Loveridge & Ors v Loveridge

Factual and Procedural Background

The case concerns a family-owned caravan park business operated through five companies and three oral partnerships at will, located in Worcestershire, Warwickshire, and Shropshire. The business was originally started by the appellants, referred to as "Ivy" and "Alldey," with the next generation, including the respondent "Michael" and his brother "Audey," becoming involved over time. From May 2019, irreconcilable differences arose between Michael and the other family members, leading to judicial findings that cooperation was impossible.

The litigation involves two sets of proceedings: the partnership proceedings concerning the winding up of the three partnerships, and the company proceedings involving the five companies. Michael sought relief under sections 994 and 996 of the Companies Act 2006 for unfair prejudice and the winding up of a company on just and equitable grounds under section 122(g) of the Insolvency Act 1986. Interim orders were made placing Michael in sole control of the partnerships and companies, restraining interference from Ivy, Alldey, and Audey.

On appeal, the court allowed the partnership appeal, discharging and replacing the judge’s order with a regime placing Ivy and Alldey in charge of the Riverside partnership, Michael in charge of the Redstone partnership, and Lesa in charge of the Oversley Mill partnership. The discharge of the original order was suspended to allow agreement on undertakings. The company proceedings order was also discharged, with reasons provided in this judgment.

Legal Issues Presented

1. Whether the judge was correct to grant interim relief placing Michael in sole control of the partnerships and companies pending trial.
2. Whether Michael had an arguable case under sections 994-996 of the Companies Act 2006 for unfair prejudice.
3. Whether the just and equitable ground for winding up the companies was made out.
4. The appropriate interim management arrangements for the partnerships pending their winding up.
5. The legal effect of Michael’s withdrawal of £1.25 million from one of the companies to finance a personal purchase.

Arguments of the Parties

Appellants' Arguments (Ivy and Alldey)

• The judge erred in finding that Michael had an equitable entitlement to sole management and control of the companies; no such agreement or understanding existed.
• The "driving force fallacy" was misapplied, as playing a leading role in business growth does not entitle one to entrenched management rights contrary to the company constitution.
• The decision to remove Michael as director and pursue repayment of the withdrawn funds was proper and not unfairly prejudicial.
• Interim relief excluding the majority from control was inappropriate, given the likelihood that the majority would retain control at trial.
• The judge failed to consider the principle of majority rule applicable to partnerships, especially for Oversley Mill.
• Michael’s conduct in withdrawing funds without consent demonstrated unsuitability to manage the partnerships.

Respondent's Arguments (Michael)

• Michael alleged he was the driving force behind the businesses’ expansion and ran the partnerships and companies day to day.
• He contended that Ivy and others denied him access to partnership funds, justifying his withdrawal of £1.25 million from one company to purchase a caravan park in his own name.
• Michael sought relief under sections 994-996 of the Companies Act 2006 for unfair prejudice and winding up on just and equitable grounds.
• He argued that the businesses would suffer irreparable harm if he were removed from control.
• Amendments to the petition were proposed to allege equitable constraints on the respondents’ use of majority control.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the partnership and company proceedings separately due to differing legal regimes. It acknowledged the partnerships were at will and dissolved by Michael’s notice, making winding up inevitable for Riverside and Redstone, and that interim management should reflect this reality. The companies, by contrast, had a range of possible outcomes, requiring different interim relief considerations.

Regarding the partnerships, the court found the judge erred in imposing unitary control over all partnerships and companies, and in relying on the "driving force fallacy" to justify placing sole control with Michael. The court emphasized the separate nature of the partnerships and their management, concluding that Ivy and Alldey should control Riverside, Michael Redstone, and Lesa Oversley Mill pending trial.

In the company proceedings, the court held that Michael’s petition lacked an arguable case for equitable constraints on majority control and for unfair prejudice under sections 994-996. The court rejected the notion that being the "driving force" of the business confers entrenched management rights. The withdrawal of £1.25 million by Michael was deemed a breach of fiduciary duty without a valid defence, and the statutory demand served was a legitimate corporate action rather than unfair prejudice.

The court found no sufficient basis for the just and equitable winding up ground, noting the absence of deadlock and clear pleaded facts. It also held that interim relief excluding the majority from control was unjustified, given the likely final outcome of majority control at trial. The judge’s reliance on the conduct and temperament of family members was considered irrelevant to the legal issues under company law.

The court applied the American Cyanamid test to the partnership injunctions, finding Michael’s sole control initially justified on balance of convenience but subject to modification to reflect the partnerships’ separate identities and winding up status.

Holding and Implications

The court ALLOWED the appeal in the partnership proceedings and DISCHARGED the judge’s order placing Michael in sole control of all partnerships, replacing it with an order that:

• Ivy and Alldey are placed in charge of the Riverside partnership;
• Michael is placed in charge of the Redstone partnership;
• Lesa is placed in charge of the Oversley Mill partnership pending trial.

The discharge of the original order was suspended to enable agreement on undertakings.

The court also DISCHARGED the judge’s order in the company proceedings that placed Michael in sole control, restoring normal company law rules and rejecting Michael’s claim for equitable constraints on majority control and unfair prejudice relief. The statutory demand against Michael was allowed to stand, but further enforcement was restrained pending trial.

The decision clarifies that in family business disputes involving companies, energetic management does not create entrenched rights overriding constitutional powers. It also reinforces the distinct legal treatment of partnerships and companies in interim relief and winding up contexts. No new legal principles were established; the judgment applies established company and partnership law to the facts presented.