Davies v Lynch-Smith & Ors

Davies v Lynch-Smith & Ors

Mr Davies’s exclusion from management and employment in Ringway was justified due to his undisclosed involvement with Novo and misappropriation of commissions. However, it was unfairly prejudicial to leave him locked in as a minority shareholder without a buy-out offer. The appropriate remedy is a buy-out of his shares at a 60% minority discount, reflecting his conduct and lack of quasi-partnership status. Other heads of alleged unfair prejudice (management charges, consultancy fees, certain transactions) were either agreed to by Mr Davies, justified, or did not warrant a buy-out order, though some transactions were found to be unfair but only merited accounting adjustments.

Parties
Petitioner/claimant: Gregory Paul Davies; Respondent/defendant: Gerard Lynch-Smith; Respondent: Lloyds Autobody Ringway Ltd; Respondent: HPP Vehicles Ltd; Defendant: Janet Evans
Jurisdiction
England and Wales
Judgment Date
06 September 2018
Procedural Posture
Unfair Prejudice Petition and Partnership Claim / Judgment After Trial
Outcome
Petition allowed in part; buy-out order granted at a 60% minority discount; partnership share to be bought out at value to be determined; HPP Vehicles Ltd shares to be bought at nominal value.
Legal Topics
Unfair Prejudice, Minority Shareholder Rights, Director Duties, Share Valuation, Partnership Dissolution
Company Law Partnership Law Unfair Prejudice Minority Shareholder Rights Director Duties Share Valuation Partnership Dissolution

Case Brief

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Parties

Gregory Paul Davies

Petitioner/claimant

Gerard Lynch-Smith

Respondent/defendant

Lloyds Autobody Ringway Ltd

Respondent

HPP Vehicles Ltd

Respondent

Janet Evans

Defendant

Procedural Posture

Unfair Prejudice Petition and Partnership Claim / Judgment After Trial

Legal Issues

  1. 1 Whether the exclusion of Mr Davies from management of Ringway was unfairly prejudicial under section 994 of the Companies Act 2006
  2. 2 Whether Mr Davies was entitled to relief as a minority shareholder
  3. 3 Whether Mr Davies breached fiduciary duties to Ringway and HPP

Ratio Decidendi

Mr Davies’s exclusion from management and employment in Ringway was justified due to his undisclosed involvement with Novo and misappropriation of commissions. However, it was unfairly prejudicial to leave him locked in as a minority shareholder without a buy-out offer. The appropriate remedy is a buy-out of his shares at a 60% minority discount, reflecting his conduct and lack of quasi-partnership status. Other heads of alleged unfair prejudice (management charges, consultancy fees, certain transactions) were either agreed to by Mr Davies, justified, or did not warrant a buy-out order, though some transactions were found to be unfair but only merited accounting adjustments.

Court Disposition

Petition allowed in part; buy-out order granted at a 60% minority discount; partnership share to be bought out at value to be determined; HPP Vehicles Ltd shares to be bought at nominal value.

Orders

  • Mr Lynch-Smith to purchase Mr Davies’s 25% shareholding in Ringway at a 60% minority discount, valuation as per judgment.
  • Mr Davies to resign as director on completion of buy-out.