Whose Claim Is It Anyway? Henderson Abuse, Unfair Prejudice Petitions And Claims Accruing To A Company

• Published date: 01 September 2021
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Shareholders
• Law Firm: Gatehouse Chambers
• Author: Mr Rob Hammond

Rob Hammond and Amy Held examine Taylor Goodchild Ltd v Taylor & Anor [2021] EWCA Civ 1135

Background

The Appellant (the 'Company') was established in 2011 to take over the solicitors' practice which the First Respondent ('Mr Taylor') had been carrying on in partnership with Mr Goodchild. Mr Taylor and Mr Goodchild were the Company's only directors and each held 50 of the 100 issued shares.

In late 2016, Mr Goodchild and Mr Taylor agreed in principle that each should go his own way. Notwithstanding that numerous important matters remained unresolved, Mr Taylor set up the Second Respondent ('STL').

In May 2017, Mr Taylor told Mr Goodchild that from June 2017, Mr Taylor would cease carrying out any work for the Company, and that several employees of the Company would also be leaving to join STL. Mr Taylor also wrote to certain clients of the Company, notifying them of his imminent move to STL and inviting them to instruct STL instead of the Company in the future. He further moved various client files - many still benefitting from the Company's work in progress and unbilled costs - and documents from the Company's premises to those of STL. Such actions were taken while Mr Taylor was still a director of the Company: he only resigned from that post in August 2018.

The Petition

In November 2017, Mr Goodchild presented a petition under section 994 of the Companies Act 2006, alleging that the affairs of the Company had been conducted in a manner that was unfairly prejudicial to his interests as shareholder.

By a judgment of 20 July 2018, Barling J reached the "firm conclusion" that the allegations of unfair prejudice had been made out: there had been no more than an agreement in principle that the former partners would go their own ways. Accordingly, Mr Taylor's actions were "the clearest possible breach of directors' fiduciary and statutory duties."

Given that Mr Goodchild and Mr Taylor had agreed that Mr Goodchild should retain the Company, subject to purchasing Mr Taylor's shares at a fair valuation, Baring J made an order to that effect. Importantly, when calculating the shares' fair value, Barling J relied on an expert report which did not account for Mr Taylor's outstanding loans from the Company, or the work in progress and unbilled costs he had taken to his new firm, STL.

The Present Proceedings

The present proceedings were issued in April 2019 by the Company, by then in the sole ownership of Mr Goodchild. It claimed against Mr Taylor and STL and sought...