UK: England and Wales: unfair prejudice, trust and confidence and winding-up

Judgment was given today in Apex Global Management Ltd & Anor v FI Call Ltd & Ors [2015] EWHC 3269 (Ch). The decision is noteworthy because of the discussion it contains concerning the operation of the unfair prejudice remedy (sections 994 to 996 of the Companies Act 2006), particularly the question of whether a section 994 petition is appropriate in all cases where the trust and confidence of the parties in a quasi-partnership has broken down. The trial judge, Hildyard J., held that the breakdown must be in consequence of some breach of either a legal right or equitable constraint affecting the conduct of the company's affairs. Insulting behaviour, his Lordship noted, would not ordinarily be sufficient unless, perhaps, the situation was one where one quasi-partner had so denigrated the activities of another quasi-partner regarding the latter's conduct of the company's affairs as to make their constructive continuation in the quasi-partnership unrealistic.

With regard to the court's discretion under section 996, Hildyard J. held that it could extend to adjusting the proportion of distributions upon a winding-up, although he made clear that the court should not ordinarily make a winding-up order under section 996.