Loveridge v Loveridge

An unfair prejudice petition must address the affairs and membership interests of each company separately, although the wider commercial context may remain relevant. A personal relationship involving mutual confidence may support an equitable entitlement to participate in management, particularly where a partnership business continues through companies with corresponding ownership and management.

Equitable considerations cannot sustain an unworkable understanding that immediately enforceable, interest-free loans will remain outstanding indefinitely unless every shareholder agrees to repayment. Legal certainty and directors’ duties impose limits.

A reasonable share-purchase offer may render continued proceedings abusive, but compliance with established guidelines is only part of a fact-sensitive assessment. In withdrawn contempt proceedings, disputed allegations must be assessed with proper regard to the respondent’s presumption of innocence.

The respondent began proceedings concerning five family companies, seeking relief for unfair prejudice under sections 994–996 of the Companies Act 2006 or winding up under section 122(1)(g) of the Insolvency Act 1986. An earlier Court of Appeal decision, [2020] EWCA Civ 1104, had held that the original petition disclosed no arguable case.

HHJ Cooke permitted amendments alleging quasi-partnership arrangements, entitlements to participate in management, and an understanding that substantial intercompany loans would remain outstanding indefinitely. He refused to strike out the amended petition and restrained the appellants from demanding or enforcing the loans. In related partnership proceedings he made no order for costs after the respondent withdrew a committal application against Ivy Loveridge.

The appeals concerned whether the amended corporate claims had a real prospect of success, whether a share-purchase offer cured any prejudice, whether the loan injunction should remain, and the proper costs order following withdrawal of the committal application.

1. The appeals were allowed. The company petition was struck out and the interim injunction restraining enforcement of the intercompany loans was set aside. The costs order in the partnership proceedings was replaced by an order requiring the respondent to pay Ivy Loveridge’s costs on the standard basis until 14 August 2020 and on the indemnity basis thereafter.

2. Permission to amend requires a case with a real prospect of success. A merely arguable case is insufficient. The pleading must be coherent, properly particularised and supported by evidence establishing a sufficient factual basis.

3. Unfair prejudice and just and equitable winding up must be considered separately for each company and by reference to the petitioner’s interest in that company. The wider business context may inform that inquiry, and membership interests should not be construed too technically. It cannot, however, displace the separate legal existence, ownership and management of each company.

4. The pleaded history arguably supported an equitable entitlement to participate in the management of Kingsford, Sales and Riverside Stourport. Those companies continued aspects of a partnership business and had corresponding ownership and management. No adequate factual foundation existed for such an entitlement in Breton Park. Michael could not complain of exclusion from Quatford, where he remained a director and was in de facto control. No actual or proposed exclusion was properly pleaded for Riverside Stourport.

5. The alleged understanding that interest-free intercompany loans would remain outstanding indefinitely unless all shareholders agreed to repayment was not realistically arguable. Such an arrangement would be unworkable, conflict with the loans’ immediately enforceable legal character, fetter directors’ duties and potentially prejudice the lending companies. Any informal understanding could only have persisted while the prevailing circumstances continued. The complete breakdown in relations was a material change.

6. A breakdown of trust and confidence does not itself create a right to a corporate “no-fault divorce”. Nor did the pleadings establish an arguable entitlement to wind up any company on just and equitable grounds. The remedy remains exceptional and depends on whether winding up is just and equitable in all the circumstances.

7. The offer to acquire Michael’s Kingsford shares at fair market value without a minority discount complied with the applicable guidance and offered all relief realistically obtainable. Although such compliance is not automatically decisive, continued prosecution of the Kingsford petition was abusive on these facts.

8. The costs judge erred by assessing the likelihood that disputed contempt allegations would have been proved. In the absence of an admission or determination, proper regard was required to the presumption of innocence. Withdrawal made Ivy the successful party. Her unaccepted offer to resolve costs on the standard basis justified indemnity costs only from the date of that offer.

• Court of Appeal (Civil Division): Allowed both appeals. It struck out the company petition, discharged the injunction concerning the intercompany loans, and substituted a costs order in Ivy Loveridge’s favour.
• High Court: HHJ Cooke, sitting as a High Court judge, had permitted amendments to the company petition, refused to strike it out, restrained enforcement of intercompany loans, and made no order for costs following withdrawal of the committal application. No neutral citation is stated.
• Earlier Court of Appeal proceedings: In the same litigation, Loveridge v Loveridge [2020] EWCA Civ 1104 discharged earlier interlocutory orders and held that the petition as then formulated disclosed no arguable case. Permission to appeal that decision to the Supreme Court was refused.