Pettie & Ors v Thomson Pettie Tube Products Ltd & Ors [2000] ScotCS 298 (29 November 2000)

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[1] This petition is brought in terms of section 459 of the Companies Act 1985 and seeks certain remedies under section 461 of that Act. Section 459, as amended, enables a member of a company to apply to the Court by petition for an order under section 461 "on the ground that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or of some part of its members (including at least himself) .....". Put very shortly, the matter of which the petitioners complain as amounting to unfairly prejudicial conduct is a decision by the directors of the company in question - Thomson Pettie Tube Products Limited (the first respondent) - whereby on 26 March 1999 allotments of ordinary shares totalling 100,000 in number were made at par, below their proper value, to the shareholders other than the petitioners, namely the second and third respondents (both of whom held office as two of the three directors of the company) and the fourth respondent. The allotment is referred to in the pleadings as "the Disputed Allotment" and I shall utilise that terminology where appropriate.

[2] The petition was brought on 23 October 1998 in circumstances to which I shall revert. At that time the authorised share capital of the company was £169,737 divided into 140,000 ordinary shares of £1 each and certain cumulative redeemable preference shares of £1 each, the existence of which in the authorised share capital is not relevant and may be ignored for present purposes. All of the ordinary shares had been issued and were fully paid. By ordinary resolution of the company passed on 29 October 1998 the authorised share capital was increased by raising the number of ordinary shares by 1,000,000 to 1,140,000. Prior to, and since, the Disputed Allotment the petitioners together held 45,000 ordinary shares. All of those shares had originally been held by the first petitioner - Mr Pettie - who along with the second respondent - Mr Thomson - had acquired the company as a "shelf company" to acquire the business of producing steel tubes carried on by another company, John Inshaw (Glasgow) Limited, which had gone into receivership. Mr Pettie later transferred all but 5,300 of those 45,000 shares to the two inter vivos trusts whose trustees are the second and third petitioners respectively. For their part, prior to the Disputed Allotment, the respondents held all the other issued ordinary shares, Mr Thomson having 45,000, Mr Wilson (the third respondent) 10,000 and British Steel (Industry) Limited (the fourth respondent) 5,263. The respondents' shareholdings thus totalled 60,263 shares. In approximate percentage terms the petitioners held 43% of the ordinary issued shares in the company. In consequence of the Disputed Allotment the second respondent's holding increased from 45,000 to 119,672 ordinary shares; that of the third respondent from 10,000 to 26,594 ordinary shares; and that of the fourth respondent came to be 13,997 ordinary shares. No shares were allocated to the petitioners, whose holdings, expressed as a percentage of the whole, thus fell from 43% to around 22% and accordingly below the level for "negative control".

[3] The Disputed Allotment of the £1 ordinary shares was made at par. Statement V of the petition adverts to the audited accounts of the company for the 18 months to 30 September 1998. Those accounts are averred to show that at that date "the Company had (i) fixed assets with a total value of £1,711,545, (ii) current assets with a total value of £1,011,402, (iii) net assets of £1,079,856 and (iv) an accumulated credit balance on its profit and loss account of £738,094". The 1998 Accounts showed also that in that 18 month period the Company made a profit after taxation of £441,428.

[4] In Statement XII of the petition the petitioners go on to aver that at 29 October 1998 the value of the whole share capital in the company was £4,781,000 and that each ordinary £1 share had a value of £45.42. That valuation is averred to have been based on the company's then assets and earnings and the approaches from certain prospective purchasers of whom details are given in the pleadings. The averments on behalf of the directors, while admitting the approaches from prospective purchasers for the whole of its share capital merely narrate in their answers that the market value of an ordinary share in the company at the relevant date was "not known and not admitted".

[5] As already mentioned the company was originally acquired by Mr Pettie and Mr Thomson, who became its directors on that acquisition. In addition to holding office as director each entered into a service contract with the company, the petitioner being the finance director. Despite being profitable throughout its existence, the company has never paid any dividends to its shareholders and it is admitted by the respondents that the remuneration which Mr Pettie and Mr Thomson received under their service contracts was "beyond the remuneration which comparable companies would have paid for their services", and that the remuneration "included, in substance, a return on their investments in the company".

[6] The relationship between Mr Pettie and Mr Thomson suffered a deterioration. At a board meeting on 10 December 1997 a motion of no confidence in Mr Pettie was passed by those present. This meeting had been preceded by board meetings in 1996 at which Mr Pettie had been reprimanded and warned about certain failings in the execution of his duties as finance director. The petitioners aver that the reprimand and the warning were each unjustified, a contention which is also asserted regarding the no-confidence motion. Be that as it may, at all events it is accepted that following the passing of that motion it was agreed that Mr Pettie would be said to have left the company "by mutual consent, but remain a major shareholder". It is also accepted that there was also agreed that there be a delay in his departure to allow the first petitioner to organise his finances and tax planning. Mr Pettie then ceased to be a director and was thereafter paid as a consultant. The inter vivos trusts under which the second and third petitioners respectively act were created on 27 January 1998.

[7] In May 1998 Mr Pettie and Mr Thomson discussed the potential acquisition by the company of the whole share capital in another company ("JGB") to which the petitioner expressed his agreement in principle. On 3 September 1998 the company's solicitors wrote to the first petitioner saying, among other things, that the company's bankers would prefer to see the additional funding needed for such an acquisition provided by way of an increase in the equity capital. It is averred and admitted that on 10 September 1998 the second respondent wrote to the first petitioner telling him that (i) the directors intended to issue further shares worth £100,000 to facilitate the JGB acquisition, (ii) that the "target date" for completion of the JGB acquisition was 25 September and (iii) that the company was terminating its consultancy arrangement with the first petitioner. It is further averred and admitted that on 12 October 1998 the secretary to the company wrote a circular letter to each shareholder in which "(i) he stated that the directors proposed to allot 100,000 new ordinary shares .... at a price of £1 each and (ii) he invited each shareholder to apply in terms of Article 8 for his proportion of the new shares no later than 29 October 1998". [The reference to Article 8 is a reference to the Articles of Association. Article 8 provided in effect that before any new equity shares were issued they should be offered to the holders of the existing equity shares in proportion to their existing holdings].

[8] The petitioners responded to this proposal by a letter of 15 October 1998 from their solicitors. In that letter they objected to the price at which the new shares were to be allotted and sought an undertaking that the allotment would not proceed at that price. In the absence of a satisfactory response to that letter, the petitioners brought this petition. A motion for interim interdict was withdrawn on the respondents giving an undertaking not to allot any shares without giving at least 48 hours notice of that intention to the petitioners. Those undertakings were then withdrawn in March 1999. A motion by the petitioners for interim interdict having been refused on 23 March 1999 the directors then proceeded to make the Disputed Allotment on 26 March 1999, without further reference to the petitioners. It is accepted that on 26 March 1999 the proposed acquisition of JGB was no longer being pursued.

[9] In Statement XIII of the petition it is averred that the effect of the Disputed Allotment was very significantly to reduce the value of each of the shares held by the petitioners. It is averred that before the Disputed Allotment "the total value of the petitioners' shares (calculated at a proportion of the value of the whole share capital) was £2,043,900. After the disputed allotment the total value of their shares (as a proportion of the increased share capital) was £1,070,100. As a result of the disputed allotment the total value of the shares (including the new shares) held by the second, third and fourth respondents was increased by £973,800. They however paid only £100,000 to the company". In response the directors in their pleadings admit that the effect of the disputed allotment was to dilute the value of each of the shares held by the petitioners but they say the extent of any dilution is not known or not admitted by them.

[10] It is convenient to mention at this point that all of the respondents have joint representation. The company adopts the averments made on behalf of the second and third respondents. Although there are certain differences between the answers lodged on behalf of those respondents and the answers for the fourth respondents it was not suggested at the hearing before me that any distinction was to be drawn between the positions of the respective respondents.

[11] At that hearing - by which time the petition and answers had been amended to take account of events subsequent to the initial lodging of the petition in October 1998 - Mr Hodge, for the petitioners, invited me to find that on the undisputed facts the allotment to the majority shareholders of the £1 shares in the Disputed Allotment at par - when they had a much greater value - constituted unfairly prejudicial conduct towards the minority formed by the petitioners. No good reason having been advanced for issuing shares at par, no relevant defence to that contention had been offered. The Court should accordingly make a finding that the petitioners had been the subject of unfairly prejudicial conduct. That should be done by upholding the petitioners' second and third pleas-in-law, reserving for further consideration, and if need be, proof, the question of the proper remedy to be afforded, the remedies currently sought being alternatively an order for the purchase by the respondents of the petitioners' shares or reduction of the Disputed Allotment.

[12] In support of that principal proposition of his argument, counsel for the petitioners put forward a number of subsidiary propositions.

[13] Firstly, in the exercise of their powers the directors of a company were under a duty to act fairly as between different shareholders. This applied not just where there were different classes of shareholder but also where shareholders of the same class had differing interests. In support of that proposition counsel referred to Mutual Life Insurance Co of New York v Rank Organisation Limited [1985] B.C.L.C.11; Re BSB Holdings Ltd (No.2) [1996] 1 B.C.L.C.155. Secondly, in issuing new shares directors were under a duty to issue them at the highest premium that could reasonably be achieved, unless there were a good reason, in the commercial interest of the company, for issuing the shares at a materially lower price. In support of the existence of this duty, which counsel for the petitioners described as being at the heart of the case, reference was made to the speech of Lord Wright in Lowry (Inspector of Taxes) v Consolidated African Selection Trust Ltd [1940] A.C.648, 679; Shearer (Inspector of Taxes) v Bercain Ltd [1980] 3 All.E.R.295; and Meyer v Scottish Co-operative Wholesale Society 1958 S.C.(H.L.) 40. The third subsidiary proposition was that it was unlawful for the majority shareholders to exercise their powers to appropriate any part of the assets of the company to themselves alone. In support of that proposition counsel referred to Burland v Earle [1902] A.C.83, 93 and In Re a company, ex parte Glossop [1988] 1 W.L.R.1068. Against the background of those broader propositions and having referred to O'Neill v Phillips [1999] 1 W.L.R.1092, counsel for the petitioners then focused more closely on the scope of unfairly prejudicial conduct within the contemplation of section 459 of the Companies Act 1985. He then submitted that (a) a material breach of duty by directors which harms the interests of a member who has not consented to that breach constitutes unfairly prejudicial conduct; and (b) acts of the majority which infringe the rights of a minority are prima facie unfairly prejudicial conduct. As regards both propositions Mr Hodge entered the qualification that there may be special circumstances which might explain and overcome the prima facie unfairness resulting from such a breach or infraction.

[14] While accepting that there were matters of averment by the petitioners which were not accepted by the respondents - such as the petitioners' contention that there was no justification for the motion of no confidence - counsel for the petitioners made plain that he did not seek to rely on those, nor upon the fact that between 23 and 26 March 1999 the petitioners had not been given any further opportunity to consider whether to subscribe for the new shares. The crucial matter was that the proposal which prompted objection and the bringing of these proceedings was the allotment of new shares at par - that is to say at a price below their true value. The Disputed Allotment gave to the majority purchasing shareholders a "windfall" gain at the expense of the minority. Given that obvious, prima facie result, the directors had to put forward some coherent explanation for issuing the shares at a par, rather than a price approximating to their much greater value. Mr Hodge went on to submit that no such explanation was proffered. There was no suggestion in the pleadings for the respondents that the value of the shares was materially less than that averred by the petitioners. There was no averment of any commercial justification for the conscious allotment of shares at a price materially below their value. There was accordingly no defence stated on the question of unfairly prejudicial conduct in the allotment of shares recognised as reducing the value of the petitioners' shareholding and any enquiry should accordingly be confined to questions of remedy.

[15] In response Mr Currie, for the respondents, stated that the respondents offered a general enquiry by way of proof before answer. He submitted firstly that even if there were unfairly prejudicial conduct the Court had a discretion in relation to whether to grant a remedy and, if so, the form which that remedy might take. Accordingly, without hearing evidence, the Court could not make that ultimate decision. Evidence on the question of remedy might be at least partially co-extensive with evidence on the question whether there was unfair prejudicial conduct. Counsel said that he was unaware of any instance in which in a section 459 proceeding an order had been made without previous inquiry by way of evidence, but that statement was later qualified by Mr Currie, on his attention having been drawn to cases such as Whyte, Petitioner 1984 S.L.T.330 and McGuinness v Bremner plc 1988 S.L.T.891. Secondly, it was submitted that the court adopted a broad approach to the question whether there was unfairly prejudicial conduct. It was not right to say that if the directors were in breach of their duties it followed that there must be unfairly prejudicial conduct. The two were not to be equiparated. While Mr Currie did not take issue with the exposition by counsel for the petitioners of the particular duties of directors to which reference had been made, it was not correct to contend, in an approach which counsel for the respondents described as a "legalistic", that a breach of those duties constituted unfairly prejudicial conduct. Whether such a breach might constitute unfairly prejudicial conduct was dependent on the whole other circumstances. There was thus no legal rule that a shareholder, unwilling to subscribe for further shares in the company, was guaranteed protection from dilution of his position of control within the company. Whether there had been unfairly prejudicial conduct and whether the Court should exercise its discretion to grant a remedy were dependent in the present case on the resolution of certain facts. These, said counsel, were the petitioners' attitude to the call for further subscription; the company's need for capital; the averments made by the petitioner regarding the practice of discounting the price by 10% when making an allotment; overall fairness, including whether the petitioners had been treated equally; and any basis for an apprehension that the company would continue its policy for not paying dividends. The nature of the Court's jurisdiction under section 459 was so broadly based that the Court should not conclude at this stage that a finding of unfairly prejudicial conduct was inevitable.

[16] With a view to supporting this approach counsel for the respondents referred to certain passages in Palmer's Company Law, mainly paragraphs 8.903, 8.904, as vouching his contention that it was not enough to say that there was a breach of the director's duty. Failure to allocate shares at a premium might be a breach of duty but it was not necessarily unfairly prejudicial conduct. The actings of a petitioner may be relevant to that matter. The distinction between breach of duty, or illegality, and unfairly prejudicial conduct was evident from the terms of the judgment of Hoffman, L.J. in Re Saul D Harrison & Sons plc [1995] 1 B.C.L.C.14. Further, the conduct had not only to be prejudicial to the interests of the minority, it also had to be unfairly so. As was evident from what was said by Arden J in re BSB Holdings Ltd (No.2), at 243G and following, the context in which an allotment is to be judged involves a consideration of its purpose.

[17] In the present case, the purpose of the allotment was to raise further capital. It had been done by issuing shares at par in order to reflect an existing practice in the company. Mr Currie went on to submit that there was no authority to the effect that the issuing of shares at par, when they were worth more, constituted unfairly prejudicial conduct. The respondents did not concede that there was any general practice of allotting new shares at market value, less say 10%. On the contrary, their position was that the practice in this company had been to make new allotments at par. That had been done in the case of the company's acquisition of the company [HML] referred to in Statement XV and Answer 13. Further, the value of shares was wholly notional until such times as there might be an actual purchaser for them. Accordingly there had been, said Mr Currie, no need for the directors of the company ever to consider the value of the shares prior to inviting application for subscription at par. The petitioners had been invited to subscribe at par, as were all the other shareholders. If there were prejudice arising from the Disputed Allotment, that in turn stemmed from the petitioners' decision not to subscribe. The petitioners might thus be said to be behaving unreasonably by declining to contribute further to the share capital of the company in a situation in which they would benefit potentially from the increase in the capital value of the assets from the company while others were increasing their exposure.

[18] Counsel for the respondents accordingly invited the Court to allow a proof before answer on the petition and answers as a whole.

[19] In my view, while the petition sets out various background circumstances upon which there may not be agreement on the face of the pleadings, the complaint made by the petitioners is within a relatively restricted compass. It is not directed at the diminution in their voting power resulting from the allotment of new shares to the majority. It is directed simply at the reduction in the worth of those shares by the decision of the directors to allot new shares at par, that is to say, at a price below the actual value of a share in the company.

[20] It is, I think, evident that the issue of new shares at a price below their true worth will reduce the value of an existing shareholding unless that shareholding is increased pro rata by the addition of new shares at the issue price. In the course of his argument counsel for the petitioners gave the simplified example of a company having an issued share capital of 100 £1 ordinary shares which were collectively worth £5,000. Each £1 share would thus be worth £50. A minority 40% shareholding would therefore be worth £2,000. In order to raise further working capital of £5,000 the company might allot 100 shares at a price of £50 each. That would leave the capital value of the minority holding unaffected in the event that the holder chose not to subscribe for the new shares. However, were the directors to choose instead to raise the £5,000 by offering the shares at par, the number of issued shares would not simply double but would increase to 5,100, thereby reducing the value of each share in the company from £50 to £1.96. The minority holding of 40 shares would thus fall in value from £2,000 to £78.40. It may be added that, viewed from the majority shareholders' perspective and assuming them to subscribe at par for all the new shares, the value of their holdings increases from £3,000 to £9,917.60 although they paid but £5,000 for the new shares. This example, as counsel recognised, is simplified (it ignores for instance a discount for the value of a minority holding by reason of its being a minority holding) but it well illustrates the petitioners' complaint and the mechanism behind what is averred in Statement XIII.

[21] It is accordingly understandable why the practice of issuing shares at an undervalue is seen as being prima facie a breach of the director's fiduciary duties. In Lowrie v Consolidated African Selection Trust Ltd [1940] A.C.648 Lord Wright, 679,

I would observe that in that case the allottees were employees of the company upon whom it was desired to give the benefit of shares at a special price with a view to fostering relations between the company and the employees for the advantage of the company. In Shearer v Bercain Ltd, having just referred to Lowrie, Walton J. said, at

Along with those passages one may include the observation of Lord Denning in Meyer v Scottish Co-operative Wholesale Society 1958 S.C.(H.L.) 40, 67 that it was the duty of the directors to get the best possible price for any new issue of the shares in the company.

[22] In the present case the petitioners aver in distinct terms that the value of a share in the company was significantly superior to its nominal or par value. They set out in Statement XII inter alia that the value of the whole share capital was £4,781,000 and that the figure of £45.42 represented a fair value of a share. The respondents do not take active issue with that averment. They simply adopt the pleading formulation "not known and not admitted". Elsewhere, namely in Answer 13 they admit that the effect of the disputed allotment was to dilute the value of each of the shares held by the petitioners. At one point in the course of his submissions counsel for the respondents contended that the respondents were entitled to put the petitioners to proof of the particular value of a share which they aver and for that reason alone, the petitioners' motion must be refused. I do not agree. It is, I believe, inherent in the fiduciary duty to which reference has already been made that prior to issuing new shares directors should form a view as to the value of the shares which they are offering. It cannot be said that the value of a share in a company is something which must be outwith the knowledge of its directors to the extent of entitling them to respond with that pleading formulation to averments setting forth a distinct valuation of the shares substantially in advance of their par value. There is no suggestion in the pleadings for the respondents that the decision to select par (£1) as the appropriate price for the sale of the new shares was prompted by any assessment of value which produced a valuation of an existing share at or around par. No such suggestion was ever made by counsel for the respondents in his submission. He did submit, in reflection of the terms of Answer 18, that the value of the shares was only "notional" until such time as there was a purchaser for them. In a sense, that is simply to assert a general qualification to any valuation exercise. To my mind it cannot remove the prima facie need for directors of a company, contemplating the allotment of new shares, to consider the existing value of a share into that company. Particularly given the admissions relating to the company's accounts, and the admissions in Answer 12 regarding the approaches of prospective purchasers, I do not find this contention to be of relevance.

[23] Accordingly in these proceedings, which are petition proceedings, I conclude that no relevant material has been presented to the Court suggesting that the value of a share in the company, at the time of the Disputed Allotment, was of the order of its par value of £1 or that there is any real dispute concerning the petitioners' contention that the value of such a share was significantly greater than its par value.

[24] In these circumstances I have little hesitation in reaching the conclusion that the Disputed Allotment was indeed prejudicial to the petitioners, who did not subscribe for the new shares, by reason of its having the effect of materially reducing the value of their holdings, to the corresponding advantage of the respondents who bought the new shares at a price below their proper value. The directors were thus, at least prima facie, in breach of their fiduciary duties.

[25] However, as counsel for the respondents pointed out, under reference particularly to Re Saul D Harrison, a breach of fiduciary duty, even if causing some prejudice to the minority need not necessarily be unfair. Thus, among the guidelines which Neill L.J. sets out in that case there is to be found at page 31 -

[26] Accordingly one must ask whether the prejudice suffered by the petitioners is also unfair and that involves in turn looking to the justifications suggested by the respondents for allotting shares to themselves at a price much below value and thereby increasing disproportionately the value of their holdings, at the petitioners' expense.

[27] Counsel for the respondents sought to justify what had been done, first, by reference to what he described as the "practice" of issuing new shares at par. This had been done on a previous occasion in relation to the need to fund the acquisition of another enterprise, HML. For my part, I have difficulty in seeing how a single previous instance can properly be elevated to the status of a practice. But in any event, that allotment of shares had been effected by agreement of all concerned in the company at that time. By contrast, in this instance the propriety of the issuing of new shares at a material undervalue had been sharply challenged in advance by the letter from the petitioners' solicitors of 15 October 1998 and nothing which occurred thereafter could give any reason to believe that the petitioners were departing from that objection . Furthermore, the relationship of Mr Pettie to the remaining shareholders had also altered in the respects already indicated. The Disputed Allotment was therefore made in the knowledge of those circumstances and the petitioners' concern that the directors should adopt the course consistent with their fiduciary duty of allocating shares, not at par, but at a price fairly reflective of their true value. I accordingly regard the attempt to invoke previous "practice" as misconceived.

[28] It was also submitted by counsel for the respondents that the Disputed Allotment was not unfair since the petitioners had been treated equally with the other shareholders in that they had also been invited to subscribe for the new shares at par. The prejudice suffered by the petitioners arose because the petitioners had chosen not to accept that invitation. The respondents' position was that the petitioners had behaved unreasonably by not subscribing for the new shares, whereas others were increasing their exposure. The universality of the invitation to subscribe was thus a ground for distinguishing the remarks by Walton J in Shearer v Bercain Ltd about allocating shares at undervalue to "one's friends" from the circumstances of the present case.

[29] It is of course true that the petitioners were at the outset invited to subscribe for shares in the proposed allotment at par. I ignore for present purposes, and thus in the respondents favour, the peripheral dispute whether the petitioners were given any practical opportunity between 23 March 1999 (when the earlier undertaking was withdrawn and the application for interim orders was refused) and 26 March 1999 (when the Disputed Allotment was effected) to subscribe. But even on that basis, the propriety of issuing new shares at a significant undervalue having been challenged, an insistence in following that course involved that the petitioners were being required to provide further capital to the company, in circumstances in which it had not previously paid dividends, or else suffer a loss in the capital value of their shareholding in favour of an increase in the value of the majority shareholders.

[30] Where, as here, the minority contest the allotment of new shares at a significant undervalue an insistence on the part of the directors and the majority on proceeding with that course rather than, say, offering new shares at a price reasonably reflective of their true value, amounts effectively to a course of coercing the provision of further funds under the threat of that minority's being penalised by suffering a substantive relative diminution in the capital value of their holdings.

[31] Of course, as is recognised by the petitioners in their pleadings, in order to ensure an adequate take-up of a rights issue, directors may properly consider that some discount on the value of the shares is desirable. That possible need is noted in the cases to which I was referred, particularly Shearer v Bercain Ltd. Statement XIV of the petition adverts to the practice of discounting shares by 10% of estimated market value. The pleader's answer on behalf of the respondents professes ignorance of that practice. It is not suggested that the decision on 26 March 1999 was in any way motivated by such considerations. There are no averments tendered on behalf of the respondents suggesting that there were any commercial reasons for allotting - and thus effectively selling - shares in the company at the substantial discount on their proper value. Nothing was said in oral argument by counsel for the respondents suggestive of any considered commercial ground for offering and allotting these shares at a substantial undervalue. Indeed, it is accepted that the original purpose for seeking further capital, namely the JGB acquisition no longer existed.

[32] Much of the submission for the respondents was to the effect that since the issue before a court in section 459 proceedings was whether there was unfairly prejudicial conduct the generality of that concept necessarily required the hearing of evidence before any court could ever conclude that unfairly prejudicial conduct had been practised. As already indicated, universality of that contention was recognised by counsel for the respondents as being unsound once counsel for the petitioners in his replique, had referred to Whyte, Petitioner 1984 S.L.T.330 and McGuinness v Bremner plc 1988 S.L.T.891.

[33] In my view, while recognising that the question of the existence of unfairly prejudicial conduct in the affairs of a company may usually involve an element of judicial discretion or assessment, it does not follow that the Court must always hear evidence prior to exercising that discretion or assessment. The hearing of evidence is only required where there are facts, recognised by the Court as being relevant to that assessment, which are disputed.

[34] In the present case, the Disputed Allotment occasioned prejudice to the petitioners in the respect that the issue of new shares at an undervalue caused the value of their shareholdings to be reduced. I have examined the various contentions put forward by the respondents in purported justification of proceeding, in face of protest, with that allotment of shares. None of those contentions, if proved, would in my view amount to a proper justification for inflicting a reduction in the value of the petitioners' shareholdings. I conclude therefore that counsel for the petitioners is correct in his submission that no relevant answer has been put forward respecting the petitioners' contention that they have been the subject of unfairly prejudicial conduct.

[35] I shall in these circumstances uphold the second and third pleas-in-law for the petitioners and appoint a proof to be heard upon the question of remedy.

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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Pettie & Ors v Thomson Pettie Tube Products Ltd & Ors [2000] ScotCS 298 (29 November 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/298.html Cite as: [2000] ScotCS 298

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