Law firm fails to strike out former partner’s unfair prejudice petition

High Court: Hearing set for November

Well-known London litigation firm Candey has failed in a bid to strike out an unfair prejudice claim brought by a former partner.

Matthew Tom claims that his former partners acted in breach of their duties as directors in causing Candey to act as it did, as well as their duties of good faith both in the years leading up to his resignation in 2015 and the years after.

He is seeking an order under section 996 of the Companies Act 2006 compelling them to buy his shareholding in Candey at a fair value and pay him all money found to be owing to him.

Mr Tom joined Candey in 2009 and left in 2015, and his former partners – Ashkhan Candey, Lucy Candey, Andrew Dunn and Nigel McEwen – applied to have his claim struck out for limitation reasons “and more generally, of delay and the passage of time”, explained Insolvency and Companies Court Judge Greenwood.

The parties are in dispute about the terms of the original LLP agreement and a restructuring that took place after the firm incorporated.

The judge explained that Mr Tom’s case was that “in various respects, the affairs of Candey have been conducted in a manner which was and is unfairly prejudicial to his interests as a member, and that in consequence, on 15 October 2015, he resigned as a director”.

Among multiple allegations, he claims that increasingly, from about the end of 2012, he was mistreated, excluded from management and put under pressure to agree disadvantageous changes to the LLP agreement and/or to sell all or part of his shareholding.

He alleges too that board decisions in autumn 2015 sought to reduce the value of his shares dramatically and that the other directors voted to approve accounts which they knew understated the sum due to him in respect of his director’s loan account.

Among his claims about the period since he left the firm are that his shares were not purchased as they should have been.

Judge Greenwood continued: “Each of these allegations is denied by the respondents. Moreover, their case is that in September 2015, if not before, Mr Tom acted in repudiatory breach of the [LLP] agreement by (amongst other things) relocating his office to his home in Gloucestershire, and thus ‘retiring’.”

As well as arguments under the Limitation Act 1980, the respondents argued that Mr Tom had acquiesced in the alleged misconduct and/or deliberately delayed the commencement of proceedings for tactical reasons, such that the proceedings were abusive or in any event bound to fail.

But the judge refused the application, finding that in relation to the loan account, the limitation period for a claim for non-monetary relief – here, a share purchase order – was 12 years.

“All of the relevant instances of alleged prejudice in this case – and certainly, all of the relevant events concerning the loan account – took place in less than 12 years before the petition was presented on 28 October 2023.”

The allegation of acquiescence was not “sufficiently supported” by the evidence and more generally “raises an issue of fact which cannot realistically be determined on a summary basis before even the exchange of trial witness statements”.

He rejected for multiple reasons the argument that the delay in bringing proceedings was deliberate, including that Mr Tom was complaining about matters that were continuing and began less than six years before the petition was presented, such as a share dilution in November 2016.

The abuse of process argument was based on Mr Tom’s refusing offers from Mr Candey to purchase his shares.

Among his reasons for rejecting this, Judge Greenwood noted that two days after Mr Tom’s shareholding had been diluted in November 2016, Mr Candey offered £1,000 for his shares.

“On 1 December 2016, Mr Candey told Mr Tom that since the dilution, his shares had only a nominal value and that it would be disproportionate to incur any further costs of providing voluntary disclosure of information.

“The respondents have not made any offers at all since that time, and there are no outstanding offers to purchase Mr Tom’s shares. It follows that if the petition were to be struck out on this basis, Mr Tom would be left with no remedy at all in respect of the unfair prejudice of which he complains.”

An eight-day trial of Mr Tom’s petition has been listed to begin on or shortly after 1 November.

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