The judge found that the affairs of BGHL had been conducted in a
manner that was unfairly prejudicial to the interests of some of
its members. The judge then considered what order he should make to
"give relief in respect of the matters complained of" (s
996(1)) and selected a share purchase order in terms of s
In order to determine how much the petitioners were to be paid
for their shares, the judge looked at the value of BGHL and the
cumulative value of the petitioners' holdings. The reasonable
valuation of BGHL at the date of conclusion of the case was
accepted by the court to be £32,000,000, with the cumulative
value of the petitioners' holdings being £20,614,400.
However, the respondents argued that due to Mr Gray's
participation in bribery offences involving BGHL, he was regarded
as a "Bad Leaver" under BGHL's Articles of
Association. This meant that he was entitled on disposal of his
shares to be paid whichever was the lesser of their fair value or
their subscription or par value. The judge agreed with this
argument and made an order for purchase of the shares at par value
The appeal was in respect of the decision to order the share
purchase for the sum of £2,444,000. The petitioners'
arguments included the following:
The order could not properly be regarded as giving relief in
respect of the matters complained of. The order had the practical
effect of reducing the value of the petitioners' shares by more
than £18,000,000, ultimately benefiting the parties whom the
judge had found had caused the affairs of BGHL to be conducted in a
manner that was unfairly prejudicial to the petitioners;
The Bad Leaver provisions in article 126.96.36.199 of BGHL's
Articles amounted to an unfair and unenforceable penalty clause,
and so could not properly form a model for an appropriate disposal
of the petition.
The appeal decision
It was a close call, but in a 2-1 majority decision the appeal
The court had a wide discretion over the precise terms of an
order made under s 996(2)(e). This was to enable the order to be
fair and equitable but also to have regard to all of the
circumstances of the case, including Mr Gray's conduct. The
discretion exercised by the court when fixing the purchase price
had to be exercised rationally and judicially, in accordance with
settled legal principle, upholding any legal agreement between the
parties and on the basis of evidence. The default figure for a s
996(2) purchase price was confirmed to be the value of the
shareholding that was to be purchased. However, the way the shares
were valued could be determined by the terms of the company's
articles of association and any shareholders' agreement, in so
far as conferring rights or imposing duties on the
Although the large discrepancy between the values that could be
attributed to the petitioners' shares was difficult to ignore,
the penal or otherwise nature of Article 188.8.131.52 fell to be judged
as at the date when it was entered into and not when it fell to be
It had already been established that it was for the court to
decide the price at which the shares were to be purchased and for
this decision to be rational, the price fixed had to be one which
bore a relationship to the court's findings in fact. By looking
at the evidence about how the business of the group was conducted
and the personalities of those principally involved, it was
accepted that the Bad Leaver mechanism did not apply. However, if
this was viewed with regard to the fact that the BGHL board would
have reasonably concluded that the petitioner had committed an act
of gross misconduct (which would have been decided had it not been
for litigation), then his employment would have been terminated and
he would have been removed from all his group directorships and the
article 184.108.40.206 provisions invoked, requiring the sale of his
shares at par value.
The judge at first instance had not gone "too far too
fast". He had been invited to determine a question of
hypothetical fact. He was entitled to arrive at his decision by
"a certain degree of cutting the Gordian knot", something
he was able to do by virtue of s 996.
This may not be the end of the argument in this interesting
case; a further appeal may be sought.
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