Home Information Cases Griffith v Gourgey (2019)

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Griffith v Gourgey (2019)

Summary

In proceedings concerning two petitions alleging unfairly prejudicial conduct, the court emphasised the importance of petitions being fully and properly pleaded. However, the rigour of the approach described in In the Matter of Tecnion Investments Limited [1985] 6 WLUK 68 was less important where the court directed points of claim and points of defence under the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 r.5. In such cases, the petition had to specify the grounds, but need not be fully particularised.

Facts

The appellant director appealed against orders made in two petitions in which he alleged unfairly prejudicial conduct against the respondents, his co-directors.

The appellant and respondents operated companies in the hotel and property business. The appellant's petitions, issued and served in 2013, concerned two of the companies (G and B). Each petition alleged that the first respondent (R) had caused G and B to make money transfers for his own personal benefit and without the appellant's knowledge and approval. The relief sought by the appellant was orders requiring R to purchase his shares in B, and R's sons to purchase his shares in G. The latter was on the basis that R had placed his 50% shareholding in G in his sons' names.

The appellant served points of claim in addition to the petition, and the respondents served points of defence. In May 2015, the court struck out the points of defence on the basis that the respondents had failed to respond to the appellant's request in September 2013 for further information about them. Thus, the respondents were not debarred from defending, but they could not put forward a case that was factually inconsistent with the points of claim. They unsuccessfully appealed against the strike out in 2017.

Numerous applications and cross-applications were then issued throughout 2018. Of relevance to the instant appeal was a decision on 9 May 2018 in which, at the request of R's sons, a judge struck out the relief sought against them in the G petition, holding that neither the petition nor points of claim contained a sufficient pleading of unfairly prejudicial conduct by the sons. In October 2018, the appellant was granted permission to amend the G petition and aspects of the B petition. The judge permitted R to plead a full defence to the entire points of claim in the B petition, not just the amended points. The appellant appealed against the 9 May order striking out the relief against R's sons and against that part of the order in the B petition by which R was permitted to plead a full defence.

Held

Appeal relating to G - The appellant maintained, among other things, that R's sons had, in the points of defence, expressly indicated their approval of R's money transfers out of G, irrespective of whether the transfers were in breach of R's fiduciary duties as a director, and that the judge had been wrong to hold that such support did not entitle him to claim a buy-out order against them. The original petition did not allege support by the sons for R's conduct, but the points of claim did. The allegation should undoubtedly have been included in the petition. However, the judge had been wrong to strike out the claim for relief against the sons on the basis of pleading inadequacies. The sons might have been expected to request further information of the allegation before serving their points of defence, or to make the strike out application earlier. Instead, points of defence were served denying breach of fiduciary duty, but not denying the payments or the sons' support. Approving the making of wrongful payments would be a clear breach of duty by the sons, sufficient to support an unfair prejudice finding. There was no doubt that such an allegation had been made against them and it was too late to strike out the claim based on a lack of detail. Moreover, having served their points of defence without putting the support allegation in issue, they could not seek further information of it now. The judge below had characterised the support allegation as "an extraordinary basis for relief", but it was difficult to see why that was so; a buy-out order could well be appropriate if unfairly prejudicial conduct by the sons was established (see paras 22-25, 30-34, 41 of judgment).

Importance of proper pleadings - Petitions were often not accompanied by points of claim and points of defence, in which case it was important for them to be fully and properly pleaded and amplified by further information where appropriate, In the Matter of Tecnion Investments Limited [1985] 6 WLUK 68 followed. However, the rigour of that approach was less important where, as here, the court directed points of claim and points of defence under the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 r.5. It was still the petition which defined "the ambit" of the case. Petitions had to specify the grounds, but did not need to be fully particularised; that was the function of the points of claim, unless the petition was to stand as the points of claim. The modern practice was for the court to issue standard directions shortly after presentation of a petition, which included a direction for the petition to stand as points of claim and for service of points of defence. (paras 35-39)

Appeal relating to B - The appellant's amendments did not plead any grounds for relief which had not already been pleaded. Had R's points of defence not been struck out in 2013, there would be no cause for amending them. There was no reason to bypass the strike-out order by permitting R to plead the grounds now. He was, however, given permission to plead a limited defence in relation to two specific arguments (paras 55).

Appeal allowed

Court of Appeal
Sir Terence Etherton MR, David Richards LJ, Newey LJ
Judgment date
22 November 2019
References
[2019] 11 WLUK 352; LTL 22/11/2019