UK: England and Wales: unfair prejudice and the reasonable offer

Judgment was given today by the Court of Appeal in Prescott v Potamianos [2019] EWCA Civ 932. This unanimous judgment of McCombe, Leggatt and Rose LJJ concerned the unfair prejudice remedy (sections 994-996 of the Companies Act 2006) and is noted here for two reasons.

The first reason is that, in the context of the remedy that is provided, the court has endorsed the view expressed by Arden LJ (as she then was) about the adaptable nature of the remedy. The case law has, the court noted, "consistently declined to introduce 'bright lines' and the assessment of an offer to purchase is no exception to this flexible approach" (para. [130]).

The second, related reason, is that the court rejected the view, expressed by the trial judge ([2018] EWHC 1924 (Ch), para. [360]), that the assessment of the offer to purchase, in order to determine its reasonableness in the sense explained by Lord Hoffmann in O'Neill v Phillips [1999] 1 WLR 1092, was a "logically antecedent question" to the assessment of the alleged unfairly prejudicial conduct. In the court's view, "[the] terms of any offer made by the majority to purchase the petitioner's shares, the circumstances in which the offer was made and the reasons why it was rejected are one aspect of the overall consideration by the court of whether an unfair prejudice petition should succeed" (para. [130]).

Whilst reluctant to set out an exhaustive list of factors relevant to deciding an offer's fairness, the court nevertheless discussed what it regarded as those factors that were relevant in most cases (see paras. [131] to [136]). But it stressed that there was no one feature of an offer that would make it automatically either reasonable or unreasonable (para. [130]).