Loveridge and another v Loveridge (No 2)

The Court of Appeal considered interlocutory orders in long‑running family disputes involving several caravan‑park companies and partnerships. The appeals concerned (i) permission to amend an unfair prejudice petition and an interim injunction restraining demands or enforcement of intercompany loans; and (ii) costs following the withdrawal of a committal application. The court applied the test for amendments to pleadings and for interim relief, considering ss 994–996 Companies Act 2006 and the just and equitable winding‑up jurisdiction under s 122(1)(g) Insolvency Act 1986.

The court allowed the appellants’ company appeal in part and struck out the petition insofar as it relied on an alleged irrevocable understanding that interest‑free intercompany loans would not be called in except by unanimous agreement, concluding that such an equitable constraint was inconsistent with the legal character of loans repayable on demand and would unlawfully fetter directors’ duties. The court also held that an O’Neill v Phillips style offer to purchase the Kingsford shares complied with guidance and cured the petition in respect of Kingsford, so the Kingsford petition was struck out and the injunction concerning the intercompany loans was set aside. On the partnership costs appeal the court allowed the appeal and awarded the respondent (Ivy) her costs of the withdrawn committal application (standard basis to 14 August 2020; indemnity thereafter).

This appeal arose from acrimonious family litigation about a group of caravan parks owned through partnerships and associated companies. Michael (the respondent) had issued unfair prejudice petitions under ss 994–996 Companies Act 2006, and alternative winding‑up petitions under s 122(1)(g) Insolvency Act 1986, in relation to five family companies. The appellants (Ivy and Alldey) applied to strike out the petition or parts of it and to resist amendments; Michael sought permission to amend and an interim injunction to restrain demands or enforcement in respect of a series of significant interest‑free intercompany loans.

Procedural history: The litigation had previously given rise to a Court of Appeal judgment (Loveridge v Loveridge [2020] EWCA Civ 1104) which found that the petition as then pleaded disclosed no arguable case; subsequent correspondence and conduct led to new proposed amendments and to demands about repayment or security for intercompany loans. HHJ Cooke (High Court) permitted certain amendments and granted an injunction restraining demands/enforcement. The present appeal challenged those orders and a separate costs decision following the withdrawal of a committal application.

Issues for this court:

• Whether the amended petition, as permitted by HHJ Cooke, disclosed a realistically arguable case of unfairly prejudicial conduct or (alternatively) just and equitable grounds to wind up each of the companies;
• Whether equitable constraints could be recognised so as to prevent creditor companies calling in significant intercompany loans absent unanimous agreement;
• Whether the O’Neill v Phillips style offer to buy the Kingsford shares cured the petition in respect of that company; and
• Whether the judge erred in making no order for costs following the withdrawal of a committal application.

Reasoning and disposition: The court reiterated the proper test for allowing amendments (the amended case must have a real prospect of success and be supported by evidence) and emphasised that each corporate entity must be considered separately. It held that (i) the amended petition contained sufficient additional material to amount to an arguable claim to participate in management in respect of some companies (notably Kingsford and Riverside Stourport) but not in respect of Quatford or Breton Park, where the pleaded facts were inadequate or the appellant was in de facto control; (ii) the pleaded assertion of an indefinite, unanimous‑consent requirement preventing the lending companies from calling in interest‑free loans was not realistically arguable because it was inconsistent with the loans' legal effect as repayable on demand and would wrongly fetter directors’ duties; (iii) the O’Neill v Phillips offer for the Kingsford shares complied with guidance and, on the facts, cured the petition in respect of Kingsford such that the Kingsford petition was struck out; and (iv) the interim injunction restraining demands/enforcement should be set aside because it rested on the erroneous finding as to the loans' alleged equitable constraint. On costs, the court found that the judge had erred in assessing the likelihood of proving contempt when the respondent had not been required to file evidence or had not admitted breach, and substituted an order that the applicant pay the respondent’s costs (standard basis to 14 August 2020; indemnity thereafter).

Appeal allowed. The Court of Appeal concluded that (a) the amended petition did not disclose a realistically arguable equitable constraint preventing the lender companies from calling in interest‑free loans; accordingly the petition so far as founded on that premise was struck out and the interim injunction restraining demands/enforcement was set aside; (b) the O’Neill v Phillips offer to purchase the Kingsford shares complied with the guidance and cured the Kingsford petition, so that part of the petition was struck out; (c) other parts of the petition failed to disclose an arguable case in respect of Quatford and Breton Park; and (d) in the partnership proceedings the judge erred in declining to award costs after withdrawal of a committal application, and the respondent was awarded costs on the standard basis up to 14 August 2020 and on the indemnity basis thereafter.

On appeal from HHJ Cooke sitting in the High Court, Business and Property Courts of England and Wales, Birmingham (Claim Nos CR-2020-BHM-000301 and BL-2020-BHM-000019). This Court previously decided aspects of related interlocutory relief in Loveridge v Loveridge [2020] EWCA Civ 1104; permission to appeal to the Supreme Court was refused. The present judgment is the determination of the appeals before the Court of Appeal (EWCA Civ) dated 19 November 2021.