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

The petitioner brought a petition under the Companies Act 2006 alleging that the affairs of two quasi‑partnership companies, Greenfrost Limited and PMO Property Limited, had been conducted in a manner unfairly prejudicial to her interests. The court applied the principles of section 994(1) of the Companies Act 2006 and relevant authorities on unfair prejudice in quasi‑partnerships, exclusion and misuse of company assets.

The judge found that, after the breakdown of the personal relationship between the parties, the first respondent excluded the petitioner from decision making and misapplied company funds and assets (including withdrawals from Greenfrost after the sale of the quarry, the securing of personal borrowing against PMO assets, and use of PMO plant by the respondent’s company). Those acts amounted to conduct of the companies’ affairs that was unfairly prejudicial to the petitioner.

Given the factual findings, the judge exercised the court’s discretion to order the respondent to buy the petitioner’s shares rather than to wind up Greenfrost, because of concerns about realisation of intercompany loans and the respondent’s lack of engagement. The buy‑out price was fixed by reference to the joint expert valuation adjusted for identified accounting anomalies.

The petitioner, formerly in a long personal relationship with the first respondent, and the respondent were joint directors and equal shareholders of two companies (Greenfrost Ltd and PMO Property Ltd) which effectively operated as quasi‑partnerships. The petitioner petitioned under the Companies Act 2006, claiming unfairly prejudicial conduct by the respondent arising from exclusion from company affairs and alleged misappropriation and misapplication of company funds following the sale of a quarry and subsequent transactions.

Nature of the application: A petition under section 994(1) of the Companies Act 2006 seeking relief for unfairly prejudicial conduct, principally a buy‑out of the petitioner’s shares. The first respondent argued in part for a voluntary winding up of Greenfrost and accepted that he would buy the petitioner’s PMO share at a fair price.

Issues framed:

• Whether the respondent conducted the affairs of Greenfrost and PMO in a manner unfairly prejudicial to the petitioner by excluding her from management and by misusing company assets;
• Credibility and reliability of the parties’ evidence and the extent of disclosure and cooperation with the joint expert;
• Appropriate remedy and valuation methodology, including whether a buy‑out or winding up was appropriate and what adjustments to the expert valuation were required.

Court’s reasoning: The judge preferred the petitioner’s evidence on the extent of exclusion and lack of information. He found misuse of assets, including significant unexplained withdrawals from Greenfrost after the quarry sale, the securing of personal borrowings against PMO assets and the use of PMO’s block‑making plant by the respondent’s company without payment. Those acts amounted to unfairly prejudicial conduct within the meaning of section 994(1), particularly given the quasi‑partnership character of the companies and the expectation of participation in management.

The court rejected winding up Greenfrost because most of the company’s apparent value was in intercompany debts largely controlled by the respondent, and there were concerns about his cooperation and whether a liquidator would be able to realise value for the petitioner. The judge therefore ordered a buy‑out. The joint expert valuation was accepted but adjusted to reflect (i) repayments and loans not recorded in the solicitor’s remittances and (ii) sums taken by the petitioner that lacked documentary support. The court fixed the buy‑out price at £787,780.67 for the petitioner’s share in Greenfrost and £66,112 for her share in PMO.

The petition was allowed. The court found that the first respondent had conducted the affairs of Greenfrost and PMO in a manner unfairly prejudicial to the petitioner by excluding her from decision making and by misusing company assets. Rather than ordering a winding up, the court ordered the respondent to purchase the petitioner’s shares, fixing the buy‑out prices after adjustments to the joint expert valuation because the respondent had not cooperated adequately with disclosure and valuation enquiries.