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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Bee Tee Alarms , Re [2006] EWHC 584 (Ch) (10 March 2006) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2006/584.html Cite as: [2006] EWHC 584 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/03/2006

His Honour Judge Weeks QC:

1. This action concerns a small company in the East Midlands called Bee Tee Alarms Limited. The company has net assets of around £70,000 or so and is making a modest annual profit of something like £50,000 a year before tax. It is owned by a brother and sister. The brother, Mr. Paul Collins, has a majority holding of 20,400 shares which he has owned since 1994. His sister bought into the company in 1996 and has 19,600 shares, which is 49% of the company against her brother's 51%. She became a director of the company in August 1996 shortly before she acquired her shares.
2. In 2004 the relationship between brother and sister in relation to the company broke down and a suggestion was made by solicitors (consulted by the brother) that there should be a buy-out. They wrote again in January 2005 but the suggestion was not taken up and the solicitors for the sister, Mrs. Banner, sent a draft petition to Mr. Collins' solicitors alleging exclusion from management and some fairly minor acts of diversion of funds which do not amount, I think, to dishonesty but might well be enough to justify an order if no offer was made to buy out the petitioner.
3. At that stage the solicitors for Mr. Collins wrote an open letter on 28th January saying that the draft petition was really unnecessary because they had made it clear that Mr. Collins was more than happy to buy out Miss Banner's shareholding and the sensible approach was to try and see if agreement could be reached as to price.
4. The letter goes on to refer to O'Neill v. Phillips [1999] 1 WLR 1092, the leading case in the House of Lords, and makes an offer in accordance with O'Neill v. Phillips that Mr. Collins will purchase or procure the company to purchase the shares at a fair value, the valuation should be decided by an expert, that both parties should have the same right of access to information and that there should be no order as to costs.
5. The letter went on to warn Miss Banner's solicitors that if she chose to file the petition the company would immediately apply for it to be struck out. The offer contained in that letter was not formally accepted by Miss Banner's solicitors at the time but the two sides went on to discuss, largely in without prejudice correspondence, who should be the valuer and on what terms should he be appointed. Eventually an accountant called Mike Reed was appointed and the instructions for his duties were drafted by Mrs. Banner's solicitors and approved by Mr. Collins' solicitors. Eventually he made his valuation on 17th May, not a precise valuation; he gave, on an undiscounted basis, a range between £72,000 and £100,000 roughly.
6. When Mr. Collins received that valuation he made an offer of a specific price to his sister through the solicitors offering to purchase the shares at £86,500. That offer, made on 1st June, was rejected on 3rd June and a counteroffer was made by Mrs. Banner's solicitors to purchase Mr. Collins' shares at the same price, adjusted pro rata to reflect that her brother had more shares than she did. That counteroffer was rejected by Mr. Collins' solicitors on 7th June and again they referred in their letter specifically to O'Neill v. Phillips and repeated the warning that proceedings should not be started when there was an offer on the table.
7. On 8th June there was notice of extraordinary general meeting to remove Mrs. Banner as director and she was removed on 7th July. On 10th August this petition was issued. It does not refer to the offer made in January and complains of the exclusion as one instance of unfair prejudice, the others being Mr. Collins' unilateral management of the company affairs and making fairly minor improper payments of the company's money.
8. On 22nd September Mr. Collins' solicitors issued their third warning and third reference to O'Neill v. Phillips, they repeated their offer of £86,500 and said that they would apply to strike the petition out. The petitioner, however, refused to drop the petition and on 21st October the present application was issued to strike it out. There are three witness statements: two witness statements by Mr. Collins' solicitors in support and one by Mrs. Banner in opposition making various objections to Mr. Reid's valuation.
9. The last significant event occurred earlier this week on 6th March 2006 when the defendant's solicitors wrote out of the blue saying:

"We refer to previous correspondence and write to confirm that the offer contained in your letter dated 28th January 2005 is accepted.

We will liaise with you in due course as to the identity of the valuer.

In light of our concluded agreement, please confirm that the application to strike out will be withdrawn with no order as to costs (as per clause 5 the terms of the agreement set out in your letter of 28th January 2005). We are happy to sign a consent order to that effect."

10. Mr. Collins' solicitors not unnaturally found that letter very surprising and a complete change from the previous stance and said:

"We do not accept that the offer made in our letter of 28 January 2005 was separate to the offer made by our client in June 2005. Indeed, the offer set out in our letter of 28 January 2005 was implemented by both parties by instructing Mr. Reed to prepare a valuation."

11. So the position on this strike-out application which has come before me today is that neither side wants to continue with the proceedings. Mr. Collins wants them struck out, and the second respondent, the company, of course, takes a neutral attitude. The claimant, Mrs. Banner, says that they have been compromised and that they ought to be stayed. In my judgment the first respondent is right. The petition ought to be struck out for this reason. When the petition was issued on 10th August the position was, according to the petitioner, that an offer had been made to buy her shares and that offer was still open for acceptance. That offer is ex hypothesi in her eyes a reasonable offer because she has since accepted it.
12. Lord Hoffmann has said repeatedly that what is unfair prejudice is not exclusion itself but exclusion without a reasonable offer being made. For example, he said in Re A company, ex parte Kremer [1989] BCLC 365 at page 367:

"Counsel for the petitioner said the petition made allegations of mismanagement and misappropriation of funds by improper payments against the respondent and that, if these were established at the trial, the court might think it right to order the respondent to sell his shares. Taken at their face value, these allegations amount at most to high-handed conduct in certain matters. There is nothing in them which can carry a serious imputation of dishonesty. This is an ordinary case of breakdown in confidence between the parties. In such circumstances, fairness requires that the minority shareholder should not have to maintain his investment in a company managed by the majority with whom he has fallen out. But the unfairness disappears if the minority shareholder is offered a fair price for his shares. In such a case, s 459 was not intended to enable the court to preside over a protracted and expensive contest of virtue between the shareholders and to award the company to the winner."

13. That, on the claimant's case, is the situation in the present case. There has been a reasonable, a fair offer. Lord Hoffmann, when he reached the House of Lords repeated the same view in O'Neill v. Phillips [1999] 1 WLR 1092, because he said at page 1107:

"But the unfairness does not lie in the exclusion alone but in exclusion without a reasonable offer. If the respondent to a petition has plainly made a reasonable offer, then the exclusion as such will not be unfairly prejudicial and he will be entitled to have the petition struck out."

14. Here the position is that the respondent has made an offer which the petitioner belatedly considers reasonable. Whether it is still open for the petitioner to accept that offer is not a matter which I need decide because the position at the time of the petition was that the offer had been made and it could have been accepted at least up to the time of the rejection of the £86,500 offer. Whether it is still open is, I think, a matter which may have to be decided in subsequent proceedings but, in my judgment, the petition was an abuse in not referring to that offer and in not alleging that the exclusion was made without any reasonable offer. Therefore, I think the petition ought to be struck out.
15. I do not accede to the alternative submission that it ought to be stayed because the parties have agreed to compromise these proceedings. What has happened is that an offer to purchase shares has, if it is still open, been accepted and there may or may not be a contract to purchase those shares. That offer was not an offer to compromise these proceedings. It was accompanied by a warning that if proceedings were issued they would be struck out. There is, in my judgment, therefore, no settlement of these proceedings even if the claimant is right and he is entitled now to accept the January offer. For those reasons, I will strike out the petition and I will not accede to the alternative informal application to stay all further proceedings.
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