Monday 15 February 2021

UK: Scotland: unfair prejudice petitions - the reasonable offer and abuse of process

The Court of Session (Outer House) delivered its opinion in Cheyne and Cheyne v Cheyne Engineering Ltd and Balmoral Group Holdings Ltd [2021] CSOH 17 last week. This is an important decision on the operation in Scotland of the unfair prejudice remedy - sections 994 to 996 of the Companies Act 2006 - because of the confirmation it provides of the court's power to dismiss an unfair prejudice petition as an abuse of process where a reasonable offer has been made for the petitioner's shares.  To quote Lord Ericht (at para. [57]): 
The unfair prejudice provisions in the Companies Act 2006 apply in both Scotland and England. The remedies given are equitable, and the court has a wide discretion. In these circumstances it seems to me that it is inherently desirable that there is consistency between the approach of the Scottish and English courts. Accordingly, in my opinion, where the respondent to an unfair prejudice petition makes a reasonable offer which gives the petitioner all the remedy which the petitioner could realistically expect to obtain, and the petitioner refuses the offer and continues with the litigation, it is competent in Scotland for the court to dismiss the petition as an abuse of process. I reserve my opinion as to whether dismissal for abuse of process for refusal of an offer would be competent in Scotland in any petition or action other than an unfair prejudice petition". 

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