Cool Seas (Seafoods) Ltd v Interfish Ltd & Ors

Key principles: The petition under section 994 of the Companies Act 2006 is to be judged broadly; the court will have regard to the company articles but may impose equitable restraints where a legitimate expectation (for example in a quasi-partnership) exists. The court may also entertain claims in unfair prejudice proceedings that mirror causes of action available to the company itself, including alleged breaches of fiduciary duty.

Primary findings:

• Northbay was not a quasi‑partnership and there was no equitable legitimate expectation that Cool Seas’ nominated directors (Christopher and Colin Anderson) would remain on the board after they ceased to be employees; their removal therefore did not, in itself, amount to unfair prejudice.
• The summary dismissals of both Andersons were justified by misconduct shown on the facts; any prejudice to Cool Seas from their exclusion was not unfair.
• The cross‑charge of professional fees (Baker Tilly and TLT) to Northbay by Interfish was justified as proper costs of effecting the acquisition and not misappropriation.
• Interfish’s cross‑petition succeeded in part: conduct by Christopher Anderson (and thus attributable to Cool Seas) was unfairly prejudicial in several respects, notably failure to disclose large‑scale historical and continuing "black fishing", nondisclosure of serious HMRC disputes, improper use of Northbay labour and facilities by associated Anderson businesses (Anderson Marine and others), and failures in transparency over the ACIL rebuild arrangements.
• No unfair prejudice was found in the continued employment and pay of Lynsey Anderson, nor in the fact that the rebuild was managed inefficiently — the rebuild problems did not by themselves justify unfair‑prejudice relief.

Background and procedural posture: This was a first‑instance Chancery Division trial of competing petitions under section 994 of the Companies Act 2006. Cool Seas (40% shareholder) petitioned alleging unfairly prejudicial conduct by Interfish (majority holders) arising from the exclusion of Cool Seas’ nominated directors from Northbay’s management and alleged misappropriation of fees. Interfish cross‑petitioned that Cool Seas (via Christopher Anderson and family companies) had conducted Northbay's affairs in a manner unfairly prejudicial to Interfish. The court was asked to determine liability issues so the parties could proceed to valuation / buy‑out discussions; the form of relief was reserved.

Nature of claims and relief sought: Cool Seas sought a buy‑out of its minority shareholding on grounds of exclusion of its chosen directors and alleged payments of professional fees by Northbay to Interfish. Interfish sought relief under section 994, including a buy‑out or adjustments to valuation, and alleged breaches of fiduciary duty, non‑disclosure of historical illegal conduct, continuing illegal landings ("black fishing"), misuse of Northbay staff and facilities by Anderson‑connected businesses, and failures in relation to the post‑fire rebuild (ACIL).

Issues framed by the court:

• Whether Northbay was a quasi‑partnership giving rise to legitimate expectations preventing exclusion of nominated directors;
• Whether the dismissals of the Andersons were unfairly prejudicial;
• Whether Interfish misappropriated company funds by cross‑charging professional fees;
• Whether Christopher (and Colin) Anderson engaged in misconduct (including historical and continuing black fishing, nondisclosure to fellow directors of HMRC disputes, misuse of staff and facilities, and ACIL billing issues) sufficient to amount to unfairly prejudicial conduct attributable to Cool Seas;
• Whether Interfish, as majority shareholder, could seek relief and whether alleged wrongdoing by a director could be attributed to his nominating corporate shareholder.

Court's reasoning and conclusions:

• The court applied established unfair‑prejudice principles, observing that the articles are the starting point but equitable considerations may qualify them (cases on quasi‑partnership and legitimate expectation were considered).
• On the quasi‑partnership point, the court found that the relationship between the parties was contractual and governed by bespoke negotiation and documentation (ISA, APA, articles). There was no prior personal relationship or other indicia supporting a quasi‑partnership; therefore no legitimate expectation prevented removing directors who ceased to be employees.
• The court found widespread, contemporaneous and credible evidence that Fresh Catch had engaged in systematic "black fishing" from 2005 until October 2013, that key documents (the 'Black Books' and related records) were genuine, and that Christopher Anderson knew of the practice and failed to disclose it in negotiating the sale. That non‑disclosure and reliance on inflated financial information meant Northbay overpaid for the assets.
• Fresh Catch had substantial unresolved disputes with HMRC which were not disclosed; the court found non‑disclosure material and unfairly prejudicial.
• Post‑acquisition, the court found instances of continuing unlawful landings and improper handling of declared weights (including the Haugagut capelin landing) and concluded these practices exposed Northbay to regulatory and financial risk.
• The court found that Northbay resources and labour were used by Anderson‑connected companies (Anderson Marine, ACIL, E2) without proper accounting or payment; the arrangements for ACIL's rebuild were deficient and transparency was lacking; these failures amounted to unfairly prejudicial conduct attributable to Cool Seas.
• The court dismissed Cool Seas’ petition in its entirety and allowed Interfish’s cross‑petition in part, reserving remedial quantification for valuation phase.

Cool Seas’ section 994 petition is dismissed. Interfish’s cross‑petition under section 994 succeeds in part. The court rejected a claim that Northbay was a quasi‑partnership and held that the exclusion of Cool Seas’ nominated directors was not unfairly prejudicial; it held, however, that Christopher Anderson’s (and thus Cool Seas’) non‑disclosure of systematic black fishing and HMRC disputes, the continued black fishing, and failures to account for use of Northbay labour and facilities by Anderson‑related companies amounted to unfairly prejudicial conduct. The cross‑charge of Baker Tilly and TLT fees to Northbay was lawful. The court made factual findings against the Andersons and left valuation and remedial orders to be determined subsequently.