Routledge v Skerritt & Ors [2019] EWHC 573 (Ch) (13 March 2019)

Routledge v Skerritt & Ors [2019] EWHC 573 (Ch) (13 March 2019)

The absence of a board policy on dividends, as required by the Special Resolution and Shareholders Agreement, means there was no basis for treating A and B shares differently for dividends. Therefore, the A and B shares rank pari passu for dividends. The failure to pay dividends to Mr Routledge on his B shares, while paying substantial dividends to A shareholders, was unfairly prejudicial conduct. The directors breached their duties by not considering dividends for B shares and not adopting or notifying a dividend policy. Delay or acquiescence by Mr Routledge did not bar relief.

Citation
[2019] EWHC 573 (Ch)
Parties
Petitioner: Michael Routledge; First Respondent: Richard James Skerritt; Second Respondent: Catherine Yvette Gabrielle Skerritt; Third Respondent: Skerritt Consultants Limited
Jurisdiction
England and Wales
Judgment Date
13 March 2019
Procedural Posture
Unfair Prejudice Petition Under Section 994 Companies Act 2006 / Liability Trial
Outcome
Petition succeeds on liability; unfair prejudice established.
Legal Topics
Unfair Prejudice, Dividends, Shareholder Rights, Directors' Duties, Share Class Rights
Company Law Equity Unfair Prejudice Dividends Shareholder Rights Directors' Duties Share Class Rights

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Parties

Michael Routledge

Petitioner

Richard James Skerritt

First Respondent

Catherine Yvette Gabrielle Skerritt

Second Respondent

Skerritt Consultants Limited

Third Respondent

Procedural Posture

Unfair Prejudice Petition Under Section 994 Companies Act 2006 / Liability Trial

Legal Issues

  1. 1 Whether the affairs of Skerritt Consultants Limited were conducted in a manner unfairly prejudicial to the interests of Mr Routledge as a member under section 994 of the Companies Act 2006
  2. 2 Whether there was a valid board policy on dividends as required by the Special Resolution and Shareholders Agreement
  3. 3 Whether the A and B shares rank pari passu for dividends in the absence of a board policy

Ratio Decidendi

The absence of a board policy on dividends, as required by the Special Resolution and Shareholders Agreement, means there was no basis for treating A and B shares differently for dividends. Therefore, the A and B shares rank pari passu for dividends. The failure to pay dividends to Mr Routledge on his B shares, while paying substantial dividends to A shareholders, was unfairly prejudicial conduct. The directors breached their duties by not considering dividends for B shares and not adopting or notifying a dividend policy. Delay or acquiescence by Mr Routledge did not bar relief.

Court Disposition

Petition succeeds on liability; unfair prejudice established.

Orders

  • Declaration that the affairs of Skerritt Consultants Limited were conducted in a manner unfairly prejudicial to Mr Routledge as a member
  • Order for further hearing to determine appropriate relief, including possible purchase of Mr Routledge's shares at fair value and/or compensation for unpaid dividends