Peter Charles Willoughby v Eric Martin Cole & Anor
[2024] EWHC 1410 (Ch)
Idrees Hashmi v Paul Lorimer-Wing & Ors
21 June 2023
[2023] EWHC 1514 (Ch)
High Court
Two business partners fell out. One partner (Lorimer-Wing) fired the other (Hashmi) without following the rules, kicked him out of the company, and tried to get his shares cheaply. The judge said that was unfair, and the fired partner wins.
Key Facts
- •Idrees Hashmi (Petitioner) sought a buy-out order against Paul Lorimer-Wing (First Respondent) for unfairly prejudicial conduct as a director of Fore Fitness Investments Holdings Limited (the "Company").
- •Hashmi was removed as a director on 26 February 2021, allegedly in accordance with the Company's Articles of Association.
- •Prior to removal, Lorimer-Wing locked Hashmi out of the Company's IT systems.
- •Hashmi's petition initially included James Gilbert (Second Respondent), but was settled out of court.
- •The Company's share capital was split into voting Ordinary A Shares and non-voting Ordinary B Shares.
- •Hashmi was an early investor, director (CTO), and independent contractor for the Company.
- •The Company's Bespoke Articles required two directors for a quorum; a previous court ruling established this.
- •The removal of Hashmi as director is contested due to alleged non-compliance with Model Articles 9 and 10 regarding notice and communication at board meetings.
- •Lorimer-Wing's defense rests on Hashmi's alleged voluntary abandonment of work and entitlement to removal under Bespoke Article 14(1)(c).
- •A key evidential dispute surrounded the nature and content of various communications (e-mails, phone calls, WhatsApp messages) between Hashmi and Lorimer-Wing.
- •Lorimer-Wing relied on legal advice (undisclosed) in support of the removal, but this was deemed insufficient.
- •The court examined the chronology of events, documentary evidence, and witness testimony to determine the validity of Hashmi's removal.
- •A late offer to purchase Hashmi's shares was made by Lorimer-Wing.
Legal Principles
Unfair prejudice to the interests of members.
Companies Act 2006, Section 994(1)
Standing to petition – membership of the company.
Companies Act 2006, Section 994
Requirements for unfair prejudice: standing, conduct relating to company affairs, conduct contrary to law or inequitable, prejudice suffered, prejudice to interests as a member, unfairness of prejudice.
O’Neill v. Phillips [1999] 1 WLR 1092, Re A Company (No. 00477 of 1986) [1986] BCLC 376, Re Tobian Properties Ltd [2013] Bus. L.R. 753, Re Coroin Ltd (No. 2) [2012] EWHC 2343
Test for unfairness: departure from agreed arrangements between shareholders; breach of agreement or understanding.
O’Neill v. Phillips, Grace v. Biagioli [2006] 2 BCLC 70, Re Saul D Harrison [1994] B.C.C. 475
Reasonable offer as defense to unfair prejudice.
O’Neill v. Phillips
Company's Articles of Association govern the removal of directors.
Companies Act 2006 and Bespoke Articles of Fore Fitness Investments Holdings Limited
Outcomes
Petition granted.
The court found that the Company's affairs were conducted in a manner unfairly prejudicial to Hashmi's interests due to the invalid removal from directorship, exclusion from management and information, and unlawful termination of his consultancy agreement. The court found that Lorimer-Wing's actions, in failing to follow proper procedure for the removal, and aiming to gain an advantage by obtaining Hashmi's shares at nominal value were unfair.