is a UK company law case dealing with

unfair prejudice Unfair prejudice in United Kingdom, company law is a statutory form of action that may be brought by aggrieved shareholders against their company. Under the Companies Act 2006 the relevant provision is s 994, the identical successor to s 459 Compa ...

under section 459 Companies Act 1985 (now section 994 Companies Act 2006). It was decided at first instance by Peter Smith J.

Facts

Rock Nominees Ltd was part of the business empire of

Lord Ashcroft Michael Anthony Ashcroft, Baron Ashcroft, (born 4 March 1946) is a British-Belizean businessman, pollster and politician. He is a former deputy chairman of the Conservative Party. Ashcroft founded Michael A. Ashcroft Associates in 1972 and is ...

, a Conservative

life peer In the United Kingdom, life peers are appointed members of the peerage whose titles cannot be inherited, in contrast to hereditary peers. In modern times, life peerages, always created at the rank of baron, are created under the Life Peerages ...

. It is a company which holds shares on behalf of other companies. It had 201,300 shares for Gambier Holdings Inc. (a British Virgin Islands company) and 65,000 shares for Kiwi Ltd. (a Belize company) invested in RCO (Holdings) plc. Its stake made up 2.48%. RCO itself was in the cleaning, catering and security porterage business. In 2000, ISS (UK) Ltd took over RCO, acquiring 96.4% of the shares. It made one of RCO's subsidiaries transfer its shares to one of ISS's subsidiaries for £30,117,784. Rock Nominee's filed for a petition of unfair prejudice on the grounds that this was a transaction at an undervalue. It did not reflect the value to the purchaser of the synergies arising from the sale or the value of avoiding risk from a sale on the open market.

Judgment

High Court

Peter Smith J, in a lengthy judgment held that the petition would be refused. Although some of the conduct by RCO constituted a breach of fiduciary duty, Rock Nominees had not discharged the burden of proof to show that the shares were transferred at an undervalue. The evidence suggested, including a report from a financial expert that Rock Nominees called, that the price did reflect a premium for "synergies". Moreover, Peter Smith J was inclined to draw adverse inferences from some of the murkier omissions in the evidence that Lord Ashcroft had given.

Court of Appeal

Potter LJ, Jonathan Parker LJ and Sir Swinton Thomas dismissed the appeal. They held that although the directors had breached their fiduciary duties, Rock Nominees had not suffered prejudice because the best price had been achieved. ROC could not have compelled ISS (UK) Ltd to pay more because only ISS (UK) Ltd was attracted by the potential cost saving. Furthermore, as majority shareholder ISS (UK) Ltd was able to place RCO in members' voluntary liquidation and at any time force a sale of assets on the open market.

Facts

Judgment

High Court

Court of Appeal

See also