Key Facts
- •Solid Star Ltd (SSL) undertook a hotel redevelopment project, a joint venture between Queensgate Place Ltd (QPL) and Viking World Investments SA (Viking).
- •Prakash Bhundia (Prakash), director of Viking and SSL, and Minesh Bhundia (Minesh), director of SSL, acted in ways prejudicial to QPL.
- •Unequal repayment of shareholder loans, undervalued property sales to Property X1 Ltd (PX1), misappropriation of funds, and involvement of SSL in an unrelated venture led to SSL's insolvency.
- •QPL sought a buy-out of its shares in SSL to compensate for the unfair prejudice.
Legal Principles
The court has wide discretion to provide a fair and equitable remedy for unfair prejudice under section 996 of the Companies Act 2006.
Companies Act 2006, section 996; Re Bird Precision Bellows Ltd [1986] Ch 658
The remedy should be proportionate to the prejudice and not a punishment.
Hawkes v Cuddy (No 2) [2007] EWHC 2999 (Ch)
Non-members responsible for unfair prejudice can be made liable for remedies, including share purchase orders.
Apex Global Management Ltd v Fi Call Ltd & Others [2013] EWHC 1652 (Ch)
The court considers each respondent's role in the unfairly prejudicial conduct when determining the remedy.
F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2011] EWHC 1731 (Ch)
A share purchase order is possible even if the company is insolvent, depending on the circumstances.
Re Via Servis Ltd; Skala v Via Servis Ltd [2014] EWHC 3069 (Ch); Re Hailey Group [1993] BCLC 459
The respondents' means are a factor, but not a bar, to a share purchase order.
Re Cumana Ltd [1986] BCLC 430
Claims under section 994 Companies Act 2006 are subject to limitation periods (6 or 12 years depending on the relief sought).
THG Plc v Zedra Trust Company (Jersey) Limited [2024] EWCA Civ 158
Outcomes
A buy-out of QPL's shares in SSL was ordered, with Prakash, Viking, and Minesh jointly and severally liable.
This remedy compensates QPL for the loss sustained due to the respondents' actions, considering the company's assets would have been available for distribution absent the unfair prejudice.
Liability was apportioned between the respondents based on their involvement.
Prakash and Viking bear greater responsibility for the unfair prejudice than Minesh, although Minesh's inaction contributed.
The limitation defense was not accepted, but the delay was considered when formulating the remedy.
The limitation issue was not raised at the liability trial, but the court's wide discretion allows for consideration of such factors.
The valuation date for the buy-out was set as the date of the final property sales to PX1 (29 October 2020).
This date reflects the primary act of unfair prejudice and ensures fairness to both parties.
Interest at 1% above the Bank of England base rate was awarded from 29 October 2020.
To fairly compensate for the delay in receiving the compensation.