Corran v Butters & Ors

In an unfair prejudice petition, the court must identify conduct affecting the company’s affairs which prejudices the petitioner’s interests as a member and is objectively unfair. A quasi-partnership is only a convenient description and does not itself determine whether equitable constraints apply. A shareholder’s misconduct may make otherwise prejudicial conduct not unfair and may affect the remedy. Directors may fairly exclude an undischarged bankrupt from central management where continued participation would contravene the Company Directors Disqualification Act 1986 and expose the parties to personal liability. Agreed remuneration for continuing services may continue after exclusion, but additional benefits require proper agreement or corporate authorisation. Relief under section 996 must be proportionate to the unfair prejudice established.

Mr Corran presented an unfair prejudice petition concerning the affairs of Energy Express Limited and its subsidiary, Greendealexpress Limited. He alleged that Simon and Mark Butters had wrongfully excluded him from management, failed to wind up the companies, paid themselves management charges and pension contributions, entered into an improper lease, conferred benefits on associated businesses, and retained a debenture.

The respondents contended that Mr Corran’s exclusion was justified because he was an undischarged bankrupt and that the remaining complaints were either authorised, commercially justified, or remedied. The central issues were whether the conduct was prejudicial and unfair under section 994 of the Companies Act 2006, and what relief, if any, should follow.

1. Claim substantially dismissed. The petitioner was fairly excluded from the companies’ central management. As an undischarged bankrupt, his continued involvement would have contravened section 11 of the Company Directors Disqualification Act 1986 and exposed him and the respondents to personal liability under section 15. There was no obligation to create or preserve a lesser temporary management role.
2. The relationship had quasi-partnership characteristics, but that label did not determine the result. The relevant question was whether the circumstances imposed equitable constraints beyond the parties’ strict legal rights. The petitioner’s concealment of his bankruptcy before the 2014 reorganisation was relevant to the application of the clean-hands principle and made the exclusion not unfair.
3. The respondents were entitled to continue receiving the agreed £5,000 monthly management payments because they continued providing services while the petitioner did not. They were not entitled to cause Greendealexpress to pay each of them a further £32,000 pension contribution without a continuing agreement or proper corporate authorisation. That conduct was unfairly prejudicial.
4. The decisions not to commence insolvency proceedings, to continue the Green Deal business, to settle the British Gas claim, and to maintain the Hall lease were not shown to be unfairly prejudicial. The failures to ensure timely invoicing of limited staff services supplied to Unicom and Express Capital involved breaches of duty, but were largely remedied and were of very limited significance.
5. The court declined to order a buy-out. Under section 996, relief had to be proportionate to the unfair prejudice found. The respondents were ordered to transfer £32,000 each to Greendealexpress, together with appropriate interest, restoring the company to the position it would have occupied had the improper pension payments not been made. The claim otherwise failed.