Ionut Cosmin Onea v Taiwo Ayoyunde Alegbe & Ors

Section 994 of the Companies Act 2006 provides for a “member of a company” to apply to the court by petition for an order in circumstances where the affairs of the company have been conducted in a manner unfairly prejudicial to his interests as a member. On 21 September 2022, Mr Cosmin Onea presented such a petition (“the Petition”) in respect of the affairs of the Third Respondent, Contingent & Future Technologies Limited (“the Company”). This is my judgment on an Application dated 27 October 2022, made by the First and Second Respondents, respectively, Mr Taiwo Alegbe and Mr Rajpal Wilkhu, represented by Mr Daniel Lightman KC and Mr Mark Baldock of counsel, to strike out and/or stay the Petition in whole or in part, fundamentally on the basis that Mr Onea - as he accepts - is not, and was not when the Petition was presented, a registered member of the Company.

The Company is a supply chain technology company, which provides customers with tools for procurement decision making. It was incorporated on 5 June 2019 and its “founders” were Mr Onea, Mr Alegbe and Mr Wilkhu. On incorporation, of its 1,000,000 issued shares, Mr Onea and Mr Wilkhu each held 30%, and Mr Alegbe held 40%; each was a member. On 12 October 2021, the Company purported to dismiss Mr Onea as an employee for gross misconduct, and it removed him from office as a director. In addition, it resolved to treat him as a “Bad Leaver” under its Articles of Association, as a result of which his shares were automatically converted into “Deferred Shares” and transferred to Mr Wilkhu in return for their nominal value, a negligible sum. As a further result, on 15 December 2021, Mr Onea was removed from the Company’s register of members; he therefore ceased to be, and has not since then been, one of its members.

Mr Onea denies that these steps were properly or lawfully taken. His case is that his dismissal and exclusion, and ultimately the transfer of those shares which he was entitled to retain, were wholly unjustified, and amongst other things comprised conduct of the Company’s affairs which was unfairly prejudicial to his interests as a member. Within the present proceedings on the Petition, he therefore seeks, in addition to relief under section 994, certain other declarations and orders concerning his shareholding, and in consequence, an order under section 125 of the Companies Act 2006 that the Company’s register of members be rectified with retrospective effect, to show him as a member holding 120,000 ordinary (“Good Leaver”) shares in the Company at all material times since before the presentation of the Petition. Although not identical, and although certain other significantly less serious allegations of unfairly prejudicial conduct are also made, the alleged grounds for rectification of the register of members (ultimately, that Mr Onea was not in fact a “Bad Leaver”) are therefore substantially similar, and certainly very closely linked, to those alleged in support of the unfair prejudice claim (that he was unfairly dismissed, excluded, and critically, that he was wrongfully deprived of his “Good Leaver” shares, which he seeks now to compel Mr Alegbe and/or Mr Wilkhu to buy from him at a fair value under section 994).

In addition, are two other sets of proceedings.

In those circumstances, by their Application, Messrs Alegbe and Wilkhu apply:

In opposition to the Application, in essence, Mr Alexander Halban of counsel, appearing on behalf of Mr Onea, argued that the Application is arid, contrary to authority, and that the relief sought based on Mr Onea’s lack of standing would involve a substantial waste of time and costs in service of no real practical or valuable purpose. In his submission, the court should direct a “preliminary issue” (but in effect a split trial) as prefaced at paragraph 71 of the Petition (“If and to the extent that any Respondent disputes [his] standing …”) at the first stage of which it should determine the overlapping and closely linked questions of Mr Onea’s standing and whether or not the Company’s affairs have been conducted in a manner unfairly prejudicial to his interests as a member (as for example did Roth J, without comment on this issue, critical or otherwise, in Re I Fit Global Ltd, Blunt v Jackson [2013] EWHC 2090 (Ch), following a direction made previously by Registrar Derrett).

As to the Confidentiality Proceedings, Mr Halban said that to stay the Petition pending their outcome would be “plainly wrong”, both because no restriction has been imposed by any order made in those Proceedings on the use of confidential materials by Mr Onea in these unfair prejudice proceedings, and because many of the issues raised in the present proceedings – for example, whether or not Mr Onea was validly dismissed – are simply not raised in the Confidentiality Proceedings. In any event, those Proceedings will be concluded long before any trial in the unfair prejudice proceedings.

On Mr Onea’s case, the Application therefore raises issues of discretionary case management, to be resolved in accordance with the overriding objective.

The remainder of this judgment is divided as follows:

On the same day that the Petition was presented, the court gave directions of its own motion, as is usual, providing amongst other things for Points of Defence by 4pm on 31 October 2022, Points of Reply by 4pm on 28 November 2022, and a CCMC on 15 February 2023. The Application was issued on 27 October 2022 and listed for directions on 18 November 2022. On 16 November 2022, ICC Judge Prentis, by consent, vacated the CCMC and in effect stayed any further progress in the unfair prejudice proceedings pending the outcome of the Application. He ordered that if appropriate, further directions could be given by the court at that stage (which will have been reached following this judgment). As a result, the Respondents are yet to serve Points of Defence and state their case.

In support of their Application, Messrs Alegbe and Wilkhu have served two witness statements, both made by their solicitor, Mr Stephen Inglis of Claremont Litigation Ltd, on 27 October 2022 and 28 April 2023, and in response, Mr Onea has served one, made by his solicitor, Mr Daniel Williams of DWF Law LLP, on 10 March 2023.

From those statements, from the allegations made in the Petition itself, and from the judgment given in the Confidentiality Proceedings by Ms Wicks QC on 27 June 2022, the background, in terms substantially undisputed for the purposes of the present Application, is as follows.

On 9 August 2021, the Company brought disciplinary action against Mr Onea and suspended him pending an investigation. By his suspension letter, Mr Onea was told that his email account had been suspended and that he no longer had access to the Company’s IT network.

On 13 August 2021, Ms Kamila Kolasinska (the Company’s Head of Legal & Operations) emailed Mr Onea to say that his work email had not in fact been suspended and he should still use it for his communications with the Company’s employees. On 24 August 2021, Mr Alegbe emailed Mr Onea to confirm that his access to the account had not been suspended, to ensure that Mr Onea had access to information he may need for the disciplinary investigation. In addition, Mr Alegbe said that if Mr Onea needed to “collect” evidence from the computer network, he would need the Company’s supervision.

An investigation meeting was held on 16 August 2021, with Mr Wilkhu as investigator, at which the Company’s allegations against Mr Onea were presented. Mr Onea denied all of them including on the basis that they were misconceived, contradicted by contemporary documents and witnesses, and/or were stale (dating back over a year).

On 15 September 2021, a disciplinary hearing took place, and on 20 September 2021, the Company issued a final written warning to Mr Onea.

On the same day, 20 September 2021, the Company extended Mr Onea’s suspension and commenced a further set of disciplinary proceedings (in fact the third, the second having been started on 20 August 2021, but terminated on 20 September 2021) on the grounds that he had breached the terms of his earlier suspension. The breaches alleged were that during the period of his suspension, Mr Onea had accessed the Company’s IT systems without authorisation and downloaded various documents. In particular, the Company alleged that Mr Onea had accessed its IT system without authorisation, on 64 occasions, 57 of which were on 4 October 2021, as set out in a spreadsheet provided to Mr Onea on 11 October 2021 (“the Access Spreadsheet”).

The allegations of unauthorised access on 4 October 2021 transpired to be false. In fact, it was Mr Wilkhu, as the Company’s IT administrator, who had accessed Mr Onea’s Company user account on 4 October 2021 and carried out the 57 actions in Mr Onea’s name. Despite the Company’s initial denial that Mr Wilkhu had done so (including when applying for an interim injunction on 9 November 2021) it later admitted that fact. In her judgment of 27 June 2022, Ms Wicks QC said, at [31], in respect of the witness statement of Ms Kolasinska relied on by the Company at the hearing on 9 November 2021:

Finally, having also found that the Company subsequently exacerbated its failure to give full and frank disclosure, first by failing to correct the position swiftly on learning the truth, and second, by refusing to disclose the Google audit logs which would have revealed what Mr Wilkhu did on 4 October (as a result of which Mr Onea eventually made an application for their preservation on 28 March 2022) the Deputy Judge concluded, at [38]:

To mark the court’s evident displeasure, it was ordered: (i) that the Company should pay the costs of the hearing on 9 November 2022 (if any costs had been incurred by Mr Onea, who had been a litigant in person, but assisted by a member of the Chancery Bar Litigant in Person Scheme), (ii) that the Company was not to have 50% of its costs of the application in any event, and (iii) that the Company was to pay 50% of Mr Onea’s costs of the application, assessed on an indemnity basis, in any event.

As regards the seven remaining instances of access referred to in the Access Spreadsheet, Mr Onea denied (and denies) that they were unauthorised, on grounds that the Company had permitted him to access the system to find information for the disciplinary proceedings and/or that he had been supervised at the time.

On 11 October 2021, Mr Onea submitted his resignation for constructive dismissal as a result of the Company’s alleged repudiatory breach of his service agreement by bringing the various disciplinary proceedings against him. He also filed a whistleblowing report setting out his concerns about certain alleged actions of Mr Alegbe.

On the following day, 12 October 2021, the Company purported to dismiss Mr Onea for alleged gross misconduct for breach of the terms of his suspension, including by reference to his alleged unauthorised access to the IT system on 4 October 2021, since acknowledged by the Company and confirmed by the court to be false.

At the time of Mr Onea’s dismissal, the Company had adopted Articles of Association which provided for a mechanism by which, if a “Founder” (defined as one of Messrs Alegbe, Wilkhu and Onea) was a “Bad Leaver” their shares would be converted into “Deferred Shares” and could be offered and ultimately transferred to the remaining Founders. That mechanism was contained in the following provisions of the Articles.

In short, if Mr Onea left as a Bad Leaver (for fraud or gross misconduct, but not for “simple” misconduct) he would be forced to sell all his shares at nominal value; but if he left as a Good Leaver (defined as someone who leaves not as a Bad Leaver), he would be forced to sell his unvested shares (60% at the time) for nominal value, but he could retain the remaining 40% of his shares, 120,000 shares (“the Good Leaver Shares”).

In the event, the Company resolved to treat Mr Onea as a Bad Leaver. Accordingly, on 27 October 2021, Ms Kolasinska sent an email to Mr Onea in which she said:

On 2 November 2021, Mr Onea replied:

In the event, on 15 December 2021 (and despite the Company having previously purported, on 3 November 2021, to act in accordance with Ms Kolasinska’s email of 27 October 2021) the Company's directors resolved in writing to “ratify the automatic conversion of 300,000 ordinary shares of £0.0001 each in the capital of the Company”, to approve the appointment of Mr Alegbe to execute stock transfer forms in favour of Mr Wilkhu, and to acknowledge that the re-designation of a portion of the shares as Deferred Shares (about which Ms Kolasinska had informed Mr Onea) was invalid “because the Relevant Shares automatically converted into Deferred Shares on the Effective Termination Date in accordance with article 11.1 of the Articles.”

Pursuant to that resolution, Mr Alegbe executed a stock transfer form in the name of Mr Onea, in favour of Mr Wilkhu, in respect of Mr Onea’s 300,000 Deferred Shares, and it was recorded in the Company’s register of members that Mr Onea ceased to be a member on 15 December 2021.

In the meantime, on 8 November 2021, the Company began the Confidentiality Proceedings and, as explained, on 9 November 2021 applied for, and was granted, an interim injunction in the Chancery Division on the basis of Mr Onea’s alleged breaches of confidentiality and unauthorised access to its IT systems, including those, representing a significant majority, which later transpired to be “obviously false”.

On 27 June 2022, shortly after the injunction return date, Ms Wicks QC made an Order, in terms which Mr Halban told me had been proposed by or on behalf of Mr Onea (Mr Halban having appeared at the hearing) for the delivery up and deletion of any further information which Mr Onea retained, save for specific documents which would be relevant and disclosable in the Employment Proceedings and in any future unfair prejudice proceedings (including therefore the present proceedings) which documents would be held in a confidentiality club by the parties’ solicitors. Accordingly, paragraph 5 of the Order stated:

In other words, Mr Onea does not need the Company's permission to use the identified documents and information in the present proceedings. In any event, as Mr Halban pointed out, the Company itself would be required to disclose to Mr Onea any relevant documents on disclosure.

The Confidentiality Proceedings are listed for a five-day trial, floating in the week of 30 October 2023. The issues are broadly: (a) whether certain documents are confidential, (b) whether Mr Onea accessed the Company’s IT system without authorisation during his suspension on certain dates in August and September 2021, (c) whether he is entitled to retain certain documents for disclosure, (d) his whistleblowing complaint against Mr Alegbe, and (e) his counterclaim alleging that confidential information about his disciplinary proceedings held by the Company was disclosed to a third party (Mr Alegbe’s romantic partner, who also worked for the Company) who used them in a letter of claim against Mr Onea alleging defamation (which was not pursued).

Despite earlier threats, it was not until 21 September 2022 that the Petition was presented.

In respect of his standing, Mr Onea’s position, as stated in the Petition, is that he left the Company as a Good Leaver and so retains (or was entitled to retain) his 120,000 Good Leaver Shares. That allegation is made on the basis that:

On that basis, Mr Onea seeks the relief set out at paragraphs (1)-(4) of the Prayer to the Petition, as follows:

Paragraph (5) of the Prayer seeks relief available under section 994, but not (in this context) otherwise:

In the Petition, in addition to the principal allegations about his exclusion and the wrongful conversion and transfer to Mr Wilkhu of his Good Leaver Shares, Mr Onea also alleges that Mr Alegbe acted in breach of his duties as a director, in that, in broad summary:

These additional allegations, directed at Mr Alegbe, were the subject of Mr Onea’s whistleblowing report sent formally to the Company on 11 October 2021, but dismissed by Mr Kjartan Rist, a director of an investor shareholder in the Company, on 12 October 2021, without further investigation, on the basis that Mr Onea’s complaints were unsupported by evidence (which Mr Onea denies, and describes as false). Mr Rist also found that the report had been made maliciously, which again, Mr Onea denies.

Section 994 of the Companies Act 2006 provides:

Members of a company are defined in section 112 of the 2006 Act as follows:

It was common ground that unless and until the Company's register of members is rectified, Mr Onea is not a member, and that he has not been a member since at least 15 December 2021, before the Petition was presented. Except where provision is made to the contrary, company membership is determined by entry on the register of members; it does not refer to the holding of rights of membership: see Enviroco Ltd v Farstad Supply A/S [2011] UKSC, at [37]-[40].

Equally, it was common ground that a court is only able to make an order under section 994 on the application of a member. Subject to section 994(2), which is inapplicable in the present case, no other variety of person has standing. It follows that in certain cases the court will strike out an application made by a person who is not a member, or will otherwise act to prevent it from being pursued. One such case, cited by Mr Lightman, was Atlasview Ltd v Brightview Ltd [2004] EWHC 1056 (Ch), in which Mr Jonathan Crow QC (sitting as a Deputy Judge of the High Court) said, at [31]:

On that footing, the Deputy Judge “removed” Mr and Mrs Barton as petitioners, neither of whom was a member, and neither of whom asserted or relied upon a right to become a member or to rectify the register. In reaching that conclusion, he rejected the Bartons’ opposition based on the fact of Mrs Barton’s beneficial interest in the shares held by “JGR” (which was itself both a member and also a petitioner) and based on the alleged desirability of binding them both to the outcome of the proceedings and exposing them (to the advantage of the Respondents) to the possibility of adverse costs orders.

No criticism is or can be made of the decision in Brightview. However, the present Application raises a different variety of problem, because unlike the Bartons, Mr Onea asserts a claim, not simply to rectification of the register under section 125 of the 2006 Act, but to retrospective rectification, pre-dating the Petition’s presentation. Section 125 provides, in relevant part:

It was not in dispute that in a proper case, the court has the power, by virtue of that provision, to order rectification of the register with retrospective effect: see Re Sussex Brick Company [1904] 1 Ch 598. It was that power that the petitioners sought to rely on in Starlight Developers.

In that case, the respondents to an unfair prejudice petition (presented under section 459 of the Companies Act 1985, the predecessor to section 994 of the 2006 Act) applied to strike it out on grounds that the petitioner lacked standing, because he was not a member of the company. It was accepted by the petitioner “after the recent evidence and the production in court of the company’s register” that he was unable to show that he was, or had ever been, a member. Equally, although “hotly disputed” by the respondents, the judge said, at [7], that:

Section 359 of the 1985 Act was the predecessor of section 125 of the 2006 Act, and was in the same terms. Plainly, as explained at [6] of the judgment, having been based on an alleged pre-incorporation agreement with the respondents to allot shares in due course, the grounds for rectification asserted in Starlight Developers were different from the grounds of alleged unfair prejudice.

The judge continued, at [8]:

The respondents opposed that outcome. They argued that the petition was an abuse “committed by the petitioner with his eyes open and that the petition should be struck out”. In reaching his conclusion, Briggs J first referred to Sussex Brick Company (and the court’s power to rectify with retrospective effect), and to three cases in which petitions had been struck out because the petitioners were not members, and thus lacked standing (Re a Company No.007827 of 1985 (1986) 2 BCC 98,951, Re a Company No.003160 of 1986 (1986) 2 BCC 99,276, and Re Quickdome Ltd (1988) 4 BCC 296). He noted that in none of those cases was there any suggestion of retrospective rectification of the register.

In addition, Briggs J referred to the decision of Brightman J in Re JN2 Ltd [1978] 1 WLR 183, in which a contributories’ winding-up petition had been dismissed because there was a triable issue whether the petitioner, who was not a member, was an allottee of shares in the company, with standing to petition on that ground. Brightman J had said:

Finally, Briggs J referred to the decision of the Court of Appeal in Re Hoicrest Ltd [2000] 1 BCLC 194, in which a claim for rectification of a company's register of members had been allowed to proceed, notwithstanding the summary nature of that jurisdiction and that the case raised substantial questions of fact. Mummery LJ referred to the recently introduced CPR, which he described as “applicable to the exercise of the discretion under s.359(3)” and continued:

At [18]-[22] Briggs J expressed his conclusions:

As to the decision in Starlight Developers:

Two other points about Starlight Developers are important to emphasise.

In respect of the decision in Re Hoicrest (referred to by Briggs J in Starlight Developers) and more generally regarding the scope of the court’s jurisdiction to determine disputes under section 125 of the 2006 Act, I should add that although neither counsel cited it, I referred in argument to the decision of the Privy Counsel in Nilon Ltd v Royal Westminster Investment SA [2015] UKPC 2, which concerned an appeal from a judgment of the Court of Appeal, Eastern Caribbean Supreme Court, Territory of the Virgin Islands in relation to section 43(1) of the BVI Business Companies Act 2004, which provides for rectification of a relevant company’s register of members, and is the equivalent in that jurisdiction of section 125 of the 2006 Act.

The decision in Nilon Ltd contains a detailed discussion of Re Hoicrest and other rectification cases, as a result of which it was said (at [37]-38]) that two points emerge, first, that the courts have made it clear from the earliest days of the legislation, that the nature of the jurisdiction makes it an unsuitable vehicle if there is a substantial factual question in dispute, and second, that Re Hoicrest “appears to be alone in deciding that it is sufficient for the applicant to have a prospective right against the company, and not an immediate right, to be entered on, or removed from, the register.” At [49] and [50], it was said that “in reality” Re Hoicrest was a case management decision, which “however sensible it might have been as a matter of case management” was wrong as a matter of principle, because the jurisdiction is available only where “the applicant has a right to registration by virtue of a valid transfer of legal title, and not merely a prospective claim against the company dependent on the conversion of an equitable right to a legal title by an order for specific performance”.

In the context of the present case, Nilon Ltd serves to demonstrate that case management powers, however sensibly deployed, cannot properly be used to circumvent or avoid a jurisdictional limitation.

In respect of the decision in Starlight Developers, Mr Lightman referred me to the judgment of Mark Cawson QC (Sitting as a Deputy High Court Judge) in Intermedia Productions Ltd v Patel [2020] EWHC (Ch) 473, on the trial of an unfair prejudice petition brought by two petitioners, and in particular to [15] of the judgment, where the Deputy Judge said:

I do not read that passage, in the context of that case (which reached trial, but apparently without the issue of standing having been considered or case managed) to mean that a petition presented by a person claiming retrospective rectification must necessarily be either struck out or stayed.

I was also referred by Mr Lightman to various cases in which an unfair prejudice petitioner had established his standing by means of proceedings brought and concluded before the presentation of a petition. For example, the decision of Mr John Randall QC (sitting as a Deputy Judge of the High Court) in Hunter v Senate Support Services Ltd [2004] EWHC 1085 (Ch), on the trial an action to impugn the forfeiture of minority shareholdings in the defendant companies, explicitly in order to gain standing to bring unfair prejudice petitions, and of Lawrence Collins J (as he then was) in Re Clearsprings Management Ltd [2003] EWHC 2516 (Ch), in which he referred, at [3]-[4], to prior proceedings for specific performance of a pre-incorporation agreement to issue a 50% shareholding in the company, which were “merely preparatory to a petition”.

Those decisions do no more than illustrate the unexceptional point that a putative petitioner (who is not a member) is invariably free to take steps, including by litigation, to establish his membership and standing before petitioning. They do not illustrate and are not authority for the proposition that he must necessarily do so in every case and regardless of the circumstances, and they did not consider or concern the possibility of doing otherwise. Moreover, both were decided before Starlight Developers, in which Briggs J referred to an earlier “body of authority to the effect that firstly, the restriction as to the types of person with standing to present a … petition should be firmly enforced by striking out non-qualifying petitions”.

I was referred to a single case, decided since Starlight Developers, in which much the approach proposed by Mr Onea was adopted by the court. Re I Fit Global Limited [2014] 2 BCLC 116 is a decision of Roth J on a trial of two preliminary issues ordered by Registrar Derrett: first, whether the petitioner was a shareholder in the company, and second, if he was, whether the alleged matters comprised unfairly prejudicial conduct of the company's affairs. The judge concluded that the petitioner was a shareholder, but had never been a member, if for no other reason than that no register of members had ever existed. He observed that in his petition, the petitioner had sought a declaration as to his shareholding, and added, at [49], “insofar as it is formally necessary to give him permission to ask in addition for an order for rectification of the register, I shall grant that permission … [S]ince no register exists, I shall hear the parties as to what further order, if any, might be appropriate in that regard”. He said that it was appropriate and would cause no injustice to rectify with retrospective effect. On the second preliminary issue, he concluded that the petitioner had indeed suffered unfair prejudice within the terms of section 994.

As to Re I Fit Global:

In England therefore, the procedural approach suggested by Mr Halban has been adopted in a single reported case, and I was referred to no case in which it has been considered and rejected. I was however referred to a decision of the New South Wales Court of Appeal in Treadtel International Pty Ltd v Cocco [2016] NSWCA 360, in which certain proposed amendments were not permitted: “What Mr Cocco sought to achieve by the contested amendments was to have determined in the same proceedings the very matters on which his standing to apply for a winding up order and for relief in the case of oppression depended. But acceptance of this “cut-through” approach would necessarily introduce additional costly and time consuming contentions relating to alleged oppression and winding up on an asserted just and equitable basis that should not be permitted to go forward in the same proceedings as those in which Mr Cocco sought to establish that he was member, or alternatively, a creditor, of Treadtel.” per Gleeson JA at [7].

To the same effect, at [99], Barrett AJA (with whom Gleeson and Leeming JA agreed) cited Clearsprings Management, referred to above, in support of the proposition that “someone wishing to claim a right as a “member” must first obtain entry of their name in the register, if necessary by preliminary proceedings.” At [100], he cited, with approval, the decision of Sifris J in Rodda v Lifestyle Loans Vic Pty Ltd [2015] VSC 628, at [17]-[19]:

Finally, at [102], in his conclusion, Barrett JA said that although there may be occasions on which it is appropriate to determine contested issues of standing on the hearing of the substantive proceedings themselves (for example, where the dispute is one which is “very easy to decide”) those cases are to be distinguished from cases in which standing raises difficult questions, involving for example contested witness evidence.

As to the decision in Treadtel:

As to the approach in England to issues of contested standing in a winding-up petition presented by an alleged contributory on the just and equitable basis, I was referred to the decision of the Court of Appeal in Alipour v Ary and another [1997] 1 WLR 534, in which a petitioner claimed to be the registered holder of shares in a foreign company, and presented a winding-up petition on the just and equitable ground. There was evidence of a risk of dissipation of the assets and on an ex parte application the petitioner obtained the appointment of a provisional liquidator. In the light of allegations made by the directors that the petitioner's share certificate was a forgery, the provisional liquidator sought the directions of the court. At the hearing, the petitioner accepted that his claim to be a registered shareholder could not be maintained but claimed instead to be entitled to present a petition as an original allottee of the shares. The judge at first instance refused to direct a preliminary issue on the standing of the petitioner and instead dismissed the petition on grounds, amongst others, that the appointment of a provisional liquidator was significantly detrimental to the company and that the petitioner should establish his standing before the petition was presented.

The Court of Appeal reversed that decision, and in doing so refused to follow the decision of Brightman J in Re JN2 (referred to by Briggs J in Starlight Developers). At [1997] 1 WLR 534, 546B-C, it was said (in the judgment of the court handed down by Peter Gibson LJ):

As to the proposition (derived from Re JN2 by the judge at first instance) that it was a “valid point of departure” that a petitioner should establish his standing outside the petition, if it was disputed, the Court said, at 547H-548D:

Whilst I accept that in Alipour (unlike the present case) it was of particular significance that the petitioner would probably have been left without an effective remedy had the petition been struck out, in my view the essence of the court’s decision was that on a contributory's petition - which has certain features in common with an unfair prejudice petition, both being in substance a dispute between shareholders - where the petitioner’s standing is disputed, the court “will consider all the circumstances, including the likelihood of damage to the company if the petition is not dismissed, in determining whether to require the petitioner to seek the determination of the dispute outside the petition.” The possibility of the petitioner in that case being left without a remedy was of course a powerful reason to allow the petition to proceed, but it was not a necessary condition; it was a feature of the particular case. Other cases are to be decided on their own facts, “in all the circumstances”. As was said at 545H: “It is hard to see why the Companies Court now should normally refuse to determine such a dispute, even if it does relate to the petitioner's locus standi, if the existence of the petition is not likely to cause substantial damage or inconvenience to the company.”

In my view, if, in appropriate circumstances, the court can determine standing at the substantive hearing of a contributory's winding-up petition, it can equally do so, in principle, in the context of an unfair prejudice petition. Indeed, given that unfair prejudice proceedings routinely involve statements of case, costs management, substantial disclosure and written and oral witness evidence, there is no obvious obstacle of procedure or practice which would prevent such a course or for that reason make it inappropriate or unworkable.

By contrast, in the case of a creditor’s winding-up petition, it is the usual practice of the court to dismiss a petition if there is a substantial dispute about the existence of the petitioner’s debt (and thus its standing) as was, for example, explained by Hildyard J in Re Coilcolor Ltd [2015] EWHC 3202 at [32]:

That “essentially pragmatic” reason was also referred to in Alipour itself at [1997] 1 WLR 534 at 541F-H:

In the context of creditor’s petitions, in addition to considerations of pragmatism, the court is concerned to prevent a party to a dispute from using the threat of a winding up petition as an improper means of forcing the company to pay a genuinely disputed debt: see for example Parmalat Capital Finance Ltd v Food Holdings Ltd [2008] UKPC 23 at [9], per Lord Hoffmann, and Tallington Lakes Ltd v Ancasta International Boat Sales Ltd [2012] EWCA Civ 1712, per David Richards J (as he then was) at [5]. Again, that is not a relevant consideration in the context of unfair prejudice proceedings.

Mr Halban also placed reliance on the decision of the Court of Appeal in Boston Trust Co Ltd v Szerelmey Ltd [2021] EWCA Civ 1176, which was an appeal against an order giving conditional permission to continue a derivative action. At [2], Sir David Richards (with whom Henderson and Warby LJJ agreed) explained the background:

By the time the appeal was heard, the register of members had been rectified with retrospective effect, and the significance of the point raised had thus been “much reduced”. It was nonetheless determined, “both because it raised an issue of principle with potential impacts beyond this case and because the judge's order for conditional permission should not remain in place if we were satisfied that it should not have been made.”

In the event, the Court set aside the judge’s conditional permission order, and substituted an order giving unconditional permission, essentially for two reasons.

First, at [42], Sir David Richards said: “The claimants' standing to bring the present proceedings is, as the judge correctly said, "the threshold question". As the claimants were not members of Tellisford, and did have not standing on any other basis, they had no basis in law on which to bring the proceedings. It is only if a claimant has standing, that the issues as to whether the court should give permission for the proceedings to continue arise, however strong on those issues the claimant's case may appear to be. Unless a claimant can cross the threshold, there is no warrant for examining and deciding the issues that are contingent upon it. As Henderson LJ observed in argument, by granting permission, albeit conditionally, the judge was accepting that there was a state of facts to justify the grant of permission at that very point, but that was to beg the question of whether there was standing to make the application at all.” In other words, the judge had made an order on the application itself but before and without deciding whether or not the applicant had standing to advance it – before the claimants had “crossed the threshold”.

Second, at [43]: “There is a further substantial reason for deciding the threshold issue before deciding whether permission should be granted. The judge himself remarked ... that the starting point must be that the court's power to grant permission is exercisable in the circumstances pertaining at the time that such permission is sought or granted. The grant of permission is a single step, requiring the determination or assessment of a number of issues. It is therefore not only appropriate but also necessary that permission is not granted until all those issues have been determined. An issue like standing can quite properly be taken as a preliminary issue, leaving the assessment of the other elements to a later time (assuming only no change in standing in the meantime). To determine all the issues, but leave standing undecided, is to invite the problem that the assessment of those issues might be different by the time that standing had been determined.” In other words, the question of permission must ultimately be considered and determined on a single occasion, as at a single point in time, taking into account all relevant matters, even if certain disputed matters or issues relevant to that question have been determined previously. The judge had fractured the process, purporting to reach a final conclusion but without having determined standing; that approach was impermissible, other perhaps than in the most exceptional cases. Mr Halban relied upon the comment in this paragraph, that an “issue like standing can quite properly be taken as a preliminary issue”, and I note (from the judgment at [28]) that the judge at first instance had commented that the point “might have been a candidate for determination as a preliminary issue, as has been done in some other cases, but none of the parties suggested or sought it.”

Finally, having referred to Starlight Developers, Sir David Richards said, at [45]: “In my judgment, the grant of conditional permission was not a course which was properly open to the judge and the appropriate course was to adjourn or stay the permission application pending determination of the rectification application within a reasonable time. There are no circumstances in the present case which would have made this an inappropriate order to make.” As he had explained earlier, at [40]-[41], the question was not really one of “jurisdiction” (“... it would be a strong thing to say that the High Court, a court of unlimited jurisdiction, wholly lacked jurisdiction to attach a condition to the grant of permission …") but "whether it can ever be right to grant conditional permission in favour of a claimant who lacks standing, save perhaps in the most exceptional circumstances”.

As to the decision in Boston Trust Co Ltd:

Ultimately, in the present context, I derived limited assistance from the decision in Boston Trust Co Ltd.

In summary, for the purposes of this application, the relevant principles regarding standing are, in my view, as follows.

There was no dispute in respect of the following points.

First, an application for relief under section 994 of the 2006 Act must be made by petition, because that is an explicit requirement of the statute; no other form of originating process is valid; a failure to proceed by petition is not a procedural irregularity that can be waived. Thus, in Re Osea Road Camp Sites Ltd [2005] 1 WLR 760, an application for relief commenced by Part 7 claim form, rather than petition, was struck out by Pumfrey J, both because it was without merit and because it was irretrievably and “fatally” procedurally flawed.

As to the procedural point, at [12]-[15], the judge explained that by virtue of the 1985 Act (the claim was made under section 459 of the 1985 Act, but nothing turns on that) the use of a petition was mandatory, not directory: “there is only one gateway through which a member of a company who alleges unfair prejudice may pass, and that is through the gateway of a petition to the court.”

Further, and crucially, he held that a failure to use a petition was not “an error of procedure” within the meaning of CPR 3.10. Those words were not apt to relate to requirements imposed by statute (other perhaps than those underlying the CPR). Rule 3.10 did not therefore give jurisdiction to dispense with the requirements of the Companies Act. He doubted (but did not need to decide, because the claim was without merit in any event) that the court had power to give permission to amend in order somehow to transform one form of originating process (a claim form) into another (a petition).

The point has been confirmed more recently, for example, by Chief ICC Judge Briggs in Evans v Eurokey Properties Ltd [2020] EWHC 1047 (Ch), at [14].

Second, it was common ground that given an otherwise validly constituted petition, it is permissible, in appropriate circumstances, to add or make claims other than under section 994, and other than in a petitioner's capacity as a member. Thus, in Re Asa Resource Group plc [2018] EWHC 1102 (Ch), Morgan J gave permission to add, by amendment, various claims including damages for unlawful means conspiracy, and for breach of a contract made between one of the petitioners and the company itself: “So, what has been added, amongst many other things, are claims by the petitioners for personal losses distinguished from claims to recover the losses of the Company for the Company and, significantly, there is a claim against the Company for damages for breach of contract.” [18].

In that case, the application to amend was opposed, on various grounds, including that the petitioners should bring separate or “new” proceedings. That objection (and all of the others) was rejected: “...it appears to me to be sensible to have these allegations made and considered in the context of the allegations made elsewhere in the petition having regard to the significant degree of overlap between the sets of allegations.” [20]. The point was one of case management.

Third, similarly, it was common ground that the respondents to a petition might themselves bring counterclaims and other additional claims other than by cross-petition under section 994, and again therefore, other than in their capacity as a member: see HRH Prince Abdulaziz Bin Mishal Abdulaziz Al Saud v Apex Global Management Ltd [2014] EWCA Civ 1106, at [67].

These cases therefore make clear:

Fourth, as to the company's typical role in typical unfair prejudice proceedings, again, it was common ground that such claims are usually treated, in substance, as comprising a dispute between the company’s shareholders and/or other controllers, and that the role of the company, as a named respondent, is usually therefore limited to giving disclosure or participating only where the relief sought may affect it directly, for example where a share purchase order is ought against the company itself: see for example, King v Kings Solutions Group Ltd [2022] EWHC 1099 (Ch), at [56], per Leech J. It is therefore ordinarily the case that the company's money should not be expended in defence of such proceedings: see Re Crossmore Electrical and Civil Engineering Ltd (1989) 5 BCC 37, 379G-H, per Hoffman J (as he then was). That is not however to say that the company’s participation and expenditure is invariably improper.

Moreover, if the company's role in the litigation is outside the scope of the claim advanced under section 994 (as for example, would have been the position in Re Asa Resource Group plc in which it was a defendant to a contractual damages claim) then the company is likely to have a compelling reason to participate actively and independently, and to incur cost in doing so. There is a distinction between the company’s (ordinarily limited) role in respect of a claim under section 994, and its (quite possibly active, direct and costly) role in respect of claims advanced directly either by or against it outside the scope of section 994 but in the same proceedings (such as, therefore, a claim to rectification of the register of its members).

Paragraphs 2 and 5 of PD 49A provide that an application for rectification of the register of members under section 125 of the 2006 Act “must be started by Part 8 Claim Form”. Mr Lightman described the requirement to use a Part 8 Claim Form as “mandatory”. Mr Onea’s failure to do so in the present case was one of the bases upon which it was said that the claim was abusive and that the Petition, or that part of it, should be struck out.

Certainly, in the usual case, it would not be appropriate and there would be no reason not to proceed by means of the Part 8 procedure. That may perhaps reflect (although I heard no submissions on this point) the traditional approach that an application under section 125 is not suitable if there are substantial issues of fact (as mentioned above at paragraph 57, and as reflected in the point made by Briggs J in Starlight Developers, that the petitioner in that case had rightly conceded that “his claim [was] not suitable for summary determination within the procedure contemplated by [section 125] of the Act …” (emphasis added) (see paragraph 47 above)).

In my view however:

In conclusion, the mere fact of a rectification claim being made by petition (or some originating process other than Part 8 Claim Form) does not render it an abuse; on the contrary, it may be wholly appropriate; at most it would be a procedural irregularity.

There was no issue regarding the law in these respects.

The court may strike out a statement of case pursuant to CPR r.3.4(2) where it discloses no reasonable grounds for bringing or defending the claim and/or it is an abuse of the court’s process of otherwise likely to obstruct the just disposal of the proceedings.

As to whether a statement of case discloses no reasonable grounds, the test is whether the claims are “bound to fail”: see the White Book at Vol.1, 3.4.2. There is no real difference between the test under r.3.4(2)(a) and in respect of summary judgment under r.24.2(a)(i), other than that the court, under r.24.2(b), must also be satisfied that there is no other compelling reason for a trial.

As to whether proceedings are abusive, the categories are many and not closed. Where abuse is established, the court has a discretion regarding the appropriate and proportionate response – striking out tends to be viewed as a remedy of last resort. I accept that it may be an abuse for a claimant to issue or continue a claim knowing that he has no cause of action (see Munday v Hilburn [2014] EWHC 4496 (Ch) at [16] per Nugee J, and Pathania v Adedeji [2014] EWCA Civ 681 at [15] per Floyd J) or to use the wrong procedure to claim certain relief (as in Menjou v Secretary of State for Justice [2021] EWHC 1231 (QB) where the claimant attempted to evade the provisions of CPR Part 54 governing judicial review applications, by issuing a Part 8 Claim Form) or to fail to comply with the CPR or its Practice Directions (see Cable v Liverpool Victoria Insurance Co Ltd [2020] EWCA Civ 1015 at [44], per Coulson J, where he cited cases that “involved the deliberate understating of the value of the claim on the claim form in order to avoid paying higher court fees”). Essentially, an abuse of process involves the use of the court’s process for a purpose or in a way which is significantly different from the ordinary and proper use of that process.

There was no dispute that the court has the power, where just and convenient to do so, to stay civil proceedings either generally or until a specified date or event, including pending the conclusion of connected or parallel proceedings, in order to avoid, for example, a multiplicity of proceedings involving the same parties and the same issues: CPR 3.1(2)(f).

Where an applicant applies for a stay of one set of proceedings on the basis of parallel civil proceedings, “the burden lies upon the applicant seeking a stay to demonstrate, through cogent evidence, that there are sound reasons for a stay in the circumstances of the particular case”: Wakefield v Channel Four Television Company [2005] EWHC 2410 (QB) at [11], per Eady J.

As stated above (but repeated for convenience) the Applicants seek:

Against this, in essence, Mr Halban argued that the most appropriate course would be to direct a “preliminary issue trial” at which to decide issues of both standing and the First and Second Respondents’ liability for unfair prejudice, reserving any further issues of, or concerning, Mr Onea’s remedy under section 994 (including any relevant share valuation in the event of a share purchase order) to a further trial. As I said during the hearing, it does not seem to me that this course, whatever its merits, would be described appropriately as entailing the determination of a “preliminary issue”. More accurately described, Mr Onea seeks a “split trial”, as is comparatively commonplace in the context of unfair prejudice proceedings: see Re Tobian Properties Ltd [2013] 2 BCLC 567, at [27], per Arden LJ. To some extent, the label attaching to Mr Onea’s preferred course might be thought immaterial, but: (i) although not unrelated, there is a real and significant distinction between the two which ought to be observed (see for example, the Chancery Guide at 6.10 – 6.16); and (ii) given the difference, the authorities concerning factors relevant to the court’s power to order a preliminary issue, such as Steele v Steele [2001] CP Rep 106, cited by Mr Halban, will not necessarily be relevant, or entirely so, to the court’s power to order a split trial.

It is artificial to deal separately with the Applicants’ first and (insofar as based on Mr Onea’s present lack of standing) third alternatives; they are both concerned with the appropriate reaction to the same problem, and I shall therefore deal with them together, before considering whether my conclusions are affected by the Applicants’ allegations of abuse. The relevant principles are summarised above at paragraph 85: the question is ultimately one of discretionary case management, to be decided in every case, in all the circumstances of that case. It is for the court and the parties to fashion an appropriate, just and proportionate process; the court is not driven inevitably to strike out the proceedings.

The material circumstances, and in this respect my conclusions, are as follows.

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.

In particular, as I have explained, the Company dismissed Mr Onea, or purported to do so, on 12 October 2021, for alleged gross misconduct, including by reference to the allegation that he gained unauthorised access to its IT system on 4 October 2021. That allegation was subsequently withdrawn by the Company and described by the Court as having been “obviously false”, access having in fact been gained by Mr Wilkhu, as the Company’s IT administrator, albeit in the name of Mr Onea. It was the Company’s own evidence, in the words of Ms Kolasinska, that as to alleged unauthorised access, apart from the alleged events of 4 October 2021, there were only a “handful of incidents” (comprising 7 of the alleged 64 occasions of unlawful access). That circumstance alone must tend to diminish the basis upon which Mr Onea was dismissed, and lend support to his case (albeit of course not before me for final determination) that his dismissal was unjustified, and was instead pursuant to a pre-orchestrated plan to deprive him of his shares and end his participation in the Company’s affairs. In any event, I did not understand Mr Lightman to argue that Mr Onea’s claim was, in this respect, unarguable or plainly without merit, or not genuinely advanced.

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.

Third, Mr Onea does not seek a winding-up order against the Company.

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.

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:

Having reached that view, the next question is whether or not my conclusions are affected or undermined by the arguments that the proceedings are an abuse of process (and so should be struck out, wholly or in part). In my judgment they are not: the proceedings are not abusive; but in any event, even if they were, the court has a discretion regarding relief, and in the present circumstances, the appropriate order is to direct a split trial, for the reasons stated above. My reasons are as follows.

First, it was of course common ground that Mr Onea knew that he was not a member, and knew that he did not have standing to apply as a member when the Petition was presented; it is for that reason that he seeks rectification. Mr Lightman described Mr Onea’s approach as “brazen”, pursued in the face of his opponents’ warnings that it was inappropriate.

For the following reasons, I do not accept that in consequence of Mr Onea’s knowledge of his lack of standing (rather than, or in combination with, its mere fact) the Petition comprises, and must be struck out as, an abuse of process:

Second, as I have explained above at paragraphs 99-100, the mere fact of a rectification claim being made by petition (or by some originating process other than Part 8 Claim Form) does not render it an abuse; on the contrary, it may be wholly appropriate; at most it would be a procedural irregularity. In the present case, given the scope and nature of the dispute regarding Mr Onea’s membership, I am in any event doubtful that it would have been procedurally appropriate to make the claim under CPR Part 8 rather than Part 7, and if it could have been made under Part 7, it can, in principle, equally be made by petition. But aside from that:

Finally, as to the argument that it is an abuse by means of an unfair prejudice petition to advance a claim made primarily against the company, which is only ever a nominal party to such proceedings:

In my judgment, for the following reasons, there are no grounds on which to stay the Petition pending the outcome of the Confidentiality Proceedings.

First, although the Confidentiality Proceedings will (for the purposes of deciding whether the Company is entitled to permanent injunctive relief) determine whether or not Mr Onea is entitled to retain and/or use certain of the Company’s documents and/or information, that issue does not affect his right to use and disclose those disputed documents in the present Petition proceedings. That is clear from the express terms of the Order made by the Deputy Judge on 27 June 2022 and explained above at paragraph 31. It follows that contrary to Mr Lightman’s principal argument in support of a stay, there is no need to await the outcome of the Confidentiality Proceedings in order to know whether the disputed documents are capable of being used and disclosed in the present proceedings: there is no impediment to their use. Further, as Mr Halban pointed out, the documents, if relevant, would have to be disclosed by the Company and/or the other Respondents to the Petition in any event.

Second, whilst there is clearly some overlap between the proceedings, it is not sufficiently substantial to justify a stay. The Confidentiality Proceedings concern, as outlined above at paragraph 33, issues of documentary confidentiality, access and use: the Company seeks permanent injunctive relief. However, only Mr Onea and the Company are parties, and the proceedings will not determine, for example, whether or not Mr Onea was properly dismissed, whether he was a “Good” or “Bad Leaver”, or whether he is entitled retrospectively to be a member - let alone whether he has been unfairly prejudiced in that capacity, is entitled to a remedy as a result, and if so what.

Third, the Confidentiality Proceedings are listed for trial beginning in the week commencing 30 October 2023. They will likely be concluded (and their final effect capable of being considered) far in advance of the Petition proceedings, and at a point before the Petition proceedings have advanced very much further.

Accordingly, for all the reasons given, the Application is dismissed. I will, if necessary, hear the parties as to the appropriate form of order required to reflect my judgment.