COMPANY LAW : MINORITY SHAREHOLDERS 

A court should not entertain a petition under Companies Act 1985 based on the conduct of a company’s affairs that had occurred nine years before presentation of the petition and in which the petitioner had participated. While a s.459 petition was not subject to any period of limitation, relief granted under the section was always within the discretion of the court.

The respondents (H) applied for an order striking out a petition under the Companies Act 1985 s.459. The parties had been shareholders in a company (G). H and the fourth petitioner were involved in the management of G. G entered into an agreement with another company (X), in which the first, second and third respondents (R) were shareholders, and to which G paid a licensing fee for various intellectual property rights. Further allotments of shares were made. The petitioners (P) presented the petition alleging that there had been an unfair dilution of certain classes of shares in G and that R had unfairly received a share in the profits of X. H submitted that the petition disclosed no grounds on which it was likely to be successful at trial particularly given that the events surrounding the issue of further shares had occurred nine years before presentation of the petition.

HELD: In the circumstances there was no real prospect of the court granting relief under s.459. A court should not entertain a s.459 petition based on the conduct of a company’s affairs in which the petitioner had participated nine years before presentation of the petition. While a s.459 petition was not subject to any period of limitation, relief granted under the section was always within the discretion of the court. A court should not countenance proceedings such as those described in the instant case where the petition was presented nearly ten years after the events complained of. While it might in certain cases be possible to say that the conduct of the affairs of one company could also constitute the affairs of another, in the instant case X was not controlled by G nor did X control G. The petition did not contain any allegation that had a real prospect of success and would be dismissed.

Application granted.

IN THE MATTER OF GRANDACTUAL LTD sub nom HOUGH & ORS v HARDCASTLE & ORS

(2005)

Ch D (Sir Donald Rattee) 22/4/2005