Richardson & Anor v Blackmore

An undiscovered fraud by one participant does not, without more, automatically terminate good-faith obligations arising from a quasi-partnership. Under Companies Act 1985 provisions governing unfair-prejudice relief, clean hands are not a precondition to relief. A petitioner’s misconduct may nevertheless affect, and in a sufficiently serious and directly relevant case may defeat, the discretionary remedy.

A fabricated document that had no immediate or necessary relation to the unfairly prejudicial conduct did not justify refusing relief. Money paid by a company as a mediation gesture, but not accepted as an unconditional gift, remained the company’s money. It could not satisfy other respondents’ liability to buy shares.

The parties had formed a taxi-radio company after carrying on the same business in partnership. They were equal shareholders and directors, with Mr Blackmore managing the business. Mr Richardson and Mr Wheeler sold their shares to a competitor without Mr Blackmore’s knowledge. Mr Blackmore petitioned under section 459 of the Companies Act 1985, alleging unfair prejudice.

A Deputy High Court judge found a quasi-partnership, unfair prejudice arising from the share sale, exclusion from management and later acquisitions, and ordered the respondents other than the company to buy Mr Blackmore’s shares for £300,000. The company’s separate claim against him was dismissed. Mr Richardson and Mr Wheeler appealed, relying principally on Mr Blackmore’s forged letter. The company separately appealed the order releasing £60,000 paid into court.

1. Mr Richardson and Mr Wheeler’s appeal was dismissed. The court held that the forged letter did not automatically discharge the good-faith obligations which arose from the parties’ quasi-partnership. The letter was not known to the other participants when it was sent. Its existence therefore did not itself alter the relationship or end the obligations owed within it.
2. The court held that relief under sections 459 and 461 of the Companies Act 1985 is discretionary and does not require a petitioner to approach the court with clean hands. Re London School of Electronics Ltd [1986] Ch 211 established that misconduct may affect the relief granted. Depending on its seriousness and relevance, it could justify refusing all relief. The equitable cases were useful by analogy. Misconduct must have an immediate and necessary relation to the relief sought: Moody v Cox [1917] 2 Ch 71.
3. The forgery and its later forensic use were reprehensible, but they had no material effect on the respondents’ conduct, the price negotiations, or the grounds on which unfair prejudice had been established. They did not make a fair trial impossible and were not sufficiently closely connected with the unfair prejudice to justify refusing a remedy. The court also upheld the finding that Mr Blackmore’s suspension was unjustified, although that issue was not material to the result because other grounds of unfair prejudice stood.
4. Capital Cabs Ltd’s separate appeal was allowed. The £60,000 had been paid by the company as a proposed gesture of good faith. Mr Blackmore had not accepted it as an unconditional gift. It therefore remained the company’s money and could not be used to discharge the other respondents’ liability to purchase his shares. It could not be used to pay for the company’s own shares consistently with section 151 of the Companies Act 1985. The court discharged the payment-out provision, declared the money belonged to the company, and directed that it be retained subject to the company’s possible costs liability and further directions.

• Court of Appeal (Civil Division): In [2005] EWCA Civ 1356, dismissed the appeal by Mr Richardson and Mr Wheeler, but allowed Capital Cabs Ltd’s separate appeal concerning the £60,000 and varied the order accordingly.
• High Court, Chancery Division, Cardiff District Registry: His Honour Judge Wyn Williams QC dismissed the company’s claim against Mr Blackmore and ordered the other respondents to purchase his shares for £300,000. The judge also ordered the £60,000 in court to be paid to Mr Blackmore on account of that price.