Brewin & Anor v Bathroom Brands Holdings UK Ltd (& Anor

A petition under Companies Act 2006, sections 994–996, requires conduct of the company’s affairs which is both prejudicial and unfair, with a causal link between them. In a quasi-partnership, the court may consider contractual arrangements, equitable understandings, legitimate expectations and directors’ duties. Nominee directors owe their duties to the company alone unless a clear shareholder-approved qualification is established. A majority shareholder cannot prioritise its own interests when acting through nominee directors. Unilateral withdrawal of agreed funding, exclusion from management, conflicted decision-making and preventing the company from enforcing its rights may together constitute unfair prejudice. The court assesses unfairness objectively; the actors’ subjective motivation is not determinative.

The petitioners were minority shareholders and directors of Cintep Development Ltd, a joint venture established with Bathroom Brands Holdings UK Ltd to develop and commercialise a water-recycling shower. The arrangements contemplated a shareholders’ agreement, continued board participation by the petitioners and substantial funding by the first respondent.

The first respondent did not execute the promised deed of adherence, removed the prototype from Australia without consultation, sought to renegotiate its funding obligations at a board meeting, stopped funding and later blocked company proceedings against itself. The petitioners alleged that these matters, together with failures concerning share options and company accounts, amounted to unfairly prejudicial conduct.

The central issues were whether the conduct was unfair and prejudicial, whether the petitioners’ conduct justified it, and what relief should follow.

1. Liability established. The petition was well founded under sections 994–996 of the Companies Act 2006. The company was a quasi-partnership and joint venture. The parties therefore had mutual expectations of good faith, participation in management and pursuit of the agreed commercial purpose.
2. The first respondent’s failure to execute a deed of adherence to the shareholders’ agreement was unfair conduct and caused prejudice because it deprived the petitioners of direct contractual rights, including a direct remedy for the promised funding.
3. The removal of the prototype from Australia was a unilateral and unjustified decision made without consulting the petitioners and contrary to an earlier agreement. The respondent’s nominee directors had to act in the company’s interests. Their position did not permit them to prioritise the interests of the nominating shareholder. The decision was gross mismanagement and unfairly prejudicial.
4. At the 14 November 2014 board meeting, the respondent’s nominee director sought, without proper notice, to renegotiate the respondent’s contractual obligations. This breached the company’s articles concerning notice and conflicted interests. No agreement or board resolution varied the funding obligations. The conduct unfairly excluded the petitioners from management and threatened the company’s funding.
5. The unilateral cessation of funding was an admitted breach of contract and unfairly prejudicial conduct. The petitioners had not misled the respondent about the project’s development stage, and no conduct by them justified the breach. The court did not need to decide whether the project was technically viable.
6. Manipulation of the draft board minutes and failures concerning statutory accounts were unfair conduct, but those matters alone caused no prejudice. Blocking the company’s 2017 attempt to pursue its rights against the respondent was separately unfairly prejudicial.
7. The cumulative effect destroyed the company’s commercial vitality and deprived the petitioners of management participation, share value and the opportunity to develop the technology. The court’s preliminary view was that relief should be financial, valued without a minority discount as at late October 2014. The remedy was adjourned for a separate hearing under section 996.