UK: Court Of Appeal Judgment: Thomas v Dawson & Anor [2015] EWCA Civ 706

Last Updated: 1 October 2015
Article by Chris Smith

In Thomas v Dawson & Anor [2015] EWCA Civ 706 the Court of Appeal was called upon to make a judgment on whether the Court has absolute discretion to make awards in unfair prejudice petitions under s 994 Companies Act 2006.


The Companies Act 2006 ("CA 2006") allows for a member of a company to make an unfair prejudice petition if it is believed that a company activity is being carried out incorrectly and is unfairly prejudicial to the member's interest (s994). If a petition is successful, s996 provides the Court with the power to make an order to remedy the situation as they see fit.

In Thomas v Dawson and anor there was a breakdown in the business relationship between Mr Thomas and Ms Dawson, who had set up a residential care home business, through their company Invicta. Mr Thomas and Ms Dawson were the only two directors, each holding one share. Mr Thomas was more actively engaged in running the business. However, Ms Dawson, as a director and shareholder, was also involved in the running of the company. The breakdown of the business relationship came to a head in 2014, with both parties making unauthorised withdrawals from the company bank account. Ms Dawson used the money to repay a director loan by her to Invicta, which resulted in an Order being issued for the sums of the loan to be repaid to the company. This was the basis for Mr Thomas' unfair prejudice petition under s 994 CA 2006, along with the fact that Ms Dawson (i) was restricting Mr Thomas' access to the company accounts and (ii) refusing to advance to him his proper salary.

The Court at first instance found that the petition was successful. Prior to making an Order, the judge made an Interim Order that an independent valuation should be carried out to establish the value of the shares in the company, by reference to the company's assets, profitability and future prospects. The valuation concluded that Invicta was balance sheet insolvent, but not commercially insolvent.

The Order given under s 996 CA 2006 was the grant of an option to Mr Thomas to purchase Ms Dawson's share in Invicta for £50,000. In calculating this figure, the Judge considered the amount of income Ms Dawson would have received had she remained a shareholder and the liability outstanding on the Order made against Ms Dawson for the repayment of the director loan. Mr Thomas appealed the decision, stating that the judge had not followed procedure and had veered away from the results of the valuation, which indicated the share should have had a nominal value, due to the balance sheet insolvency.

The Court of Appeal upheld the first instance decision. S 996 of the CA 2006 states that the judge has absolute discretion in making orders. In coming to its conclusion, the Court of Appeal considered whether the price of Ms Dawson's share should have been a nominal amount. It was concluded that because the Interim Order was not a final order, the judge was not bound by it and the valuation did not actually provide a price for the shares, so it was therefore for the judge to decide what value to put on Ms Dawson's share. Additionally, by losing her share, Ms Dawson lost the benefits it provided and thus it was just and equitable to provide her with a figure for the income she would have received had she retained her shareholding. Finally, it was considered that whilst this was a difficult case, the decision of the judge to include the value of the Order against Ms Dawson was just and equitable, because had Ms Dawson retained her share in the company, the amount would have unlikely been returned to Invicta.


The Court of Appeal's decision demonstrates the width of the Court's discretion. Parties issuing a petition under s 994 CA 2006 cannot be certain of the Order the Court will make; the background fcats will all play an important role in the Court's decision. The court will consider what is just and equitable in the situation. The Court will take all factors into consideration and make a judgment that is appropriate, having considered all the circumstances.

This article was written by Chris Smith, Solicitor, Corporate department with assistance from Caroline Mathews, Trainee Solicitor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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