Two friends were business partners. One (R) made a deal that favored him as landlord, hurting the business and the other partner (P). A judge decided that was unfair and ordered R to buy out P's share of the business.
Key Facts
- •Unfair prejudice petition under section 994 of the Companies Act 2006.
- •Petitioner (P) and Respondent (R) were equal shareholders and directors in Xact Skips Limited.
- •Dispute over valuation date of P's shares following a falling out.
- •P claimed unfair prejudice due to R's actions concerning a new lease and loan.
- •R argued P abandoned the company and that R's actions saved the company from insolvency.
- •Significant costs incurred by both parties, disproportionate to the amount in dispute.
- •R, as director and landlord, entered into a new lease with the company on terms considered unfavorable to the company by the court.
Legal Principles
Fairness in the context of unfair prejudice petitions is flexible and open-textured.
In re Tobian Properties Ltd [2012] EWCA Civ 998
The court considers the terms on which the parties agreed to do business together, including articles of association.
Companies Act 2006, Section 994
Outcomes
R to purchase P's shares at £115,000.
R's conduct in entering into the new lease and handling the rent deposit was unfairly prejudicial to P. The terms of the lease were not market terms and were detrimental to the company's interests.