ANDREW JAMES BRIDGEN v PAUL JULIAN BRIDGEN & Ors

A company may be treated as a quasi-partnership where the circumstances make it inequitable for members to rely on their strict legal rights. The relevant equitable constraints may bind some shareholders but not others. The court examines the parties’ understanding and the circumstances as a whole; the usual indicators are not mandatory tests.

Unfair prejudice requires conduct that is both unfair and prejudicial. A breach of statutory or fiduciary duty may be unfair, but a technical breach causing no practical difference will ordinarily be insufficient. Commercial decisions are not reviewed merely because another decision might have been preferable. Serious mismanagement must be established before the court intervenes.

The petitioner presented three amended petitions under Companies Act 2006, section 994, concerning A.B. Produce Trading Limited, Bridgen Investments Limited and A B Farms Limited. The complaints concerned exclusion from management, the acquisition of Barn Farm, transactions involving a family farming partnership, use of company resources, conflicts of interest, renewable-energy revenues and alleged mismanagement.

A trial was directed on liability, with remedy reserved. The principal questions were whether the companies were quasi-partnerships, whether the petitioner had a legitimate expectation of management participation, whether the respondents had breached statutory or fiduciary duties, and whether the affairs of any company had been conducted in a manner unfairly prejudicial to the petitioner.

1. Quasi-partnerships. The court held that ABPT and BIL were quasi-partnerships, but only the family shareholders were subject to the relevant equitable constraints. ABF was never a quasi-partnership. The constraints on supporting the petitioner’s participation in ABPT and PLC ended, at the latest, when he consented to the termination of his employment and directorship in 2014; those concerning BIL ended when he resigned as its sole director in 2010. The petitioner had no legitimate expectation of participating in ABF’s management.
2. Statutory and fiduciary duties. The respondents breached duties in relation to the Barn Farm loan, the Cemex and Biffa sub-contracts, the use of PLC employees, fuel, maintenance, insurance and road tax for the partnership, and the potato-growing arrangements. The breaches included failures under sections 172, 173, 175, 177 and 182 of the Companies Act 2006. Section 177 requires sufficient disclosure of the nature and extent of an interested director’s interest to enable the other directors to decide whether the transaction is in the company’s interests and on what terms. The likely profit and material risks may form part of that disclosure.
3. Commercial judgment. The failure to adopt an alternative parts supplier and the delay in pursuing renewable-energy revenue did not amount to gross mismanagement. The court will not interfere with commercial judgment unless the decision or omission is clearly wrong and sufficiently serious to justify relief.
4. Unfair prejudice. Technical breaches concerning the Barn Farm loan, WPS and the potato arrangements caused no established loss and made no practical difference. They were not unfairly prejudicial. By contrast, the continuing, substantial and unrecorded use of PLC resources by the partnership, without proper recompense, was unfair and materially prejudicial to the petitioner as a member of ABPT. Similar prejudice arose from PLC resources used in connection with the Cemex and Biffa arrangements. Precise loss could be assessed using a broad-axe approach.
5. The judgment therefore determined liability in favour of the petitioner in part, principally in relation to ABPT, with quantification and any relief left for a remedies hearing. The petitions concerning BIL and the remaining allegations were not established on the findings stated.