-trial'.
Summary judgment granted on the issue of Stefanova's breach of duty in taking company funds.
The judge concluded that Stefanova had no realistic prospect of successfully defending the claim that she breached her duties by misappropriating funds, particularly legal fees, the car, handbag, and pension contributions. However, the judge refused a declaration due to case management concerns and the likelihood that most issues would require a full trial.
Application for transfer of County Court proceedings was refused.
The court did not see sufficient reason to reconsider an earlier rejection of this application, suggesting the matter could be case managed effectively in separate courts.