Amanda Ann Davies v Patrick Michael O'Keeffe & Ors.

Unfair prejudice under the Companies Act 2006 requires conduct of the company’s affairs which is objectively unfair and prejudicial to the petitioner’s interests as a member. In a quasi-partnership, equitable considerations may include mutual confidence and participation in management. Exclusion may arise where a member is not informed about matters having a fundamental effect on the company, even if that member does not take part in day-to-day management. Misuse of company assets and undisclosed personal borrowing secured on company property may amount to unfairly prejudicial conduct. The court has a wide discretion to grant relief, including a fair-value buy-out.

The petitioner and the first respondent were former personal partners, equal shareholders and joint directors of Greenfrost Limited and PMO Property Limited. Both companies operated as quasi-partnerships. Following the breakdown of their personal relationship, the petitioner alleged that the first respondent had excluded her from management, misused company assets and dealt with company property for his own benefit.

The petition sought relief under section 994 of the Companies Act 2006, principally an order requiring the first respondent to purchase her shares. The first respondent denied unfair prejudice and proposed voluntary liquidation of Greenfrost, while accepting that he should buy the petitioner’s PMO shares at a fair price. The issues were whether the conduct was unfairly prejudicial and what relief and valuation were appropriate.

1. Unfair prejudice established. The first respondent made fundamental decisions concerning both companies without consulting or informing the petitioner after their relationship broke down. He also misused company assets and applied company money for himself or his company.
2. The payment of genuine company or family debts from quarry-sale proceeds was not unfairly prejudicial merely because some debts belonged to other companies or the first respondent. The unexplained withdrawal of £180,000 was a misuse of Greenfrost’s money and involved a failure to consult or inform the petitioner.
3. The purported sale of the petitioner’s Greenfrost shares, the appointment of a replacement director and the failure to provide proper information were unfairly prejudicial. Personal borrowing secured on PMO assets, insofar as it benefited the first respondent or his company, was also misuse of those assets and excluded the petitioner from fundamental decisions. The unpaid use by Teifi Blocks of PMO’s plant and land was likewise unfairly prejudicial.
4. Although Greenfrost was in deadlock, liquidation was unsuitable. Further accounts and inquiries would likely cause delay and difficulty. The appropriate remedy was a buy-out.
5. The first respondent was ordered to pay £787,780.67 for the petitioner’s Greenfrost shares and £66,112 for her PMO shares. Any consequential matters not agreed were to be dealt with by written submissions, with an agreed draft order filed within 14 days.