Weatherley v Weatherley [2019] 1 BCLC 520

Facts

  • The case concerned a family-owned company where shareholders, who were family members, disputed among themselves.
  • One of the shareholders alleged unfair prejudice under section 232 of the Companies Act 2006 (formerly section 459 of the Companies Act 1985).
  • The alleged unfair conduct by the majority was said to have caused harm to the petitioner’s interests as a member.
  • The court considered whether there was a direct connection between the alleged conduct and the claimed loss.
  • The claimant’s own conduct in relation to the dispute was examined.

Issues

  1. Whether the petitioner could establish a direct connection between the majority’s alleged unfair conduct and their loss as a member.
  2. Whether alternative legal remedies—such as breach of contract or enforcement of shareholder agreements—would preclude a claim for unfair prejudice.
  3. Whether the petitioner’s own conduct should affect the availability or extent of relief under section 232.

Decision

  • The court held that claimants must prove a direct causal link between the alleged unfair conduct and their loss as shareholders.
  • Unfairly prejudicial conduct that does not result in a direct loss to the member may not give rise to relief under section 232.
  • Where alternative remedies are available to address the dispute—such as breach of contract claims or enforcement of shareholder agreements—the court may refuse to grant relief for unfair prejudice.
  • The petitioner’s own involvement in or contribution to the dispute is relevant; relief may be denied or reduced if the petitioner contributed to the harm.

Legal Principles

  • A successful unfair prejudice claim under section 232 requires evidence that the impugned conduct directly caused harm to the petitioner’s interests as a member.
  • The remedy is not available where loss is not directly linked to the alleged unfair conduct; claimants must demonstrate specific financial impact.
  • The existence of alternative remedies, such as contractual claims, can bar unfair prejudice relief, making section 232 a remedy of last resort.
  • The conduct of the petitioner is material in assessing whether and what relief should be granted.
  • The approach is consistent with earlier decisions, such as Re a Company (No. 005207 of 1985) [1986] BCLC 376.

Conclusion

Weatherley v Weatherley [2019] 1 BCLC 520 clarifies that, for unfair prejudice claims under section 232 Companies Act 2006, petitioners must establish a direct connection between the alleged unfair conduct and their loss. The availability of alternative remedies and the petitioner’s own conduct are significant in determining whether relief will be granted, confirming the necessity of compelling evidence and a careful assessment of all circumstances.

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