SophistiCats Shareholders In The High Court

Russells is very pleased to have represented Diana Langer in a successful claim brought as an unfair prejudice petition in respect of her shareholding in The Stratos Club Limited (“the Company”), relating to her ownership interest in the SophistiCats Gentlemen’s clubs.  This complex and highly personal corporate dispute was the subject of a nine day trial in the High Court of Justice in November 2020.  Due to the COVID-19 pandemic, the trial took place by way of a hybrid hearing; the practical impact of this was that the parties, their legal representatives, the Judge and the majority of the witnesses attended Court in person but some of the witnesses were permitted to make use of the Court’s video conferencing facilities in order to appear remotely for cross-examination.  In addition to the factual witnesses, the Court heard evidence from experts in three disciplines, namely property valuation, brand valuation and forensic accountancy.

In a Judgment handed down on 21 December 2020 ([2020] EWHC 3485 (Ch)) Mr Nicholas Thompsell, sitting as a Deputy Judge of the High Court, found comprehensively in Mrs Langer’s favour and held that she had made out her case that she had been unfairly prejudiced by the manner in which the Company’s affairs had been conducted in a number of ways, including through the financial mismanagement of the Company and its subsidiaries, through the sale of the SophistiCats Soho Club to the Company’s director at an undervalue and through that director personally taking an opportunity to acquire the SophistiCats Euston Club when this opportunity should have been made available to the Company.

The Court has accordingly determined that Mrs Langer is entitled to relief pursuant to section 994 of the Companies Act 2006.  Recognising the wide discretion that the Court has in relation to the appropriate remedy where section 994 is triggered, the Judge made an order that the director and majority shareholder is to purchase Mrs Langer’s shares at a price that is to be determined following a valuation exercise.  The valuation assumptions to be applied are set out in the Judgment, with the Judge commenting that “In framing an appropriate order, I think it is important to stand back and look holistically at the cumulative effect of the various actions of the Company and its subsidiaries that have given rise to unfair prejudice”.  The case will now proceed to this second stage of the split trial litigation.

We are delighted to have achieved this outcome for our client and we are proud to operate within a legal system that recognises and protects minority interests.

The litigation was run by Elizabeth Scandrett, the supervising partner was John Reid.  Counsel was Anna Lintner of 39 Essex Chambers.

If you are interested in finding out more about how we can help you, please contact the Litigation Department for further advice and assistance.