Ndungu v SPG

 

In Ndungu v SPG, Mr Ndungu was a founding shareholder in a company SPG. In 2019 he had a shareholding of 17%. After the company raised additional investment, Mr Ndungu’s stake was diluted to just 0.85%. This meant that in 2024 the value of his shares was around £264,000 instead of over £5 million if he still held 17%.

 

Mr Ndungu, the petitioner (claimant) issued an “unfair prejudice” petition (brought a claim) in 2022 against the other shareholders of the company under section 994 of the Companies Act 2006.

 

Mr Ndungu alleged that he had been excluded from the investment rounds. He said that the respondents (defendants) engineered an unlawful dilution of his shares. Mr Ndungu argued that they did this through a series of manoeuvres: meeting notices sent to email addresses he could not access, missing offer letters, a failure to follow statutory procedures, and what he described as a deliberate strategy to sideline him from the company’s affairs.

 

Mr Ndungu’s petition failed. The Court found that the right procedures had not been followed by SPG and the required notices were not properly given to Mr Ndungu. However, the Court also found that even if they had been carried out flawlessly, Mr Ndungu’s emails, financial position, and negotiation history showed that he would not or could not have taken up the investment offer to prevent him having been diluted. As a result, the dilution Mr Ndungu suffered was not as a result of SPG’s procedural breaches.

 

The Court also rejected Mr Ndungu’s allegations that there had been a targeted conspiracy to push him out and that the respondents had forged or fabricated the documents after the event to legitimise the investment rounds.

 

The Court said that prejudice must be suffered in the petitioner’s capacity as a member (shareholder), not simply as a disappointed or marginalised participant in management.

 

The case is a reminder that unfair prejudice cases require careful consideration and specialist advice. They are often difficult to prove and risky to bring. Legal costs to bring an unfair prejudice petition cases can often be substantially in excess of £500,000 each side. Both parties appear to have been represented by law firms and barristers in this case. Even if a party runs the case on their own without lawyers, generally a very bad idea, they are still likely to be exposed to those kinds of costs of the other party. Legal costs are often greater than the sums being argued about in these cases and enough to bankrupt even those who are relatively wealthy.

 

The judgment does not mention that mediation was attempted only that there were some pre-action correspondence. It may well have been that an experienced mediator, especially one that specialises in shareholder disputes like I do, could have resolved this dispute at a substantially lower cost and risk and substantially more quickly.

 

Ndungu v SPG Limited and others [2025] EWHC 3039 (Ch).