The substantive proceedings in Queensgate Place Ltd v Solid Star Ltd & Ors [2023] EWHC 93 (Ch) took the form of an unfair prejudice petition under s 994 Companies Act 2006 by which the petitioner, Queensgate Place Ltd, sought an order for for the purchase of its shares in the first respondent, Solid Star Ltd, by the other respondents because of conduct unfairly prejudicial to it as a shareholder. The petition was contested. A seven day trial on liability had already been listed for 27 February 2023. By an application made in October 2022 Queensgate sought summary judgment against the second respondent (Viking) and the third respondent (Mr Bhundia). By a further application made at about the same time, the fourth respondent (Mr Bhundia’s brother, Minesh Bhundia) applied for an order that Queensgate should provide security for his costs.
The petitioner’s case was that, whilst summary judgment on a petition under s 994 was unusual, especially in a case such as this in which allegations of dishonesty were made, summary relief was in principle available in all kinds of proceedings; and this was an overwhelmingly clear case of dishonesty justifying that course. Counsel for the petitioner submitted that his client’s case was overwhelming, and he plainly made submissions that went a long way towards making out that case. Nonetheless, the judge, whilst accepting that there was “a sound basis for [counsel’s] submission that there had been…dishonest breaches of Mr Bhundia’s fiduciary duty as a director of Star,” there remained “compelling reasons for a trial”. They were:
(1) There were different aspects of the dishonesty alleged, and the evidence on paper regarding some appeared stronger than others.
(2) The trial was just weeks away.
(3) There was a realistic prospect that that trial would take place, and substantial costs had already been incurred; so summary judgment in this case would achieve much less in terms of saving costs and court time than would be normal (see the notes to CPR 24.2(b) in the White Book).
(4) The trial was on liability only.
(5) Summary judgment was not sought against Minesh Bhundia. “A summary finding of liability against Viking or Mr Bhundia might run the risk of impacting on Minesh Bhundia’s defence at trial”. Following Iliffe v Feltham Construction Ltd, the judge decided that similar issues remained to be determined at a full trial as between the other parties, which constituted a compelling reason not to enter summary judgment within the meaning of CPR 24.2(b). “A judge in multi-party litigation must aim to do justice as between all parties involved in the case.”
As to security for costs, the judge began by noting the concession that the conditions for an order set out in CPR 25.13 were met. Queensgate was incorporated out of the jurisdiction and there was reason to believe that it would be unable to pay Minesh Bhundia’s costs if ordered to do so. However, as the judge noted, CPR 25.13(1) also provided that the court was obliged to have regard to all the circumstances and to be satisfied that it was just to make an order. He referred to the principles to be applied as summarised by the Court of Appeal in Keary Developments Ltd v Tarmac Construction Ltd:
(1) The court had a complete discretion whether to order security. (2) The possibility that the claimant would be deterred from pursuing its claim by an order for security was not of itself a sufficient reason for not ordering security. (3) The court was obliged to weigh the injustice to the claimant if prevented from pursuing a proper claim against the injustice to the defendant if no security was ordered and any costs ordered in the defendant’s favour could not be recovered. (4) The court was obliged to have regard to the claimant’s prospects of success, but without going into the merits in detail unless it was clear that there was a high degree of probability of success or failure. (5) The court could order any amount up to the full amount claimed by way of security, provided that it was more than a simply nominal amount, but was not bound to make an order of a substantial amount. (6) The lateness of an application was a circumstance which could properly be taken into account: “It is proper to take into account the fact that costs have already been incurred by the claimant without there being an order for security. Nevertheless it is appropriate for the court to have regard to what costs may yet be incurred.”
The judge took the view that the case against Minesh Bhundia was not so strong as to justify the dismissal of the application. As for delay, there were no hard and fast rules, he said: even if there was delay, security could be limited to future costs (Re RBS). That was in fact the course the judge took, making an order limited to future costs as from the date of the application. After some debate about the figure, he ordered that security be given in the sum of £280,000 within 14 days by solicitors’ undertaking, failing which the claim against Minesh Bhundia should be stayed.
Summary judgment is virtually unknown on an unfair prejudice petition, and this decision of His Honour Judge Jarman KC, sitting as a High Court judge, shows how difficult it is to achieve it. Generally, the factual issues are simply too complex and wide ranging.
The limited success of the application for security for costs demonstrates the advisability of applying at an early stage. The judge’s decision to limit security to future costs was plainly the product of a careful balancing exercise between the lateness of the application in this case and the obvious justification for seeking it.