Unfair Prejudice
Rosenblatt Law Partner Anthony Field and Associate Jacques Domican-Bird discuss unfair prejudice petitions – as experts in acting for both for petitioners themselves and those defending petitions brought against them.
What is an unfair prejudice petition?
Section 994 of the Companies Act 2006 (“CA06”) provides a route for a shareholder of a company to petition the court, should they have been unfairly prejudiced by another’s conduct. The potential respondent(s) of an unfair prejudice petition will most likely be another company shareholder. However, the respondent(s) could also be a company director, or even a third party who may have become involved in unfairly prejudicial conduct against the petitioning shareholder. It is a notable that a company itself will generally only be a nominal defendant.
Criteria for a successful petition
In June 2025, the Court of Appeal handed down its judgment on a case involving an unfair prejudice petition: Saxon Woods Investments Limited v Francesco Costa [2025] EWCA Civ 708. The Court of Appeal helpfully re-stated the criteria to be considered in relation to issuing a successful unfair prejudice petition, set out as follows:
1. The jurisdiction to grant any relief under section 996 CA06 is only engaged if the grounds established in section 994(1) are established: Re Coroin, per Arden LJ at §11;
2. The conduct complained of must be both prejudicial (in the sense of causing harm or prejudice to the relevant interest) and unfairly so: Re Saul D Harrison & Sons plc [1994] BCC 475, per Neill LJ at p.499G;
3. There must be a causal link between the conduct complained of and the prejudice suffered by the shareholder: Re Southern Counties Fresh Food Limited [2008] EWHC 2810 (Ch), per Warren J at §47 (a case in which Rosenblatt acted);
4. Prejudice can, but need not, be financial in character. A disregard of the rights of a shareholder, as such, without any financial consequences may amount to prejudice falling within the section: Re Coroin (in the passage quoted above from the judgment of David Richards J);
5. Unfairness can include a breach of the terms on which it is agreed that the company’s affairs would be conducted, for example a breach of the articles of association, or of a shareholders’ agreement, or of the expectation that the directors would act in accordance with their duties to the company: Re Tobian Properties Ltd [2012] WCA Civ 998; [2013] 2 BCLC 567, per Arden LJ at §21 to §22;
6. If unfair prejudice is established, the Court’s power to award relief is discretionary, and is intended to remedy the unfair prejudice, both for the present and for the future. The breadth of this discretion was explained by Oliver LJ in Re Bird Precision Bellows Ltd [1986] Ch 658 (CA), at p.669:
“It seems to me that the whole framework of the section, and of such of the authorities as we have seen, which seem to me to support this, is to confer on the court a very wide discretion to do what is considered fair and equitable in all the circumstances of the case, in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company.”
7. It is incumbent on a petitioner properly to identify in its pleading the prejudice which it says it has suffered. Given the breadth of the Court’s jurisdiction, it is essential that the respondents know the case they have to meet: see, for example, In re G&G Properties Ltd [2019] EWCA Civ 2046; [2020] Bus LR 762, per David Richards LJ at §35.
In Saxon Woods, the Court of Appeal also held that the first instance (High Court) judge, Mr Simon Gleeson, misdirected himself on the application of the law under section 172 CA06, such that the Respondent had, in fact, acted dishonestly and in breach of duty. The Court of Appeal criticised the first instance court’s application of the dishonesty test in Ivey v Genting Casinos (UK) Ltd (trading as Crockfords Club) [2017] UKSC 67; [2018] AC 391 emphasising (at paragraph 123) that: “Deliberately deceiving the board of a company must, either always or almost always, be inconsistent with a director’s duty under section 172”. Further, whilst the Court of Appeal did “not rule out the possibility of wholly exceptional circumstance where this may not hold good […] nothing of the kind exists in this case.”
Remedies and Relief
The court has wide discretion when it comes to remedies and relief, including to:
1. Regulate the conduct of the company’s future affairs;
2. Requiring the company to refrain from doing an act complained of by the petitioner;
3. Authorise civil proceedings to be brought in the name of the company;
4. Prohibit changes to the company’s articles without the leave of the court; and
5. Order that the petitioner’s shares are purchased by another shareholder – or shareholders – of the company. For this relief, the date on which shares are valued is significant in determining the sum received by the petitioner. The court has wide discretion as to which date on which shares valuation should be set. This will be fact specific, likely contentious between parties, and require evidence by expert valuers.
Rosenblatt Experience
Rosenblatt has significant experience in acting for clients in relation to unfair prejudice petitions – both for petitioners themselves and those defending petitions brought against them. Whilst most unfair prejudice cases settle before reaching court, some do not, and Rosenblatt has experience of progressing cases from the pre-action stage, through negotiation and settlement, to trial and the assessment of costs. We represented the successful Petitioner in one of the leading cases on unfair prejudice, led by Partner, Anthony Field, Re Southern Counties Fresh Food Limited [2008] EWHC 2810 (Ch). In Southern Counties, the affairs of a joint venture company had been conducted in a manner unfairly prejudicial to the interests of a 50 per cent shareholder, due to nominee directors, appointed by the other 50 per cent shareholder, breaching their fiduciary duties and breaches of a shareholders' agreement.
If you need any advice regarding a company dispute, please contact Anthony Field at Anthony.field@rosenblatt.law
Rosenblatt Law
July 2025