Maresca v Brookfield Development & Construction & Anor

A winding-up petition based on unfair prejudice or the just and equitable ground is concerned with the company’s affairs, not with adjusting the parties’ wider quasi-matrimonial property rights. Directors must account for company money, keep proper records, and treat substantial personal injections as recoverable loans where that reflects the parties’ intentions. A breakdown in a relationship underlying a quasi-partnership may justify winding up, particularly where the company is in deadlock. However, winding up should be refused under section 125(2) of the Insolvency Act 1986 where the petitioner has an adequate alternative remedy, such as repayment of a genuine directors’ loan account.

The petitioner and the second respondent were equal shareholders and originally directors of the first respondent, a company formed to acquire, renovate and sell property. Their personal relationship ended, and the petitioner sought relief under section 994 of the Companies Act 2006, including an order requiring the respondent to buy her shares, or alternatively the winding up of the company.

The petitioner alleged that company funds had been used improperly, that she had been removed as a director without consent, and that the company’s affairs had become unfairly prejudicial. The central issues were whether the jurisdictional threshold for unfair prejudice was met, whether it was just and equitable to wind up the company, and whether another remedy was available.

1. The petitioner’s attempt to treat the company’s property and profits as jointly owned relationship assets was rejected. The petition had to be determined by reference to the affairs, assets and liabilities of the company, rather than the parties’ overall financial relationship.

2. Company money could not be treated as the shareholders’ own money by informal agreement. Directors owed obligations to use company property for company purposes and to maintain records giving a true and fair view of the company’s affairs. The accountant was therefore right to maintain a directors’ loan account. Substantial cash injections were intended to be recoverable by the person who made them, while the parties had accepted that minor credits and debits need not be strictly adjusted.

3. The jurisdictional threshold under section 994 of the Companies Act 2006 was not crossed. Although the relationship of trust and confidence had irretrievably broken down, the petitioner was not locked into the company. Her removal as a director recorded the practical reality and caused no established prejudice. The replacement bank account also caused no actionable prejudice because expenditure from it could be debited against the second respondent’s contribution.

4. The company was in deadlock, insolvent on a realistic valuation of its property, and arose from a relationship which had dissolved. In the absence of another sensible means of extricating the petitioner, winding up would have been just and equitable.

5. Nevertheless, section 125(2) of the Insolvency Act 1986 required the winding-up relief to be refused because the petitioner had an alternative remedy: repayment of her creditor claim under the directors’ loan account. After allowing for prior payments, the company was ordered to pay her £10,000 by 1 December 2013. If payment was made, she was to transfer her share to the second respondent and the company was not to be wound up.