UK: Scotland: remedies for unfairly prejudicial conduct and the powers of the court

The Court of Session (Inner House) has today given its opinion in Li v Holouis Ltd [2009] CSIH 87. The principal issue before the court concerned the remedies available to the Sheriff court when granting relief for unfairly prejudicial conduct under Section 996 of the Companies Act (2006). Lord Carloway delivered the opinion of the court and, at paras. [14] and [15], stated:

Section 994 of the Companies Act 2006 provides, inter alia, that a shareholder can apply to the Court for relief in a situation where a company's affairs are being, or have been, conducted in a manner unfairly prejudicial to him. Section 996 allows the Court to "make such order as it thinks fit". It is recognised that this gives a court the "widest possible discretion" in the selecting the remedy (Wilson v Jaymarke Estates Ltd 2006 SCLR 510, Lord President (Cullen) at para [12]). However, this does not mean that the court can create new remedies, of a type which it otherwise has no power to grant. Thus, it can select from its armoury of competent remedies the one which it thinks appropriate to a given situation. Obvious examples will be orders for payment, ad factum praestandum and interdict. But, in the absence of an express statutory provision, a court cannot grant a remedy which it has no general power to grant.

The Sheriff Court has no jurisdiction to grant the remedy of reduction of documents (Dobie: Sheriff Court Practice, p 22, under reference to Donald v Donald 1913 SC 274). As distinct from the situation where a statute permits the Sheriff Court to "set aside" a decision or other matter as between the parties to a cause or where reduction ope exceptionis constitutes a defence, reduction of deeds can have a much wider effect. It can affect third parties, over which the Sheriff Court may have no general jurisdiction. In the case of heritable rights, any potential Sheriff Court jurisdiction may rest exclusively in another Sheriffdom. Hence, reduction has tended to be restricted to the Court of Session. It may be that this will change in the future (Report of the Scottish Civil Courts Review chapter 4, para 141, recommendation 29) but that is the law at present. The Sheriff's objections to it, however well reasoned in practical terms, cannot change that. In short, the Sheriff Court has no power to grant reduction in a petition under section 994".

Note: a glossary of Scottish legal terms is available here.