Otto and others v Inner Mongolia Happy Lamb Catering Management Company Ltd and others (2025) EWHC 2291 (Ch)

A recent High Court judgment concerning Inner Mongolia Happy Lamb Catering Management is a perfect example of shareholder disputes and the strict legal tests applied in an unfair prejudice case.

Background of the Case

The case involved multiple petitioners and respondents connected to a chain of companies operating under the “Happy Lamb” restaurant brand in the UK and Europe. The petitioners, minority shareholders in some of these companies, alleged unfairly prejudicial conduct by the majority shareholders.

The dispute centers on three companies, HLHP Oriental Food Limited, HLHP Birmingham Limited, and HLHP Bayswater Limited. The sixth respondent company, HLHP Oriental Food Limited, is the main focus as it is the most valuable and contested entity. Four petitioners hold minority shares: 5%, 2%, 5%, and 1% respectively. The first respondent controls 60% of this company, with others holding varying smaller stakes.

Core Allegations by Minority Shareholders

The petitioners made several serious allegations, including:

Expropriation of their shareholdings without fair compensation.
Breach of agreements related to shareholdings made in 2017 and 2018.
Unilateral reduction of roles and salaries, including forcing some petitioners to step down from directorships.
Exclusion from company management and denial of access to company records.
Ongoing bullying and intimidation by controlling shareholders.
Conduct of company affairs in a wrongful, dishonest, and illegal manner.

The petitioners sought relief through a buyout of their shares at fair value or damages reflecting their rightful participation in the business.

The Respondents’ Position

The majority shareholders and directors vigorously denied all allegations. Their key defenses included:

Denying any expropriation of shares without consent.
Arguing that various agreements cited were governed by Chinese law or superseded.
Rejecting claims of bullying, exclusion, or mismanagement.
Contesting the petitioners’ standing, arguing some had no legal ownership of shares.
Challenging the specific attribution of alleged wrongful conduct to the respondents.

Legal Issues Addressed by the Court

A significant part of the judgment focused on:

Standing to Bring the Petition: A critical question was whether the petitioners had legal standing under section 994 of the Companies Act 2006. This requires the petitioners to be members of the company or persons to whom shares have been legally transferred. The court held that beneficial or equitable ownership alone does not confer standing. Shares must be legally owned or properly transferred with registration. The petitioners’ claims involving equitable interests in shares were rejected for the purposes of standing. However, after restoration of In-Touch company and execution of stock transfer forms, the petitioners secured their standing for the sixth respondent.
Scope of Unfair Prejudice: Claims needed to specifically relate to acts or omissions by the company or conduct of its affairs unfairly prejudicial to members’ interests. Mere employment disputes or personal grievances outside company affairs did not qualify. However, reductions in shareholdings, forced resignations as directors, unilateral salary reductions, exclusion from company management, and payments of company funds for respondents’ legal fees fell within scope.
Specificity and Clarity: The court found the original petitions insufficiently specific about which respondents were responsible for specific acts of unfair prejudice, which is necessary so respondents can properly plead to allegations. The court refused to allow the petition to proceed in its current form due to these deficiencies.
Procedural History and Delay: Despite the serious problems with the petition, the court gave the petitioners a final opportunity to file an amended petition addressing the specificity concerns. The petitioners were to provide a draft with clearer attribution of conduct to respondents by 26 September 2025. If this was done, the court would consider it and the respondents’ responses before deciding whether to allow the amended petition to proceed.

Court’s Decisions and Directions

HHJ Paul Matthews ultimately ruled that while the petitioners’ claims had some substance, the formal pleadings were defective in standing and clarity. The petition was refused leave to amend unless the petitioners filed a revised petition with more precise attribution of conduct.

For more information, read the full case on Otto and other v Inner Mongolia Happy Lamb Catering Management Company Ltd and others.

Timeline of the proceedings

September 2022: Petitioners issued their unfair prejudice petition.
December 2022: Case management hearing set trial for March 2024.
March 2023: Respondents attempt to transfer the case to London dismissed. Directions issued.
June-July 2023: Delays in disclosure and legal representatives changes, including the fifth respondent opting to represent himself.
October-November 2023: Petitioners move for injunction to stop company using funds for respondents’ legal costs; partial injunction granted but later withdrawn.
Early 2024: Attempts to strike out parts of the petition and disputes over petitioners’ standing based on share registration. Claims relating to the seventh respondent abandoned due to the shares’ lack of value.
Mid to late 2024: Complex proceedings to restore a dissolved company (In-Touch Investment Holding Ltd) which holds petitioners’ shares delayed progress.
Early 2025: Petitioners obtain counsel by direct access, redraft petition multiple times to address issues.
May 2025: Hearings held on applications to re-amend the petition and strike out the petition by respondents.
September 2025: Judgment delivered by HHJ Paul Matthews after extensive consideration.