Judgment handed down in Sandycombe Developments Limited [2026] EWHC 1766 (Ch)
On 24 June 2026, Cawson J handed down judgment in Re Sandycombe Development Ltd [2026] EWHC 1776 (Ch), dismissing an application to strike out an unfair prejudice petition under section 994 of the Companies Act 2006. Stephen Cogley KC, instructed by TLT LLP, appeared for the successful Petitioners in the first reported case since the Supreme Court’s decision in Marex Financial Ltd v Sevilleja [2020] UKSC 31 to clarify the scope of the rule against “reflective loss” in the context of unfair prejudice petitions.
The background will be familiar to anyone acting on shareholder disputes involving property joint ventures. Sandycombe Development Limited (“Sandycombe”) was a special purpose vehicle to develop a site in Richmond. The Petitioners, holders of “A” preference shares, invested £3.22 million under a shareholders’ agreement dated 2 May 2018. A company controlled by Sandeep Singh Mangat held voting control, with Mr Mangat as sole director until another individual, Sukhdeep Dhillon, was appointed in October 2022. Sandycombe went under in 2024 and LPA receivers were appointed, leaving the Petitioners’ shares, on their case, worthless. The petition advanced in the Re Sandycombe proceedings alleges that Mr Mangat and Mr Dhillon diverted company funds and borrowing facilities to separate projects and concealed the diversion from investors.
The Respondents applied under CPR 3.4(2)(a) and (b) to strike out the petition, alternatively for reverse summary judgment, on the footing that every head of relief was barred by reflective loss and the proper claimant rule. The Respondents’ counsel submitted that the petition’s language showed the true owner of the causes of action was the company, and the case should have been brought as a derivative claim under Part 11 of the Companies Act 2006.
Cawson J dismissed the application, holding in summary:
- Whilst personal claims pursued by ordinary action might be caught by the reflective loss rule as restated in Marex, the remedy pursued here was the statutory remedy under section 994, not a common law or equitable cause of action belonging to the company.
- Drawing on Re The Hut Group Ltd [2021] EWCA Civ 904, Atlasview Ltd v Brightview Ltd [2004] EWHC 1056 (Ch) and Re Coinomi Ltd [2023] EWCA Civ 1480, sections 994 to 996 of the Companies Act 2006 were recognised as providing a wide and flexible remedy, consistent with Lord Reed’s observation in Marex at [83] that a shareholder retains a “variety of other rights,” including the right to seek relief for unfairly prejudicial conduct, where an ordinary reflective loss claim may be barred.
- There is nothing objectionable in a buy-out calculated on an adjusted valuation reflecting unfairly prejudicial conduct, as was the case here. The application to strike out this remedy was therefore dismissed; and the alternative claims for equitable compensation and an account of profits were likewise upheld.
- The argument that allowing the petition to proceed would prejudice other shareholders was also rejected; relief in favour of the company would benefit rather than harm them, while personal remedies would affect only the parties before the court.
Accordingly, section 994 operates as the escape hatch from reflective loss: where a shareholder cannot sue directly because their loss mirrors the company’s, the unfair prejudice jurisdiction remains open as a separate, sui generis remedy not caught by the Prudential Assurance/Marex line of authority.
That analysis aligns with Marex, which restricted the rule to claims by a shareholder against the same wrongdoer as the company and rejected the traditional double-recovery and creditor-protection rationales. In Re Sandycombe, Cawson J confirmed that a well-pleaded allegation of wrongful diversion of company funds can found a section 994 petition even though the underlying loss is, in a loose sense, the company’s loss. As the deputy judge put it in Atlasview, one purpose of unfair prejudice is to outflank Foss v Harbottle (1843) 2 Hare 461; it would defy common sense to force minority shareholders down the derivative route merely because a director had stripped the company’s assets.
A word of caution on drafting is warranted. A petition seeking relief that benefits only the company, such as an order that a director simply pay compensation into the corporate treasury, without any accompanying claim to a personal remedy, risks being struck out as a “disguised derivative claim” designed to sidestep the Part 11 permission filter. Newey LJ held in Re Coinomi Ltd that a petition seeking relief in favour of the company alone will rarely, if ever, be proper, and that even a petition which includes a claim for a personal remedy can be struck out as abusive if the petitioner is not genuinely interested in that remedy and is instead using it to bypass the Part 11 derivative claim gateway. Practitioners drafting unfair prejudice petitions where directors have misapplied company funds should therefore take care to anchor the primary relief in a personal remedy, most obviously a buy-out order.
This is where the drafting in Re Sandycombe proved its worth. Rather than seek an order that the Respondents “pay the company back”, the Prayer sought a buy-out at fair value, calculated on the premise that Sandycombe’s assets had been restored and the company compensated for the breaches pleaded. That formulation converted what might have looked like a derivative claim into an unambiguously personal remedy – and received approval from the court. Re Sandycombe Development Ltd is essential reading for anyone advising minority shareholders whose directors have diverted company funds, offering welcome certainty after Marex and a valuable lesson in pleading. For rogue directors hoping reflective loss might offer a costless escape from accountability, the judgment sends an unambiguous message: the corporate veil is not a shield they can wield as a sword against the shareholders they have wronged.
Case note written by Katy Handley.
Read the full judgment here.
