Factual and Procedural Background
This opinion concerns the third dispute about the jurisdiction of the Court to determine a petition under section 994 of the Companies Act 2006 ("section 994") filed on 12th December 2011 by Company A, incorporated in the Seychelles and owned by Mr Businessman. The dispute focuses on whether the Court has jurisdiction to join three individuals (the 3rd, 4th, and 5th Respondents), connected to a substantial business known as Company B, as respondents to Company A's petition.
Company C, incorporated in the British Virgin Islands, is a shareholder in Company D, which is incorporated in England. Company A and Company C each hold shares in Company D. The 3rd to 5th Respondents seek to set aside permission to serve the petition on them outside the jurisdiction, arguing lack of jurisdiction and material non-disclosure.
Company A alleges unfairly prejudicial conduct by the 2nd to 5th Respondents, including misuse of Company D for unlawful activities, coercion to transfer shares without consideration, and destruction of trust between the parties. The final hearings of both Company C's and Company A's petitions are scheduled for January 2014.
Legal Issues Presented
- Whether, as a matter of law, if the facts alleged were established, relief under section 996 could and should be granted against each of the 3rd, 4th and 5th Respondents;
- If so, whether there is a serious issue to be tried as to whether the company affairs are being or have been conducted in a manner unfairly prejudicial to the interests of Company A within section 994;
- Whether each of the 3rd, 4th and 5th Respondents are necessary or proper parties to the claim against Company C;
- Whether the claims against each of the 3rd, 4th and 5th Respondents are brought under an enactment which allows proceedings to be brought;
- Whether there is a good arguable case that the claim is brought in respect of a contract governed by English law or containing a jurisdiction clause in favour of the court.
Arguments of the Parties
3rd to 5th Respondents' Arguments
- The Court has no jurisdiction and/or should not exercise jurisdiction over them.
- The order permitting service outside the jurisdiction should be discharged.
- The petition is of no effect against them.
- Service of the petition was ineffective as against them.
- Material non-disclosure occurred in the application for service out, including failure to disclose the Petitioner's alleged criminal convictions and changes in key allegations.
- The facts alleged against them are far-fetched, incredible and fanciful, not meeting the threshold for service out.
- Relief sought against them personally is unnecessary as relief against Company C would suffice.
- They claim state, sovereign, and/or diplomatic immunity under relevant statutes.
Company A's Arguments
- There is unfairly prejudicial conduct by the 2nd to 5th Respondents, including breach of statutory duties and unlawful activities.
- Company D was effectively a quasi-partnership between Company A and Company C, with personal relationships critical to the business.
- The 3rd to 5th Respondents are responsible for conduct that destroyed trust and confidence, justifying relief against them personally.
- Relief under section 996 can be granted against non-members who are responsible for the unfairly prejudicial conduct.
- The claims fall within jurisdictional gateways, including the 'necessary or proper party' and 'enactment' gateways.
- There is a serious issue to be tried based on transcripts, emails, and other evidence supporting the allegations.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| VTB Capital PLC v. Nutritrek International Corp [2013] 2 WLR 398 |
Tests for permission to serve out of jurisdiction: serious issue to be tried, good arguable case on gateway, appropriate forum. |
Applied these tests to determine whether service out should be permitted on the 3rd to 5th Respondents. |
| AK Investment CJSC v. Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 |
Clarification that good arguable case on underlying merits is not required for service out gateway. |
Confirmed that a good arguable case on the gateway suffices for service out permission. |
| Re a Company (No. 005287 of 1985) [1986] 1 WLR 281 |
Relief under unfair prejudice petition can be granted against non-members if appropriate. |
Supported joinder of non-members as respondents and relief against them. |
| Electric Furnace Company v. Selas Corporation of America [1987] RPC 23 |
Service out should not be permitted if it achieves no practical advantage. |
Considered in assessing whether joinder of individuals added practical advantage. |
| Re Little Olympian Each-Ways Ltd. [1994] 2 BCLC 420 |
Wide jurisdiction to join non-members as respondents in unfair prejudice petitions. |
Supported flexible approach to joinder of parties responsible for conduct. |
| Legal Costs Negotiators Ltd. [1999] BCC 547 |
Limitations on relief under unfair prejudice petitions; pragmatic approach to striking out petitions. |
Emphasized need for serious case to be tried and limits on relief. |
| Chime Corporation Limited (FACV No 6 of 2004) |
Distinction between derivative actions and unfair prejudice petitions. |
Confirmed unfair prejudice petitions are not the proper vehicle for damages claims against directors. |
| Gamlestaden Fastigheter AB v. Baltic Partners Ltd [2008] 1 BCLC 468 |
Court's power to make orders for payment of damages to company under unfair prejudice petitions. |
Confirmed power to order damages to company under section 994 petitions. |
| Re Sunrise Radio Ltd [2010] 1 BCLC 367 |
Non-shareholders can be liable to purchase shares under unfair prejudice petitions. |
Supported joinder and liability of non-members. |
| Maidment v. Attwood [2012] EWCA Civ 998 |
Flexible approach to proceedings under section 994. |
Endorsed wide scope of relief and joinder of non-members. |
| F & C Alternative Investments (Holdings) v. Barthelemy (No 2) [2012] 3 WLR 10 |
Whether a respondent is sufficiently connected to unfairly prejudicial conduct to justify relief against them. |
Applied to determine joinder and relief against the 3rd to 5th Respondents. |
| AES Ust-Kamenororsk Hydropwer Plant LLP v. Ust-Kamenororsk Hydropwer Plant JSC [2012] 1 WLR 920 |
Interpretation of 'enactment' gateway for service out of jurisdiction. |
Supported that section 994 claims fall within the enactment gateway for service out. |
| Seaconsar Far East Ltd. v. Bank Markazi Jomhouri Islami Iran [1994] 1 A.C. 438 |
Jurisdiction established under statutory provisions once claim is made under statute. |
Confirmed that serious case to be tried suffices for jurisdiction. |
| Global 5000 v. Wadhawan [2012] EWCA Civ 13 |
Contract gateway requires that the defendant be party to the contract relied upon. |
Considered in relation to contract gateway arguments. |
| Alliance Bank JSC v. Aquanta Corp [2012] EWCA Civ 1588 |
Contract gateway requires defendant to be party to contract. |
Applied in assessing contract gateway applicability. |
| Greene Wood & McClean LLP v. Templeton Insurance Ltd [2009] 1 WLR 2013 |
Interpretation of 'in respect of a contract' requiring contract between claimant and defendant. |
Referenced in contract gateway discussion. |
Court's Reasoning and Analysis
The court began by acknowledging the complexity of the case and the voluminous evidence but emphasized that the jurisdictional hearing should not become a mini-trial. It applied established tests from leading authorities (VTB Capital PLC and AK Investment) to determine whether permission to serve the petition outside the jurisdiction on the 3rd to 5th Respondents should be granted.
On the first issue, the court held that if the facts alleged were established, relief under section 996 could and should be granted against the 3rd to 5th Respondents, despite them not being shareholders. The relief could include compensation or an order to purchase shares. The court rejected the argument that relief against Company C alone would suffice, noting the economic interdependence among the Respondents and the possibility that one or more might be primarily liable.
Regarding the seriousness of the case to be tried, the court found that the allegations, supported by transcripts and emails, raised serious issues of unfairly prejudicial conduct. The court rejected submissions that the claims were far-fetched or incredible, noting that the trust and confidence fundamental to the quasi-partnership had broken down.
On whether the 3rd to 5th Respondents were necessary or proper parties, the court concluded that they were, as relief could not be satisfactorily granted against Company C alone. The court found a good arguable case that each was a necessary or proper party to the claim.
In relation to the 'enactment' gateway, the court held that claims under section 994 of the Companies Act 2006 constitute claims under an enactment allowing proceedings to be brought, thus satisfying that gateway. The court rejected arguments limiting the scope of the enactment gateway to statutes listed under previous procedural rules.
The court did not finally decide the contract gateway issue, noting that it was unnecessary given the sufficiency of the 'necessary or proper party' gateway. It acknowledged that the claims might not all be "in respect of" the relevant contracts but preferred to leave this issue undecided.
Overall, the court emphasized the importance of joining all alleged wrongdoers to ensure effective relief and to avoid the risk that the true wrongdoers might evade responsibility.
Holding and Implications
The court held that the Registrar was correct to permit Company A's petition to be served out of the jurisdiction on each of the 3rd to 5th Respondents. The jurisdictional challenges by the 3rd to 5th Respondents were dismissed.
The direct effect is that the 3rd to 5th Respondents remain parties to the petition and the case will proceed to trial with their involvement. The court underscored the necessity of their joinder to provide effective relief under sections 994 to 996 of the Companies Act 2006. No new legal precedent was established, but the decision reaffirms the flexible and wide jurisdictional approach to service out and joinder in unfair prejudice petitions involving non-members.