Davies v Lynch-Smith & Ors [2018] EWHC 2336 (Ch) (06 September 2018)

Davies v Lynch-Smith & Ors [2018] EWHC 2336 (Ch) (06 September 2018)

The court found that Lloyds Autobody Ringway Ltd was not operated as a true quasi-partnership but that Mr Davies was unfairly excluded from management without a fair offer for his shares. The exclusion and diversion of profits via management charges constituted unfair prejudice. The appropriate remedy was an order for Mr Lynch-Smith to purchase Mr Davies’s 25% shareholding at full, undiscounted value. The winding up of HPP Vehicles Ltd was not necessary as the remaining partners were ordered to purchase Mr Davies’s shares at nominal value.

Citation
[2018] EWHC 2336 (Ch)
Parties
Petitioner and Claimant: Gregory Paul Davies; First Respondent and Defendant: Gerard Lynch-Smith; Second Respondent: Lloyds Autobody Ringway Ltd; Third Respondent: HPP Vehicles Ltd; Defendant: Janet Evans
Jurisdiction
England and Wales
Judgment Date
06 September 2018
Procedural Posture
Section 994 Companies Act 2006 Unfair Prejudice Petition and Partnership Claim / Post Trial Judgment
Outcome
Petition and claim allowed in part
Legal Topics
Unfair Prejudice, Quasi Partnership, Exclusion From Management, Shareholder Remedies, Winding Up, Valuation of Shares
Company Law Partnership Law Equity Unfair Prejudice Quasi Partnership Exclusion From Management Shareholder Remedies Winding Up +1 more

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Parties

Gregory Paul Davies

Petitioner and Claimant

Gerard Lynch-Smith

First Respondent and Defendant

Lloyds Autobody Ringway Ltd

Second Respondent

HPP Vehicles Ltd

Third Respondent

Janet Evans

Defendant

Procedural Posture

Section 994 Companies Act 2006 Unfair Prejudice Petition and Partnership Claim / Post Trial Judgment

Legal Issues

  1. 1 Whether the affairs of Lloyds Autobody Ringway Ltd were conducted in a manner unfairly prejudicial to Mr Davies under s.994 Companies Act 2006
  2. 2 Whether the company operated as a quasi-partnership
  3. 3 Whether Mr Davies was wrongfully excluded from management

Ratio Decidendi

The court found that Lloyds Autobody Ringway Ltd was not operated as a true quasi-partnership but that Mr Davies was unfairly excluded from management without a fair offer for his shares. The exclusion and diversion of profits via management charges constituted unfair prejudice. The appropriate remedy was an order for Mr Lynch-Smith to purchase Mr Davies’s 25% shareholding at full, undiscounted value. The winding up of HPP Vehicles Ltd was not necessary as the remaining partners were ordered to purchase Mr Davies’s shares at nominal value.

Court Disposition

Petition and claim allowed in part

Orders

  • Mr Lynch-Smith to purchase Mr Davies’s 25% shareholding in Lloyds Autobody Ringway Ltd at full, undiscounted value to be determined by the court.
  • Remaining partners to purchase Mr Davies’s shares in HPP Vehicles Ltd at nominal value.