Sacked Director’s Novel Wrongful Dismissal Claim Can Proceed to Trial

In a case that broke new legal ground, a former company director has been granted permission to pursue a wrongful dismissal claim in conjunction with unfair prejudice proceedings under Section 994 of the Companies Act 2006.

The man was sole director of a restaurant bookings company that merged with another. He entered into a service agreement with the merged company and agreed to serve as its chief executive officer. He was, however, subsequently dismissed and removed as a director of the company.

He issued a petition under Section 994, claiming that his removal as a director and the issuance of further shares after his departure unfairly prejudiced his position as a minority shareholder. Included in the petition was a claim for lost salary based on an assertion that his dismissal was wrongful.

The company and its majority shareholders applied to have the latter claim struck out on the basis that it was misconceived. The High Court acknowledged that the issue was a novel one and that there was no precedent for a wrongful dismissal claim to be issued in the context of an unfair prejudice petition. However, the Court could identify no objection in principle to that course and allowed the claim to proceed to trial.