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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Otto & Ors v Inner Mongolia Happy Lamb Catering Management Company Ltd & Ors [2025] EWHC 2291 (Ch) (10 September 2025) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2025/2291.html Cite as: [2025] EWHC 2291 (Ch) |
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2025] EWHC 2291 ( Ch) | ||
BUSINESS & PROPERTY COURTS IN BRISTOL
INSOLVENCY & COMPANIES LIST (
ChD)
IN
THE MATTER OF HLHP ORIENTAL FOOD LIMITED
AND IN THE MATTER OF HLHP BAYSWATER LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
Bristol Civil and Family Justice Centre 2 Redcliff Street Bristol BS1 6GR |
||
2025 |
B e f o r e :
____________________
| (1) MAGGIE OTTO (2) TAO XU (3) IC UK HOLDINGS LIMITED (4) JESSICA PUI MAN KWOK |
Petitioners |
|
| - and - |
||
| (1) INNER MONGOLIA HAPPY LAMB CATERING MANAGEMENT COMPANY LIMITED (2) XIAOBING LIU (3) ZHANHAI ZHANG (4) GANG ZHANG (5) CHANGSONG WANG (6) HLHP ORIENTAL FOOD LIMITED (8) HLHP BAYSWATER LIMITED |
Respondents |
____________________
Edward Davies KC and Seamus Woods (instructed by Stewarts Law LLP) for the First to Fifth Respondents
The Sixth and Eighth Respondents were neither present nor represented
Hearing dates: 13-14 May
2025
____________________
Crown Copyright ©
2025
by circulation to the parties or their representatives by e-mail and by release to the National ArchiveHHJ Paul Matthews :
Introduction
2025,
is the application of the first to fifth respondents to strike out the petition, alternatively for reverse summary judgment. The second is the petitioners' application, by notice dated 1 April
2025,
to re-amend their petition, and also to join a fifth petitioner, In-Touch Investment Holding Ltd ("In-Touch"). I say "to begin with", because the position has moved on, and is regrettably more complicated than that. The petition as originally formulated, concerned the affairs of three companies, the sixth, seventh and eighth respondents. The sixth is the most important. The allegations concerning the seventh were dismissed some time ago, as will be seen below. The eighth respondent is said to be less valuable than the sixth, and only the fourth petitioner has any claim to a shareholding in it.
2025,
when Marc Beaumont of counsel appeared for the petitioners, and Edward Davies KC and Seamus Woods of counsel appeared for the first to fifth respondents (whom I shall call "the active respondents"). As is usual, the sixth and eighth respondents were neither present nor represented. The petitioners' claims in respect of the seventh respondent were abandoned some time ago, it being common ground that there is no value in the shares of that company, and it was dismissed from the claim in 2024. I am sorry for the length of time that it has taken to produce this judgment, caused partly by pressure of other work, but partly by the exigencies of this extraordinary litigation.
Background and nature of the claims
challenged,
that I cannot make the numbering of the paragraphs and sub-paragraphs of the original document exactly correspond to the text below):
"1. The Petitioners have issued an unfair prejudice petition in respect of the alleged unfairly prejudicial conduct of the affairs of the 6th, 7th and 8th respondents contrary to their alleged interests as shareholders in the 6th to 8th Respondents, companies which the Petitioners further allege are under the control of the 1st to 5th Respondents.
i) 6th Respondent
a) The Petitioners are all shareholders in the 6th Respondent (1st Petitioner has 5% shareholding; 2nd Petitioner has 2% shareholding; 3rd Petitioner has 5% shareholding; 4th Petitioner has 1% shareholding).
b) The 5th Respondent is the sole director of the company and has a 10% shareholding in the company.
c) The 1st Respondent has a 60% shareholding in the company; the 2nd Respondent has a 7% shareholding in the company; and the 4th Respondent has a 9% shareholding in the company. None of the 1st Respondent, 2nd Respondent or 4th Respondent are directors of the company.
d) It is denied that the 6th Respondent is under the control of the 3rd Respondent who is neither a director nor shareholder of the company.
ii) 7th Respondent
a) The Petitioners are all shareholders in the 7th Respondent (1st Petitioner has 5% shareholding; 2nd Petitioner has 2% shareholding; 3rd Petitioner has 5% shareholding; 4th Petitioner has 1% shareholding).
b) The 5th Respondent is the sole director of the company and has a 10% shareholding in the company.
c) The 2nd Respondent has a 19.5% shareholding in the company; the 3rd Respondent has a 10% shareholding in the company; and the 4th Respondent has a 9% shareholding in the company. None of the 2nd Respondent, 3rd Respondent or 4th Respondent are directors of the company.
d) It is denied that the 7th Respondent is under the control of the 1st Respondent who is neither a director nor shareholder of the company.
iii) 8th Respondent
a) The 4th Petitioner is a shareholder of the 8th Respondent with a 1% shareholding in the company. None of the 1st Petitioner, 2nd Petitioner or 3rd Petitioner are shareholders in the 8th Respondent or have any interest in the company. Accordingly, none of the 1st Petitioner, 2nd Petitioner or 3rd Petitioner are entitled to bring an unfair prejudice claim in relation to the 8th Respondent.
b) The 5th Respondent is the sole director of the company but is not a shareholder of the company.
c) The 2nd Respondent has a 10% shareholding in the company; the 3rd Respondent has a 10% shareholding in the company; and the 4th Respondent has a 22.5% shareholding in the company. None of the 2nd Respondent, 3rd Respondent or 4th Respondent are directors of the company.
d) It is denied that the 8th Respondent is under the control of the 1st Respondent who is neither a director nor shareholder of the company.
2. The Petitioners allege that the affairs of the 6th to 8th Respondents have been conducted in such a way as to be, and continue to be, unfairly prejudicial to their interests, specifically the Petitioners allege as follows:
iv) Part of their shareholdings (specifically the 1st to 3rd Petitioners) have been expropriated without recognition of the fair value of those shareholdings
v) The Respondents have failed to adhere to an agreement entered into in 2017 in relation to shareholdings
vi) The Respondents have failed to adhere to a further agreement entered into in 2018 in relation to shareholdings
vii) The Petitioners' roles in the various companies were re-assigned without proper reference or agreement
viii) The 1st to 5th Respondents took over control of the business and affairs of the 6th to 8th Respondents
ix) The First Petitioner, and a shareholder who is also the sole director of the Third Petitioner, were forced to step down from being directors of the 6th to 8th Respondents
x) The First Petitioner's salary was reduced unilaterally
xi) Expenses were not reimbursed
xii) The Petitioners were excluded from the conduct of the 6th to 8th Respondents
xiii) The Petitioners were denied access to company records and documents relating to the 6th to 8th Respondents
xiv) The First and Second Petitioner, and a shareholder who is also the sole director of the Third Petitioner, were subject to ongoing bullying and intimidation by the Respondents
xv) The Respondents have conducted the affairs of the 6th to 8th Respondents in a wrongful, dishonest and illegal manner
3. The Respondents vigorously deny all allegations above in full. In particular, the Respondents have responded as follows:
xvi) Reduction of shareholdings of 1st Petitioner, 2nd Petitioner and 3rd Petitioner was not without consent and does not otherwise amount to expropriation
a) 1st Petitioner
i) It is denied that any reduction of the 1st Petitioner's shareholding in the 6th Respondent was without her consent and/or otherwise amounts to expropriation. In any event, it is noted that MO first became a shareholder in the company as of 22 January 2020 with a 5% shareholding which remains unchanged.
ii) It is denied that any reduction of the 1st Petitioner's shareholding in the 7th Respondent was without her consent and/or otherwise amounts to expropriation. It is noted that MO first became a shareholder in the company as of 18 May 2020 with a 5% shareholding which remains unchanged.
iii) The 1st Petitioner does not have, and has not at any time had, any interest in the 8th Respondent.
b) 2nd Petitioner
i) It is denied that any reduction of the 2nd Petitioner's shareholding in the 6th Respondent was without his consent and/or otherwise amounts to expropriation. In any event, it is noted that upon incorporation of the 6th Respondent, the 2nd Petitioner had a 2% shareholding in the company which currently remains unchanged.
ii) It is denied that any reduction of the 2nd Petitioner's shareholding in the 7th Respondent was without his consent and/or otherwise amounts to expropriation.
iii) The 2nd Petitioner does not have, and has not at any time had, any interest in the 8th Respondent.
c) 3rd Petitioner
i) It is denied that any reduction of the 3rd Petitioner's shareholding in the 6th Respondent was without its consent and/or otherwise amounts to expropriation.
ii) It is denied that any reduction of the 3rd Petitioner's shareholding in the 7th Respondent was without its consent and/or otherwise amounts to expropriation.
iii) The 3rd Petitioner does not have, and has not at any time had, any interest in the 8th Respondent.
xvii) the "2017 Co-operation Agreement"
a) None of the Petitioners are parties to the "2017 Co-operation Agreement". It has not been suggested that ITIHL (which was a separate legal entity to the 1st Petitioner and in any event, dissolved on 22 June 2021) will be a party to any potential claim.
b) The document that is referred to as the "2017 Co-operation Agreement" that was purported to have been entered into between the 1st Respondent and ITIHL (a company of which the 1st Petitioner became the sole shareholder and which is now dissolved) is governed byChinese
law and not English law.
c) The "2017 Co-operation Agreement" is superseded by the "2018 Co-operation Agreement" which contains an entire agreements clause which provides that any agreement entered into prior to the 2018 Co-operation Agreement is null and void.
xviii) the "2018 Co-operation Agreement"
a) None of the 1st Petitioner, 3rd Petitioner or 4th Petitioner are parties to the "2018 Co-operation Agreement". It has not been suggested that ITIHL (which was a separate legal entity to the 1st Petitioner and in any event, dissolved on 22 June 2021) will be a party to any potential claim.
b) The document on its own does not show how the affairs of the 6th Respondent are being or have been conducted in a manner which is unfairly prejudicial to the interests of the 2nd Petitioner in his capacity as a member of the company.
xix) It is denied that any re-assignment of roles within any of the companies took place without the consent of any of the Petitioners.
xx) In relation to the issue of control, paragraph 1 above is repeated.
xxi) Directorships
a) It is denied that the 1st Petitioner has been a director of the 8th Respondent at any time.
b) it is denied that the 1st Petitioner, and a shareholder who is also the sole director of the Third Petitioner, were forced to step down as directors of any of the 6th, 7th, or 8th Respondent.
xxii) It is denied that the 1st Petitioner's salary was reduced without her consent.
xxiii) It is denied that the 1st and/or 2nd Petitioners, and/or a shareholder who is also the sole director of the 3rd Petitioner incurred expenses supported by receipts or other evidence that have not been reimbursed.
xxiv) It is denied that any of the Petitioners have been excluded from the business.
xxv) It is denied that the Petitioners have been wrongfully denied access to company records and documents relating to the 6th to 8th Respondents.
xxvi) It is denied that the 1st and/or 2nd Petitioners, and/or a shareholder who is also the sole director of the 3rd Petitioner, were subject to ongoing bullying and intimidation by the Respondents. In any event, it is denied that any such allegations constitute conduct that is unfairly prejudicial to any of the Petitioners' interests qua member.
xxvii) It is denied that the Respondents or any of them have conducted the affairs of the 6th to 8th Respondents in a wrongful, dishonest and illegal manner
4. The Petitioners are seeking an order for a buy out of their respective shareholdings in the 6th to 8th Respondents at a "fair value", damages or other relief reflecting not only the interests they should have had in the 6th, 7th and 8th Respondents but the entitlement they should have to participate in all HLHP restaurants established or to be established in the UK or Europe."
The history of the litigation
Petition, defence and directions
changes
in representation, both as to counsel and as to solicitors, that have taken place, and on both sides. The original petition was presented on 21 September 2022. At that stage, the petitioners were represented by GL Law. I gave directions on the same day, and listed the matter for a case management hearing on 14 December 2022. On 4 October 2022 the petitioners served notice of
change
of legal representative from GL Law to Shakespeare Martineau LLP. Points of defence were filed on 2 November 2022 by Jackson Lyon LLP. The petitioners' reply was filed on 30 November 2022. At the CMC on 14 December 2022, the petitioners were represented by Andrew Marsden of counsel, and the active respondents by Lois Aldred and Grace
Cheng
of counsel. At that hearing I gave directions to trial.
change
of legal representative from Jackson Lyon LLP to R & H Lawyers LLP. At the hearing on 20 March 2023, Andrew Marsden of counsel represented the petitioners, and Mark Grant of counsel represented the active respondents. At that hearing, I heard and dismissed the petitioners' application of 2 March 2023, and gave further directions.
Interim injunction application
Charlie
Newington-Bridges of counsel appeared for the petitioners, and Simon Davenport KC and Olivia
Chaffin-Laird
of counsel appeared for the first to fourth and sixth respondents. The first to fourth and sixth respondents gave undertakings to the court in lieu of an injunction, and an injunction was granted against the fifth respondent, in each case over until 15 November 2023, when there would be a further hearing.
Chaffin-Laird,
and on this occasion she also represented the seventh and eighth respondents. The fifth respondent was not present or represented. As a result of evidence filed by the active respondents shortly before the hearing of 15 November 2023, at that hearing the petitioners did not pursue their application for an interim injunction. The argument at that hearing was concerned with the mechanism for putting an end to the application and the costs consequences. I dealt with these in a judgment handed down on 20 November 2023 ([2023]
EWHC
2920 (
Ch)),
giving the petitioners leave to withdraw their application and ordering the first to fourth respondents to pay the petitioners' costs. Subsequently, I assessed those costs summarily in a written ruling of 8 December 2023 ([2023]
EWHC
3151 (
Ch)).
Pre-trial review
change
of legal representative from R & H Lawyers LLP to Stewarts Law LLP. On the same day, the fifth respondent also
changed
his self-representation to representation by Stewarts Law LLP. On 9 January 2024 the date of the PTR was altered from 9 February 2024 to 8 February 2024, in order to accommodate Mr Justice Zacaroli, who would now be trying the claim. On 31 January 2024, the active respondents issued an application to strike out significant parts of the petition or alternatively for reverse summary judgment in respect of them.
Charlie
Newington-Bridges of counsel, but the active respondents were now represented by Edward Davies KC. The judge declined to deal with the respondents' strike-out application on that occasion. But on 26 February 2024 the active respondents dropped a bombshell when they issued an application to amend their points of defence dated 2 November 2022 to withdraw admissions made in the defence and to replace them with non-admissions. The active respondents now wished not to admit that the petitioners were shareholders of either the sixth or the eighth respondents as alleged. If that were the case, it would mean that the petitioners did not have standing to present the petition, and the petition would fail. On 29 February 2024, the petitioners issued an application to amend their petition, adding a claim for rectification of the share register of the companies concerned.
The abortive trial and aftermath
The hearing of the applications
EWHC
497 (
Ch)).
He allowed the active respondents to amend their defence to withdraw the admissions in respect of the sixth and eighth respondents. But he refused the petitioners permission to amend their petition by adding a claim for rectification of the register. He then went on to hear further argument on what that meant for the future of this litigation. He reserved his decision overnight. On 6 March 2024, the judge gave a short written ruling, in substance that the petition should be stayed until September 2024, in order for the petitioners (if they could) to deal with the problem of standing which it appeared would lead to the dismissal of the entire petition. He also dismissed the claims relating to the seventh respondent on the basis that these had been abandoned.
The restoration of In-Touch
2025.
I gave directions as to steps to be taken by the petitioners to address the question of their standing in the meantime.
Further adjournment
2025,
the active respondents applied for an adjournment of the hearing listed for 17 February
2025.
This was based on the fact that they had not yet issued their application to strike out the petition. I acceded to the application, on the basis that there was no point in dealing with the petitioners' application to amend their petition and then on a subsequent occasion dealing with an application to strike out, because they would almost certainly overlap, and the preparation of the claim for trial could not realistically be advanced until the strike-out application was determined. Accordingly, I set a timetable for issue and service of the application to strike out and evidence in support, and for evidence in reply. In the event, the strike-out application was issued on 24 February
2025,
evidence was duly filed, and the hearing of both applications was listed over two days, 13 and 14 May
2025.
The hearing on 13-14 May
2025
Redrafting the petition
2025,
for permission to re-amend the petition in the form (dated 31 March
2025)
attached to the notice. This in turn had two consequences. The first consequence was that the application of the petitioners of 28 October 2024 to amend their petition in the terms annexed was superseded. The second consequence was that the application of the respondents to strike out was aiming at the wrong target. Neither of those two applications was therefore proceeded with. However, at the hearing, after argument, I ordered the petitioners to pay the active respondents' costs of both of them, on the standard basis, and also to make a payment on account of those costs (see [
2025]
EWHC
1211 (
Ch)).
2025,
the petitioners' counsel reconsidered his draft, and produced a fresh one, dated 9 May
2025
(though actually completed on 10 May). It was this draft that he sought to rely on at the hearing on 13 May. So, what was debated at the hearing was a new application by the petitioners for permission to re-amend their petition in the form of the draft dated 9 May
2025,
the application to strike out the earlier draft amended petition having been overtaken. As I said at the time, if the new draft re-amended petition was demurrable, then I would not give permission for it, and the petition would simply fail. But if it was not, then I would go on to consider whether and if so on what terms I would give permission.
The question of standing
2025.
Indeed, counsel took me to a copy of it in the hearing bundle. It further appears that this stock transfer form was lodged with the eighth respondent shortly after being executed, but that, so far, the transfer of shares has not been registered by the company. I was taken to an email correspondence in the bundle which appears to bear that out. If that is right, then, according to the authorities to which I shall refer later in this judgment, the fourth petitioner does have standing in relation to the eighth respondent, even without recourse to the argument from equitable interests.
Procedural rules
Rule texts
"17.1(1) A party may amend their statement of case, including by removing, adding or substituting a party, at any time before it has been served on any other party.
(2) If his statement of case has been served, a party may amend it only –
(a) with the written consent of all the other parties; or
(b) with the permission of the court.
(3) If a statement of case has been served, an application to amend it by removing, adding or substituting a party must be made in accordance with rule 19.4.
[ … ]
17.3(1) Where the court gives permission for a party to amend their statement of case, it may give directions as to –
(a) amendments to be made to any other statement of case; and
(b) service of any amended statement of case.
(2) The power of the court to give permission under this rule is subject to –
(a) rule 19.2 (change
of parties – general);
[ … ]
[ … ]
19.2(1) This rule applies where a party is to be added or substituted except where the case falls within rule 19.6 (special provisions aboutchanging
parties after the end of a relevant limitation period).
(2) The court may order a person to be added as a new party if –
(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or
(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.
[ … ]
19.3(1) All persons jointly entitled to the remedy claimed by a claimant must be parties unless the court orders otherwise.
[ … ]
19.4(1) The court's permission is required to remove, add or substitute a party, unless the claim form has not been served.
(2) An application for permission under paragraph (1)—
(a) may be made by—
(i) an existing party; or
(ii) a person who wishes to become a party; and
(b) must be—
(i) supported by evidence; and
(ii) made under Part 23.
(3) An application for an order under rule 19.2(4) –
(a) may be made without notice; and
(b) must be supported by evidence.
(4) Nobody may be added or substituted as a claimant unless –
(a) they have given their consent in writing; and
(b) that consent, and the proposed amended claim form and particulars of claim, have been filed with the court.
[ … ]"
Relevant caselaw
EWHC
1504 (QB), Lambert J summarised the applicable principles as follows:
"10. The legal framework is not in dispute and can be stated succinctly here. The starting point is CPR 17.3 which confers on the Court a broad discretionary power to grant permission to amend. The case-law is replete with guidance as to how that discretionary power should be exercised in different contexts. I need cite only two cases which taken together provide a helpful list of factors to be borne in mind when considering an application such as this: CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015]EWHC
1345 (TCC) and Quah Su-Ling v Goldman Sachs International [2015]
EWHC
759 (Comm). From those cases, I draw together the following points.
a) In exercising the discretion under CPR 17.3, the overriding objective is of central importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted.
b) A strict view must be taken to non-compliance with the CPR and directions of the Court. The Court must take into account the fair and efficient distribution of resources, not just between the parties but amongst litigants as a group. It follows that parties can no longer expect indulgence if they fail to comply with their procedural obligations: those obligations serve the purpose of ensuring that litigation is conducted proportionately as between the parties and that the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately is satisfied.
c) The timing of the application should be considered and weighed in the balance. An amendment can be regarded as 'very late' if permission to amend threatens the trial date, even if the application is made some months before the trial is due to start. Parties have a legitimate expectation that trial dates will be met and not adjourned without good reason. Where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. A heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The timing of the amendment, its history and an explanation for its lateness, is a matter for the amending party and is an important factor in the necessary balancing exercise: there must be a good reason for the delay.
d) The prejudice to the resisting parties if the amendments are allowed will incorporate, at one end of the spectrum, the simple fact of being 'mucked around' to the disruption of and additional pressure on their lawyers in the run-up to trial and the duplication of cost and effort at the other. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission. If allowing the amendments would necessitate the adjournment of the trial, this may be an overwhelming reason to refuse the amendments.
e) Prejudice to the amending party if the amendments are not allowed will, obviously, include its inability to advance its amended case, but that is just one factor to be considered. Moreover, if that prejudice has come about by the amending party's own conduct, then it is a much less important element of the balancing exercise."
"16. It was common ground that on an application to serve a claim on a defendant out of the jurisdiction, a claimant needs to establish a serious issue to be tried, which means a case which has a real as opposed to fanciful prospect of success, the same test as applies to applications for summary judgment: Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2102] 1 WLR 1804 per Lord Collins JSC.
17. The Court will apply the same test when considering an application to amend a statement of case, and will also refuse permission to amend to raise a case which does not have a real prospect of success.
18. In both these contexts:
(1) It is not enough that the claim is merely arguable; it must carry some degree of conviction: ED & F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 at paragraph 8; Global Asset Capital Inc. v Aabar Block SARL [2017] 4 WLR 164 at paragraph 27(1).
(2) The pleading must be coherent and properly particularised: Elite Property Holdings Ltd v Barclays Bank Plc [2019] EWCA Civ 204 at paragraph 42.
(3) The pleading must be supported by evidence which establishes a factual basis which meets the merits test; it is not sufficient simply to plead allegations which if true would establish a claim; there must be evidential material which establishes a sufficiently arguable case that the allegations are correct: Elite Property at paragraph 41."
The draft re-amended petition
Structure
(1) Introduction (paragraphs 1 to 5);
(2) Standing of the petitioners (paragraphs 6 to 12);
(3) Description of the parties (paragraphs 13 to 17);
(4) Background facts (paragraphs 18 to 25);
(5) Conduct of the affairs of the company (paragraphs 26 to 27);
(6) The unfairly prejudicial conduct (paragraphs 28 to 29);
(7) Further prejudice (paragraph 30);
(8) Prayer (paragraph 31).
Brief summary
China
in 2016 by the fourth respondent. It created the "Happy Lamb" brand of restaurants. The second and third respondents are shareholders in both the first respondent and the eighth respondent. The second respondent is also a franchisee of the Happy Lamb brand. The fifth respondent is or was head
chef
for the sixth respondent, and owns shares in that company, as well as formerly owning shares in the eighth respondent.
The active respondents' objections
"54. Ps' New Amendment Application and Draft New Petition fail to satisfy the applicable principles and should be disallowed. The Draft New Petition is incoherent, internally inconsistent in several respects and fails to disclose any allegations that have a realistic prospect of success in an unfair prejudice action.
[ … ]
59. In the main, the Draft New Petition proceeds by pleading (in the introductory passages and then for each petitioner) a series of alleged agreements and/or promises but only in a very light-touch fashion and without any precision or clarity whatsoever about who exactly was involved, what the legal effects of each are said to be and how these are said to have interacted with each other.
60. For each petitioner, there then follows a series of extremely vague and imprecise allegations that Rs (without differentiation as between them) have unfairly prejudiced Ps by supposedly departing from purported "agreements" and/or "promises" as to their share entitlements and by (among other things) demoting them, reducing their salaries and humiliating and bullying them."
2025,
and neither the numbering of the paragraphs nor their text is exactly the same. I have therefore gone through both and tried to reallocate the objections in the old draft to paragraphs in the new draft, where the text remains materially the same. This was a rather burdensome exercise, especially considering that some of the objections have been specifically addressed in the new draft.
(1) lack of clarity as to the basis upon which the allegation is made (see [14], [15], [16], [17], [28](g));
(2) vagueness and lack of clarity as to the pleading itself (see [28], [28](u), [28](ff), [28](oo)-(rr));
(3) lack of specificity in pleading attribution of conduct (see [19], [25], [28], [28](f), [28](n), [28](o), [28](s));
(4) inadequate pleading (see [19], [21], [24], [25], [28](a), [28](j), [28](u); [28](w), [28](gg), [28](oo)-[28](pp), [30](a));
(5) legally unsustainable pleading (see [5], [28], [28](d), [28](i), [28](v), [28](w), [28](aa), [28](qq), and [28](rr));
(6) allegation outside scope of section 994 petition (see [28], [28](b), [28](c), [28](l), [28](n), [28](o), [28](p), [28](s), [28](x), [28](y), [28](bb), and [30](a));
(7) absence of a necessary party (see [20]).
Standing for the purposes of unfair prejudice petitions
Statutory law
"(1) A member of a company may apply to the court by petition for an order under this Part on the ground—
(a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or
(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.
[ … ]
(2) The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company."
"(1) The subscribers of a company's memorandum are deemed to have agreed to become members of the company, and on its registration become members and must be entered as such in its register of members.
(2) Every other person who agrees to become a member of a company, and whose name is entered in its register of members, is a member of the company."
"(1) In the Companies Acts 'share', in relation to a company, means share in the company's share capital."
And section 544 relevantly provides:
"(1) The shares or other interest of any member in a company are transferable in accordance with the company's articles."
"(1) In the case of a company registered in England and Wales or Northern Ireland, a certificate under the common seal of the company specifying any shares held by a member is prima facie evidence of his title to the shares."
"(1) A company may not register a transfer of shares in or debentures of the company unless—
(a) a proper instrument of transfer has been delivered to it, or
(b) the transfer—
(i) is an exempt transfer within the Stock Transfer Act 1982 (c. 41), or
(ii) is in accordance with regulations underChapter
2 of this Part."
"(1) When a transfer of shares in or debentures of a company has been lodged with the company, the company must either—
(a) register the transfer, or
(b) give the transferee notice of refusal to register the transfer, together with its reasons for the refusal,
as soon as practicable and in any event within two months after the date on which the transfer is lodged with it."
"An instrument of transfer of the share or other interest of a deceased member of a company—
(a) may be made by his personal representative although the personal representative is not himself a member of the company, and
(b) is as effective as if the personal representative had been such a member at the time of the execution of the instrument."
"(1) A company must, within two months after the date on which a transfer of any of its shares, debentures or debenture stock is lodged with the company, complete and have ready for delivery—
(a) the certificates of the shares transferred,
(b) the debentures transferred, or
(c) the certificates of the debenture stock transferred.
(2) For this purpose a "transfer" means—
(a) a transfer duly stamped and otherwise valid, or
(b) an exempt transfer within the Stock Transfer Act 1982 (c. 41),
but does not include a transfer that the company is for any reason entitled to refuse to register and does not register."
EWHC
497 (
Ch),
[19]).
Caselaw on equitable title
EWHC
1554 (
Ch),
[56]-[61]. That third possibility is in fact what appears to have been alleged in the present case.
"The nature of the title to shares in companies with which the company is concerned is at all times that of the registered holder, who has a 'legal estate'. The person who holds the shares is entitled to vote them. Of course there are equitable remedies if that person holds them as trustee, but those are remedies for theChancery
Court and not for the Companies Court, and they have nothing to do with the statutory remedy of petition and the statutory rights arising under the Companies Act. In my view, transmission by operation of law means some act in the law by which the legal estate passes even though there be some further act (such as registration) to be done; and in my view the mere allegation that there arises a constructive trust – remembering that a constructive trust is frequently a matter of a remedy supplied by a court by way of imposition upon the conscience of the person affected, rather than an existing act in the law – cannot possibly amount to a transmission by operation of law."
"The motion is to strike out the name of Frederico as a petitioner on the ground that he has no locus standi to petition either under sec. 459 or for winding-up. For the purposes of the motion I must assume the truth of the allegations in the petition and I am willing to treat these as supplemented by the allegations in Frederico's affidavit. Section 459 says that a petition may be presented by a member of a company. 'Member' is defined in sec. 22 [of the 1985 Act] as the subscribers to the memorandum and, in subsec. (2) –
'Every other person who agrees to become a member of the company and whose name is entered in its register of members … '
Frederico did not subscribe to the memorandum. If he agreed to become a member, it was according to his affidavit only with effect from January 1986. Whether or not this is sufficient to satisfy the first limb of sec. 22(2), his name has never been entered in the register of members and he therefore does not satisfy the second limb. On the language of the statute it seems to me plain that Frederico is not a member and there is in my judgment no authority which suggests the contrary.
Section 459(2) also confers the right to present a petition upon certain persons who are not members. They are persons to whom shares –
' … have been transferred or transmitted by operation of law.'
This language echoes the provisions of sec. 183 [of the 1985 Act]:
'(1) It is not lawful for a company to register a transfer of shares in … a company unless a proper instrument of transfer has been delivered to it …
(2) Sub-section (1) does not prejudice any power of the company to register as shareholder … a person to whom the right to any shares in … the company has been transmitted by operation of law.'
In my judgment the word 'transferred' in sec. 459(2) requires at least that a proper instrument of transfer should have been executed and delivered to the transferee or the company in respect of the shares in question. It is not sufficient that there should be an agreement for transfer. This construction accords with the view expressed by Harman J in Re a Company No 007828 of 1985 (1986) 2 BCC 98,951. In this case Giuseppina may have agreed to transfer her shares to her husband but there is no allegation that she has executed a transfer and there has been no transmission by operation of law. Accordingly Frederico has no locus standi to present a petition under sec. 459."
"31. … The right to petition the court under s 459 is conferred only on members and those to whom shares have been transferred by operation of law, and neither Mr nor Mrs Barton falls within those categories. No rights are conferred on them by s 459, and although there may be room for nominal defendants in certain types of proceedings, there is in my view no room for nominal petitioners in this context."
"37. It is striking that this specific point, relating to a nominee shareholder as petitioner, seems never to have been argued or decided before. However, it is also striking that numerous cases have been argued and decided on the assumed basis that a nominee shareholder is fully entitled to complain under s 459 about any diminution in value of the shares registered in its name, and that its 'interests' are for these purposes co-extensive with the interests of the beneficial owner: see Estill v Cowling Swift & Kitchin [2000] Lloyd's Rep PN 378 at [101], Arrow Nominees Inc v Blackledge [2000] 1 BCLC 709 at 711, Lloyd v Casey [2002] 1 BCLC 454 at [48]–[49], and Rock Nominees Ltd v RCO (Holdings) plc [2003]EWHC
936 (
Ch)
at [2]–[3], [2003] 2 BCLC 493 at [2]–[3]. It is, I suppose, entirely possible that all the learned counsel and judges involved in those cases (including, in Lloyd v Casey, junior counsel for the Reedbest parties in this case) completely failed to miss a knock-out point, but it seems highly unlikely. More probably, the point was never taken in any of those earlier cases because it is simply wrong.
38. For the purposes of this strike-out application, all I have to decide is whether it is properly arguable that the 'interests' of a nominee shareholder under s 459 are capable of including the economic and contractual interests of the beneficial owners of the shares. In my judgment, based on both the language of s 459 and the authorities mentioned above, I consider it to be well arguable: indeed, if I had to decide the point, I would find that it was correct."
"It is to be noted that that was not a case in which it was suggested on behalf of the petitioner that execution of the constructive trust on which he sought to rely by the court would lead to retrospective replication of the register of members."
"Again there was no suggestion made on behalf of the petitioner that he could seek rectification of the members register with retrospective effect."
"Again it is to be noted that it was not suggested on behalf of the petitioner in Re Quickdome Ltd that his locus could be made good by an application for retrospective rectification."
"18. I must now express my conclusions as a result of the effect of those authorities and the parties' submissions. First, before the coming into force of the Civil Procedure Rules there was a body of authority to the effect that firstly, the restriction as to the types of person with standing to present a s.459 petition should be firmly enforced by striking out non-qualifying petitions. Secondly, in relation to winding-up petitions, a bona fide dispute as to the petitioner's standing to present a petition should lead to the dismissal or striking out of the petition, leaving the petitioner first to establish his or her standing by separate proceedings. Thirdly, no case had established that the principle which I have just identified in relation to winding-up petitions should be applied to s.459 proceedings where no winding up is sought in the alternative. Fourthly, in none of the cases under s.459 was it alleged that the petitioner could have perfected his or her standing by retrospective rectification of the register of members and on their facts it seems to me that retrospective relief by way of rectification would not have been obtained even if the allegations relied upon by the petitioners in those cases had been made good.
[ … ]
20. The existence of a triable claim with reasonable, i.e. not purely fanciful, prospects of success for retrospective rectification from a date ante-dating the presentation of the petition means, first, that the court cannot be sure today that rectification will not lead to the petitioner having been deemed to have had the necessary standing throughout. Secondly, there is therefore a risk that if the petition is struck out now, the time and money so far spent on it will have to be re-spent on a substituted identical fresh petition in due course if this petition is struck out. Thirdly, if the petition is dismissed with costs now but the petitioner shows later that it was only due to the respondents' fault that the petitioner was not registered as a member throughout, that order may work a real injustice. By contrast, if the petition is stayed now with costs reserved, neither of those two adverse consequences or risks would flow.
[ … ]
22. In the result, therefore, it seems to me that I have a discretion whether to stay or to dismiss this petition. A stay involves making no order on the petition which would be without jurisdiction due to the petitioner's present lack of standing. On the contrary, it postpones the exercise of any jurisdiction or powers under ss.459–461 until the facts relevant to the petitioner's standing have been established one way or the other. Therefore, I propose to stay this petition for the reasons given. In my judgment, a stay is a solution more in accordance with the overriding objective than to strike out the petition now, but I intend to do so on terms … "
EWHC
2451 (
Ch).
In this case, a company was founded by three individuals, each of whom was allotted shares and became a director. The relationship between them subsequently broke down, and the company (acting by two of the three) purported to dismiss the third, Mr Onea, as an employee, and to remove him as a director. Moreover, he was treated as a "bad leaver" under the articles of association, so his shares became deferred shares and were transferred to one of the other two at nominal value. The name of Mr Onea was then removed from the register of members. He presented a petition under section 994 of the 2006 Act, including a claim to retrospective rectification of the register of members. The other two members, respondents to the petition, applied to strike out the petition for lack of standing, or alternatively for abuse of process. The ICC judge went through the authorities, and ultimately ordered a split trial of the petition, the first stage dealing with rectification of the register and standing, and the second with the allegations of unfairly prejudicial conduct.
"111. First, in my view, as matters stand, Mr Onea's claim to retrospective rectification of the register of members on the basis that he left the Company as a 'Good' rather than a 'Bad Leaver' (and has therefore at all material times since before the Petition was presented been entitled to 120,000 'Good Leaver Shares') is credible and based on reasonable grounds; it has, at least, a real prospect of success.
[ … ]
113. Second, this is a case (unlike both Starlight Developers and, certainly to some extent, Re I Fit Global) in which, as I have described, the allegations of unfair prejudice are very substantially similar to the grounds on which the petitioner claims an entitlement to retrospective rectification of the register. I accept that they are not wholly identical, and I accept that the Applicants are yet to serve Defences, but it is plain nonetheless that there will be very significant common territory.
114. Third, Mr Onea does not seek a winding-up order against the Company.
115. In those circumstances, I do not accept that it would be just to strike out the Petition, and effectively compel Mr Onea to commence fresh proceedings in which to establish, if he can, his membership, before commencing fresh proceedings under section 994. In my view, in substance, that step would be inconsistent with the approach taken by Briggs J in Starlight Developers, and in any event, is not justified by reference to the court's duty to manage cases in accordance with the overriding objective. As in Starlight Developers, if the Petition were now to be struck out in its entirety, with costs payable to the Applicants, but Mr Onea were subsequently to show that he was at all times entitled to membership and was only removed from the register due to the fault of the Respondents, there is a risk that the order would (to adopt the words of Briggs J) "work a real injustice". Mr Onea would be compelled to spend time and money reproducing steps already taken, and the costs paid to the Applicants would almost certainly be irrecoverable.
116. The real issue in this case is whether to adopt the Applicants' third alternative (to strike out paragraphs (1) – (4) of the Prayer, and otherwise stay the Petition pending proof of membership in proceedings to be commenced and concluded separately, as, essentially, in Starlight Developers) or the Petitioner's preferred course (to order a split trial, as in Re I Fit Global). In my view, the Petitioner's suggestion is plainly preferable; it is quicker, fairer and more efficient … "
"19. This overriding objective-focused decision suggests that Re Company (No 007828 of 1985) would not be decided in the same way 40 years on. In 1985, the court did not have to consider the factors in the modern overriding objective such as delay, cost and proportionality. It is submitted that the nuanced and pragmatic modern approach in Re Contingent and Future Technologies [2023]EWHC
2451 is to be preferred to the pre-Woolf doctrinaire rigidity of Re a Company (No 007828) of 1985)."
Scope of the section 994 jurisdiction
"The [words of section 459 of the Companies Act 2006, now section 994 of the 2006 Act] … are, on the face of them, extraordinarily wide and general. They allow, on the face of them, every sort and kind of conduct which has taken place over an almost unlimited – certainly upwards of 20 years – periods of time in the management of a company's business to be dug up and gone over. The words are, however, limited by the reference to 'the company's affairs' in respect of which the conduct must be alleged.
The section also enables a member to apply to the court on the ground that 'any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial'. Again the words are wide and anything that the company does or fails to do can be relied upon. But wide as the category of acts may be it is necessary that the act or omission is done or left undone by the company itself or on its behalf …
The acts of the members themselves are not acts of the company nor are they part of the conduct of the affairs of the company and cannot found a petition under section 459 [now section 994]".
"13. The requirements relevant to this appeal are that: (1) there is an act or omission on the part of the company; and (2) that act or omission is unfairly prejudicial to [the petitioner].
14. These requirements are cumulative. If the court concludes that the first requirement is not satisfied, the second requirement does not arise … "
"37. The requirement in section 994 for an 'act or omission of the company' means that the petitioner must identify something which the company does or fails to do. The alternative requirement – that "the company's affairs are being or have been conducted in a manner that is unfairly prejudicial" to members or the petitioner – does not contain the same stipulation. [The petitioner] can rely on the actions of some other persons, including his fellow shareholders. But the actions must still amount to the conduct of the company's affairs."
"The judge [in the court below] cited the observations of Powell J in Re Dernacourt Investments Pty Ltd (1990) 2 ACSR 553:
The words 'affairs of a company' are extremely wide and should be construed liberally: (a) in determining the ambit of the 'affairs' of a parent company for the purposes of s 320, the court looks at the business realities of a situation and does not confine them to a narrow legalistic view; (b) 'affairs' of a company encompass all matters which may come before its board for consideration; (c) conduct of the 'affairs' of a parent company includes refraining from procuring a subsidiary to do something or condoning by inaction an act of a subsidiary, particularly when the directors of the parent and the subsidiary are the same …
I would accept these propositions, but with some qualification. (b) may extend to matters which are capable of coming before the board for its consideration, and may not be limited to those that actually come before the board: I do not accept that matters that are not considered by the board are not capable of being part of its affairs. Nonetheless, like the judge, I am unable to see how it can be said that the affairs of Neath and of Osprey were so intermingled that all of the affairs of the latter were the affairs of the former. It would, for example, be quite irrational to suggest that Mr Blyth, when acting as a director of Osprey, was conducting the affairs of Neath."
Charterhouse
Capital Ltd [2015] EWCA Civ 536, Sir Terence Etherton C (with whom Lewison and McCombe LJJ agreed) said:
"45. The expression 'the company's affairs' in subs 1(a) is of wide ambit and plainly covers all matters decided by the board of directors. Equally plainly, it does not extend to matters which are neither effected by the company nor on its behalf but, for example, concern activities of shareholders solely in that personal capacity and as between themselves. Accordingly, actions or omissions in compliance or contravention of the articles of association of a company may or may not constitute the conduct of the company's affairs within s 994(1) depending on the precise facts … "
"63. The principle that statements of case should only set out the facts that go to make up each essential element of the cause of action relied upon is particularly relevant to pleadings in unfair prejudice petitions. There has, from the early days of the unfair prejudice jurisdiction, been a clear tendency for petitions and pleadings in such cases to seek to raise myriad grievances and complaints of diverse forms of misconduct against the respondents to the petition. This experience has been especially prevalent in cases in which it is alleged that the company is a quasi-partnership so that equitable considerations are in play. Such wide-ranging allegations are often then said to require extensive disclosure and a lengthy trial at which the entire history of the formation and breakdown of the relationship between the parties is gone through in enormous detail.
[ … ]
66. … neither section 459 of the Companies Act 1985 nor Section 994 were drafted on the basis that a shareholder could simply complain, for example, that 'a course of conduct in relation to the company' had unfairly prejudiced his interests. The potential breadth of what is now Section 994 has been limited and kept within manageable bounds by the express statutory requirements that the acts complained of must either (i) be an act or omission of the company, or (ii) be conduct of the company's affairs rather than acts done in the conduct of a shareholder's personal affairs."
"68. … In the context of ss 994-996 it is clear that the conduct must be unfairly prejudicial to the interests of one or more members as members, but in O'Neill v Phillips Lord Hoffmann stated at p.1105, by reference to R & H Electrical Ltd v Haden Bill Electrical Ltd [1995] 2 BCLC 280 ('R & H Electrical'), that 'the requirement that prejudice must be suffered as a member should not be too narrowly or technically construed'. As discussed further below, in R & H Electrical account was taken of the interest of a loan creditor that was controlled by the relevant shareholder. A more recent example is Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26; [2007] BCC 272 ('Gamlestaden'), where account was taken of the benefit that could be obtained from the relief sought by an unfair prejudice petition by a joint venturer in its capacity as a loan creditor of an insolvent joint venture company."
Discussion
2025
draft) petition as previously identified.
Claims to shares in equity
2025
petition) are [5], [28], [28](d), [28](i), [28](v), [28](w), [28](aa), [28](qq), and [28](rr).
(1) The second and third sentences of paragraph 5 of the petition say:
"Instead, the grant of shares has been treated informally by being the subject of express oral and/or written representations and/or agreements and/or expressions of shared intention from time to time between the parties. These have given rise to equitable entitlements to shares as set out hereinbelow."
(2) In paragraph 28 of the petition it is alleged that "shares have been allocated … from time to time, which have taken effect at law and/or in equity… " Here the objection is to the words "and/or in equity".
(3) The particulars in subparagraph (d) under paragraph 28 say:
"P5 (by P1 and under its previous name of Hong) carried out such work in detrimental reliance upon the representation as to its entitlement to 50% of the shareholding in the new UK business".
(4) The particulars in subparagraph (i) under paragraph 28 say:
"In the premises and insofar as may be necessary to establish locus standi, relying on the doctrines of proprietary estoppel and/or common intention constructive trust, P5 (by P1) became and is entitled in equity to 50%, alternatively to 48%, of the shareholding in Oriental;"
(5) Similarly, the particulars in subparagraph (v) under paragraph 28 say:
"In reliance on the promise of a 2% shareholding and/or the said common intention, P2 acted to his detriment by investing some £30,000 in the business and/or by assuming the role of director of Oriental in or about October 2017 and/or by working at the restaurant premises at 2, New Oxford Street as an 'executive director', and in so doing, giving up a better paid job as a manager at Burger King"
(6) The particulars in subparagraph (w) under paragraph 28 say:
"In the premises and/or relying on the doctrines of proprietary estoppel and/or common intention constructive trust, P2 became and remains entitled in equity to 2% of the shareholding in Oriental, if, which the Respondents appear to accept in any event, he did not acquire legal title to his shares".
(7) The particulars in subparagraph (aa) under paragraph 28 say:
"Between November 2018 and May 2019, P2 invested approximately another £54,000 on the faith of the promise of another 3% of Oriental's shares, which was broken by R1 to R4 in failing to pass legal title to those further shares"
(8) The particulars in subparagraph (qq) under paragraph 28 say in part:
" … but on the faith of oral promises of shares in Oriental and R8, P4 engaged or continue to engage in employment for Oriental and thereby acted to her detriment".
(9) The particulars in subparagraph (rr) under paragraph 28 say:
"In the premises, P4 relied to her detriment on the oral promise of shares and by way of the doctrine of proprietary estoppel, she also has locus standi by virtue of s.994(2) of the 2006 Act."
Claims outside scope of petition
2025
petition) paragraphs [28], [28](b), [28](c), [28](l), [28](n), [28](o), [28](p), [28](s), [28](x), [28](y), [28](bb), and [30](a). Again, I set out each in turn.
"the affairs of Oriental and/or also R8 in the case of P4, have been conducted by R1 and/or R2 and/or R3 and/or R4 and/or R5, so as to cause the Petitioners and each of them to sustain unfair prejudice, including … (b) by deliberate subjugation taking the form of demotion of company officer status and/or role and/or job title".
"The 2017 agreement required P5 (by P1 and under its previous name of Hong) to start preparatory work, including but not limited to, the registration of Oriental, opening the company bank account, site selection, project budgeting, design, decoration, and staff recruitment. The site selection and internal and external decoration plan were to be the sole responsibility of P5 (by P1), who had to report to R1. R1 was to be responsible for providing a manual, core product production standards and the supply of the main raw materials such as soup powder and stir-fry ingredients … "
"The 2017 agreement provided that R1 would not be responsible for the direct operation of the project; P1 (or P5) would be responsible for UK operations … "
"The plainly unfavourable 2018 agreement of P1 and P5 to that diminution, was procured by way of pressure by R2 and R4. They threatened P1 in oral discourse on dates that cannot now be recalled specifically that they would close down Oriental and abandon the proposal to establish restaurants with P1 (and P5), if P1 did not agree to the 2018 proposals and sign the further co-operation agreement. P1 thereby signed under economic duress. The pressure tactics, whilst not averred herein to be per se actionable, were manifestly unfairly prejudicial conduct on the part of R2 and/or R4. Reliance will be placed on the witness statement of P1 dated 16 October 2023 (paras 64-69) … "
"As at October 2018, P1 was employed by Oriental as a 'Director/Executive Director' on a salary of £42,000 per annum. From about 1 July 2019, P1's salary with Oriental was reduced by R4 arbitrarily and for no stated reason, from £42,000 to £36,000 per annum and she was demoted by R3 and/or R4 to finance manager and a waitress from her position as an 'executive director'. These were acts of intentional humiliation and capricious subjugation … "
"In November 2019, P1's job title was downgraded to 'cashier' and her salary was further arbitrarily reduced by R4 and/or R3 from £3,000 per month to £1,000 per month, again without any justification … "
"In or about January 2020, Oriental by R3 and R4 arbitrarily stopped paying P1's salary altogether, proposed that P5's shares in Oriental be reduced to 0% and that P1 should resign as a director (with P5 or P1 being granted a shareholding of 5%) … "
"On or about 22 January 2020, P1 felt compelled to resign from her position as a director and employee of Oriental in light of the aforesaid exploitation and humiliation of her by or on behalf of the Respondents, whether by action or mere acquiescence as the case may be … "
"Initially, P2 was not provided with a written employment contract. It was signed later and backdated to 1 October 2018. In it, P2's day-to-day role was described as "Restaurant Manager". In that role, P2 was paid a salary of £36,000 … "
"In or about April 2018, P2 was arbitrarily removed by R4 and/or R1 (by its CFO, Mr Jianhai Wang) as a director of Oriental. This was done without his agreement, nor was it even discussed with him. No reasons were given. This was a capricious and intentionally demeaning decision taken in the conduct of the affairs of Oriental by R4 and R1. The consequential loss of management control, influence and status by P2, despite his capital investment, is relied on as a discrete head of unfair prejudice … "
"In or about October 2019, P2 was made by R3 and/or R4 and/or R5 to give up his role as 'Restaurant Manager' for Oriental. Thereafter, he was demoted by them and required by them to work as a waiter and maintenance man without pay. Subsequently, P2 was employed fitting out a restaurant in Birmingham, before being replaced even in that role. In addition, P2 was also required by R3 and/or R4 to work on Friday, Saturday and Sunday nights as a waiter for Oriental and not permitted by them to manage any staff in the restaurant. It is to be inferred that P2's dramatic and rapid demotion from being a valued co-founder, investor and director, was, (as in the case of P1, P2's close colleague) driven by a desire intentionally to manipulate, sideline and humiliate him. This constituted the conduct of the affairs of Oriental in a way that was unfairly prejudicial to P2 … "
"substantial monies have on dates unknown been transferred from Oriental to R1 as to £312,719.11 and to R4 and R2 as to £426,205.94 and £38,407.92 respectively, as well as £506,926.10 transferred to law firms: Jackson Lyon and R&H. Absent good reason for these payments and proof of repayment, these sums must be repaid pending any valuation of Oriental or otherwise brought into account on valuation. If and insofar as payments out of Oriental may be irregular asset-stripping, they have caused P1/P5, P2, P3 and P4 further and obvious unfair prejudice. It is claimed these were payments made on behalf of and at the direction of those Respondents who had previously made loans to Oriental. But this is mere assertion and it is not made by anyone acting solely for the company. On any view they were large payments by the company to pay the legal fees of the Respondents, which is impermissible".
Lack of clarity as to basis of allegation
"R2 is an investment shareholder in the HLHP Group company and a franchisee of Happy Lamb. He approached P1 and P2 in September 2017 to be partners in establishing 'Happy Lamb' hotpot restaurants in the UK. He owns 7,000 shares in Oriental and 1,000 shares in R8."
"R3 signed the 2017 and 2018 Co-operation Agreements referred to below on behalf of R1. He owns 1,000 shares in R8."
"R4 is the founder and owner of the Happy Lamb brand. At all material times, he has been or has acted as a director of R1. He is colloquially thought of amongst the Petitioners and/or described by them as 'theChairman'.
No-one becomes or ceases to be a shareholder in Oriental without R4's approval. He owns 9,739 shares in Oriental and 2,316 shares in R8. R4's stake of less than 10% is for tax reasons. However, R4 controls the entire global Happy Lamb business. For the avoidance of doubt, R4 is primarily responsible for all of the unfairly prejudicial acts or decisions in the conduct of Oriental's affairs set out hereinbelow."
"R5 was employed as headchef
at Oriental in about July 2019. The Petitioners understand that he was appointed a director of Oriental and R8 on 22 January 2020, but resigned from both positions on or about 29 June 2023. It is understood that he owns 10,000 ordinary shares in Oriental. He formerly owned 1,000 shares in R8".
"In or about April 2018, P1 became the registered owner of the entire issued share capital in P5".
Vagueness and lack of clarity as to the pleading itself
"In broad terms and by way of preamble, the case of the Petitioners is that shares have been allocated by or on behalf of Oriental and/or, in the case of P4, R8, from time to time, which have taken effect at law and/or in equity, but that the affairs of Oriental and/or also R8 in the case of P4, have been conducted by R1 and/or R2 and/or R3 and/or R4 and/or R5, so as to cause the Petitioners and each of them to sustain unfair prejudice, including by: (a) arbitrarily and unlawfully reducing or expropriating share allocations without any proper payment or compensation and/or (b) by deliberate subjugation taking the form of demotion of company officer status and/or role and/or job title … "
"Further and/or in the alternative, in or about 2017, when he was recruited to the business, P2 was promised a 2% shareholding in Oriental. That promise was made orally by or on behalf of R1 to R4 on dates unknown in or about 2017. The shared and common intention of the parties was reflected in a confirmation statement filed at Companies House".
"In the exercise of the re-organisation of the affairs of Oriental, Ms Li was promised by R4 and/or R1 and, through P3, was allocated in oral discussions with R4 on miscellaneous dates in July 2018, a 10% shareholding in Oriental (from R1)".
"In early 2020, P4 was offered a 1% share in Oriental by R4 for no premium and was also asked by him to purchase a 1% shareholding in Oriental, for which she paid £5,000 on 20 January 2020".
"On 21 January 2021, P4 purchased a 1% shareholding in R8 for £4,000".
"P4 avers insofar as may be necessary for locus standi that no share certificates or executed stock transfer forms were provided to P4 by or on behalf of Oriental or R8, but on the faith of the said oral promises of shares in Oriental and R8, P4 continued to offer her labour to Oriental and R8 and thereby acted to her detriment".
"In the premises, P4 relied to her detriment on the oral promise of shares and by way of the doctrine of proprietary estoppel, she also has locus standi by virtue of s.994(2) of the 2006 Act".
Lack of specificity in pleading attribution of conduct
"On 25 September 2017, R2 met P1 at her home. He proposed that P1 would have 30% of the equity in the new venture and that P2 would have 2%. This was agreed by P1."
" … Oriental has been managed variously since inception by those controlling R1 and/or by R2, R3, R4 and R5 as de facto directors of or ultimate decision-makers in, Oriental, irrespective of their formal status as a director. The best particulars available are that these individuals appear to have little regard for legal status and act as a shadowy syndicate, making decisions and issuing orders and directives to their colleagues in the UK."
"… the affairs of Oriental and/or also R8 in the case of P4, have been conducted by R1 and/or R2 and/or R3 and/or R4 and/or R5, so as to cause the Petitioners and each of them to sustain unfair prejudice … "
"In October 2017, an oral agreement, understood to be averred by the Respondents, was reached that P5's shareholding in Oriental be reduced to 48% to enable P2 to acquire 2% of the shares in Oriental".
"As at October 2018, P1 was employed by Oriental as a 'Director/Executive Director' on a salary of £42,000 per annum. From about 1 July 2019, P1's salary with Oriental was reduced by R4 arbitrarily and for no stated reason, from £42,000 to £36,000 per annum and she was demoted by R3 and/or R4 to finance manager and a waitress from her position as an 'executive director'. These were acts of intentional humiliation and capricious subjugation".
"In November 2019, P1's job title was downgraded to 'cashier' and her salary was further arbitrarily reduced by R4 and/or R3 from £3,000 per month to £1,000 per month, again without any justification".
"On or about 22 January 2020, P1 felt compelled to resign from her position as a director and employee of Oriental in light of the aforesaid exploitation and humiliation of her by or on behalf of the Respondents, whether by action or mere acquiescence as the case may be".
Inadequate pleading
"On 25 September 2017, R2 met P1 at her home. He proposed that P1 would have 30% of the equity in the new venture and that P2 would have 2%. This was agreed by P1".
"On or about 6 October 2017, P1 and P2 flew to Boston, USA and met with R2, R3 and R4 and a Michael Luk of R1 at the first and then only Happy Lamb restaurant. At that meeting, an oral agreement was reached to the effect that, in return for their involvement in identifying and setting up the UK restaurants, Hong would have a 43% interest in the UK restaurants and P2 would have a 2% interest in the UK restaurants alongside the 55% interest of R1."
"On or about 8 October 2017, R2 sent P1 a WeChat message stating that shareholding in the new UK company shouldchange
to: R1 55% down to 50%; PH's to increase from 15% to 20%; P1 and P2 remained respectively at 28% and 2%".
"The current directors of Oriental are Xin Li appointed on 23 March 2023 and Qinqing Li appointed on 1 September 2024. However, Oriental has been managed variously since inception by those controlling R1 and/or by R2, R3, R4 and R5 as de facto directors of or ultimate decision-makers in, Oriental, irrespective of their formal status as a director. The best particulars available are that these individuals appear to have little regard for legal status and act as a shadowy syndicate, making decisions and issuing orders and directives to their colleagues in the UK."
"On or about 20 October 2017, P5 (by its director and owner P1 and under its previous name of Hong) and R1 (by R3), entered into a 'Cooperation Agreement' to open restaurants under the Happy Lamb brand in the UK, by which they agreed and it was represented inter alia that 50% of the UK business would be owned by P5. This will be referred to at trial for its full terms and effect".
"On or about 2 August 2018, a further "Cooperation Agreement" which will be referred to at trial for its full terms and effect, was entered into by R1 and P5 (represented by P1), as well as with P2 and P3 (by its director and owner Ms. Wenjing Li), to open restaurants under the Happy Lamb brand in the UK. The 2018 agreement stated that, "Based on the principle of equality and mutual benefit, and seeking common development, all parties reached the following cooperation agreement by consensus", this being (further) evidence of quasi-partnership in respect of the parties thereto … "
"Further and/or in the alternative, in or about 2017, when he was recruited to the business, P2 was promised a 2% shareholding in Oriental. That promise was made orally by or on behalf of R1 to R4 on dates unknown in or about 2017. The shared and common intention of the parties was reflected in a confirmation statement filed at Companies House".
"The promise of P3's 10% shareholding in Oriental was contained or expressly reflected in the 2018 Cooperation Agreement, which at that time, contemplated that Ms Li would hold shares in her own name".
"In early 2020, P4 was offered a 1% share in Oriental by R4 for no premium and was also asked by him to purchase a 1% shareholding in Oriental, for which she paid £5,000 on 20 January 2020".
"On 21 January 2021, P4 purchased a 1% shareholding in R8 for £4,000".
Absence of a necessary party
"On or about 5 October 2017, with assistance from an accountant, Vincent Lim, Hong-Otto Investment Management Company Limited [later renamed In-Touch, the proposed fifth petitioner] was incorporated by P1 ('Hong'). P1 was the sole director of Hong. Its issued share capital was 43 shares. 28 of those shares were held by P1 and 15 shares by the wife of R2, Peijin Hong ('PH'). P1 initially intended to hold any interest that she might have in the proposed UK restaurants through Hong."
2025)
petition seeks, amongst other things, "any necessary rectification … under section 125 of the Companies Act 2006". At present, however, I cannot see how, under the present petition, any order made on that petition would affect the interests of Peijin Hong (as distinct from those of In-Touch) which would justify adding Ms Hong as a necessary party. I do not think that this objection is made out.
Conclusion on particular objections
2025,
which has not yet been registered. But on the authorities that is sufficient for section 994(2). So the petition is not demurrable for lack of standing.
Opportunity to re-amend?
EWHC
1781 (QB) at [40], Tugendhat J held that, where a statement of case is found to be defective, it is normal for the court to refrain from striking out without first giving the party concerned an opportunity to amend, provided that there is reason to believe that the party will be in a position to put the defect right. This was referred to with approval by the Court of Appeal in Alton v Powszechny Zaklad Ubezpieczen [2024] EWCA Civ 1435, [34], as "a reflection of what will in many cases fulfil the Overriding Objective". But it is not always appropriate to do this: see eg Gamatronic (UK) Ltd v Hamilton [2013]
EWHC
3287 (QB), [53]; Webster v Penley [2021]
EWHC
3386 (
Ch),
[72]-[74].
changed
solicitors (and indeed counsel) during the course of the proceedings. They then had a significant period when they were acting in person, I am afraid to very little effect, until quite recently, since when new counsel (with litigation rights) has taken over both the conduct of the litigation and the advocacy. The petition as originally presented is no longer persisted in, and a number of iterations of draft amended petitions have been put forward (including two in quick succession most recently). The question for me is whether I think that, if the petitioners are given a further opportunity to put things right, they will be able to do so.
Conclusion
2025
a further draft petition is filed and served sufficiently attributing the conduct alleged in the "lack of specificity" section to be unfairly prejudicial to the petitioners' interests to one or more in particular of the active respondents. There must be sufficient specificity for the active respondents to be able to plead to the petition. Alleging that a particular act or omission is to be attributed to "A and/or B and/or C and/or D and/ or E" will simply not do.
2025,
and any reply submissions filed and served by the petitioners by 4 pm on 10 October
2025. I should be grateful for a minute of order, preferably agreed, to give effect to this judgment.