Sally Ann Gibbins v John Peter Francis Tierney & Ors
[2024] EWHC 2004 (Ch)
Dean Joseph Banfield v Paul Robert Edwards & Ors (Re Brand Evolution Ltd)
8 August 2024
[2024] EWHC 2104 (Ch)
High Court
A business partner left his company and sued, claiming he was unfairly treated. The judge ruled against him, saying there was no agreement to buy out his shares, and that any pay increases to the other partners were reasonable given the extra work they had to do.
Key Facts
- •Unfair prejudice petition under s.994 Companies Act 2006.
- •Petitioner (P) and four respondents (R1-R4) were founders of Brand Evolution Ltd.
- •Dispute arose from P's departure and subsequent allegations of unfair prejudice.
- •P claimed a binding shareholders' agreement existed, later abandoned this claim.
- •Allegations included breach of director duties, exclusion from management, and unfair dividend distribution.
- •Valuation of P's shares was a key point of contention.
Legal Principles
Unfair prejudice requires both unfairness and prejudice within the company law context.
Re Tobian Properties Ltd [2012] EWCA Civ 998
Equitable considerations may constrain lawful conduct in quasi-partnerships.
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
Quasi-partnership requires personal relationships, agreement on participation in management, and restrictions on share transfer.
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
A contract can be formed orally, but the absence of a written record may affect proof.
Ross Blue v Michael Ashley [2017] EWHC 1928 (Comm)
In unfair prejudice cases, focus should be on documentary evidence and inferences, rather than solely on witness recollections.
Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm)
Breach of director duties (ss 171-177 Companies Act 2006) generally indicates unfair prejudice.
Re Tobian Properties Ltd [2012] EWCA Civ 998
A departing shareholder in a quasi-partnership cannot unilaterally demand a buyout unless unfairly excluded from management.
Phoenix Office Supplies Ltd v Larvin [2003] EWCA Civ 1740
Outcomes
Petition dismissed.
No binding exit agreement existed; allegations of exclusion from management and unfair dividend distribution were not substantiated.
Claim of a binding exit agreement was rejected.
Lack of sufficient evidence to prove a binding agreement, considering witness testimony and documentary evidence.
Company was found to be a quasi-partnership.
Based on the long-standing personal relationships between founders, agreement on management participation, and restrictions on share transfer.
Allegations of unfair prejudice regarding exclusion from management were rejected.
P resigned and sought a new job, thus severing his connection with the company's management.
Allegations of unfair prejudice regarding increased salaries were rejected.
Increases were justified considering the increased workload on remaining directors after P and R4's departure.
Allegations of unfair prejudice regarding dividend distribution were rejected.
Dividend payments were consistent with the initial agreement and the mechanism for paying salaries.