This website uses cookies to ensure you get the best experience on our website. Learn more

Law Notes Company Law Notes

Unfair Prejudice & Just And Equitable Winding Up Notes

Updated Unfair Prejudice & Just And Equitable Winding Up Notes

Company Law Notes

Company Law

Approximately 805 pages

Company law notes fully updated for recent exams in the UK. These notes cover all the major LLB company law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Canada, Hong Kong or Malaysia (University of London). These notes were formed directly from a reading of the cases and main texts and are vigorous, concise and very well written.

Everything is conveniently split up by topic as you can see by the list ...

The following is a more accessible plain text extract of the PDF sample above, taken from our Company Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:


G&D Chapter 20: Unfair Prejudice 192

Introduction 192

Scope of the provisions 193

Independent Illegality and Legitimate Expectations or Equitable Considerations 194

Informal arrangements among the members 194

Balance between dividends and directors’ pay 195

Other categories of unfair prejudice 196

Prejudice and Unfairness 196

Unfairness Prejudices and the Derivative Action 197

Reducing Litigation Costs 198

Remedies 198

Winding up on Just and Equitable Grounds 199

Conclusion 200

Unfair prejudice remedy (S994 petition) 200

Can be against a third party 200

Re Little Olympian (No 3) [1995] 1 BCLC 636 200

Must concern the company’s affairs 200

Re Unisoft (No 3) [1994] 4 BCC 596 200

The petitioner must show unfair prejudice in the capacity as a member 201

Re JE Cade and Sons [1992] BCLC 213 201

Re A Company [1988] 4 BCC 506 201

Gamlestaden Fastigheter v Baltic Partners Ltd & Others [2007] 4 All ER 164 201

What amounts to unfairly prejudicial conduct? 202

O’Neill v Phillips [1999] 1 WLR 1092 202

Re Tobian Properties [2012] EWCA Civ 998 203

Re Coroin Ltd [2012] EWHC 2343 203

If justified, prejudicial conduct may not be unfair 204

Re RA Noble & Sons (Clothing) Ltd [1983] BCLC 273 204

Grace v Biagoli [2006] BCC 85 204

Re London School of Electronics [1986] Ch 211 204

Unlawful conduct can amount to unfair prejudice 204

Re Macro (Ipswich) [1994] 2 BCLC 354 204

Re Baumler Ltd [2005] 1 BCLC 92 205

Clark v Cutland [2003] 2 BCLC 393 205

Re DR Chemicals Ltd [1989] 5 BCC 39 205

Re Citco Banking [2007] UKPC 13 205

Equitable considerations may affect a finding of unfair prejudice 206

Who this applies to 206

Contractual frustration 206

Failure to pay a dividend 206

Exclusion from Management 207

Inequitable issuance of shares 207

Ability to contract out of S994 207

Remedies: S996 208

Order a buy-out (most common remedy) 208

London School of Electronics 208

McCarthy Surfacing 208

Croly v Good [2010] 2 BCLC 569 208

Scottish CWS v Meyer [1959] AC 324 208

Profinance Trust SA v Gladstone [2002] 1 BCLC 141 209

Annacott Holdings Ltd [2012] EWCA Civ 998 209

Orr v DS Orr & Sons (Holdings) Ltd [2013] CSOH 116 209

Authorise a derivative action 210

S996(2)(c) Powers of the court under this Part 210

When can the court use a corporate remedy? 210

Re Charnley Davies [1990] BCLC 760 210

Bhullar v Bhullar 210

Nina Kung v Tan Man Kou [2004] HKFCA 73, sub nom Re Chime Corp 210

Hannigan, Drawing Boundaries between Derivative Claims and Unfairly Prejudicial Conduct [2009] JBL 606 210

Introduction 210

Corporate wrongs – the orthodox view 211

Conclusion 212

Just and Equitable Winding Up 212

S122(1)(g) Insolvency Act 1986 212

Re Guidezone Ltd [200] BCLC 321 at [168] to [180] 212

Ebrahimi v Westbourne Galleries [2009] EWCA Civ 261 212

Hawkes v Cuddy (supra) 213

Questions 213

G&D Chapter 20: Unfair Prejudice


Statutory unfair prejudice provisions are wide-ranging and much more extensive than derivative claim provisions. S994(1) [Pt 30] – any member may petition court for relief for unfair prejudice:

  1. That the company’s affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of members generally or some part of its members (including at least himself), or

  2. that an actual or proposed act or omission of the company (including any act or omission on its behalf) is or would be so prejudicial

This is the same as S459 in CA 1985.

Who can sue:

Controlling shareholders are not expressly excluded from bringing such a claim but their normal remedy would be to make use of resolutions etc – by virtue of their controlling position it is highly unlikely that they can be said to be unfairly prejudiced by the minority: Re Legal Cost Negotiators Ltd [1999].

S994 says (minority) shareholders can sue but S994(2) extends this right to those to whom shares have been transferred who are to become members or those who own shares by operation of law (but do not appear on the books eg administrator of an estate). This is useful in small companies where the directors may unreasonably refuse to register a share transfer by misusing their AoA discretion.

However, the beneficial owner of shares cannot bring proceedings – need to get nominee to do so (or trustee) – Atlasview Ltd v Brightview Ltd [2004].

This right is extended to creditors when an administration order is in force – Para 74, Sched B1 Insolvency Act 1986.

What is captured:

Reference is made to conduct of the company’s affairs – wide enough to catch the actions of controllers, whether or not they are directors, shareholders or both. The actions of corporate groups can be brought within the remit of the Act too. However, action strictly qua shareholder eg voting in AGM is expressly excluded by the Act. Actions of parent company can be attributed to subsidiary – Nicholas v Soundcraft Electronics Ltd [1993].

When first introduced, this section was disliked by judges who have traditionally preferred a less interventionist approach – Lord President Cooper per Scottish Insurance Corp v Wilsons & Clyde Coal Co [1948].

Scope of the provisions

Right to petition deliberately drafted in wide terms – first issue therefore to define scope of Act. Suggested that three main question have arisen:

  • Should reference to conduct which is unfairly prejudicial to the ‘interests of members’ be interpreted as referring only to their interests ‘as members’? This would accord with the narrow approach taken to enforcing rights of members under the statutory AoA contract and was applied in eg expulsion of a minority shareholder from the board being treated as technically something that is qua director not qua member but is factually unfairly prejudicial – Re Lundie Bros [1965]. Courts nowadays take a wider approach – in a small company especially, the member’s expected return on investment should have included director’s fees or there was an expectation of a NED role so as to monitor his investment – Re A Company [1983]. This is now...

Buy the full version of these notes or essay plans and more in our Company Law Notes.