Ivy Loveridge v Alldey Michael Loveridge
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Falk,Lord Justice Nugee,Lord Justice Bean |
| Judgment Date | 19 November 2021 |
| Neutral Citation | [2021] EWCA Civ 1697 |
| Docket Number | Case Nos: A3/2021/0480 |
| Court | Court of Appeal (Civil Division) |
Lord Justice Bean
Lord Justice Nugee
and
Mrs Justice Falk
Case Nos: A3/2021/0480
A3/2021/0465
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES IN
BIRMINGHAM
BUSINESS LIST AND COMPANIES LIST (ChD)
HHJ Cooke sitting as a High Court Judge
Claim Nos. CR-2020-BHM-000301 and BL-2020-BHM-000019
Royal Courts of Justice
Strand, London, WC2A 2LL
Lance Ashworth QC and Dan McCourt Fritz (instructed by Thursfields) for the Appellants
Mark Anderson QC and David Stockill (instructed by Silverback Law) for the Respondent
Hearing date: 28 October 2021
APPROVED JUDGMENT
INTRODUCTION
This is the second occasion on which this court has had to consider orders made at an interlocutory stage in proceedings arising out of an acrimonious dispute about a series of caravan parks owned and operated by the Loveridge family. I will refer to family members by their first names for convenience of identification.
In brief, Ivy and her husband Alldey founded a caravan park business as a partnership. Their sons, Michael and Audey, became involved over time. Michael joined his parents' partnership and the scale of its business expanded. In due course a number of companies were also acquired to hold additional parks and two further partnerships were formed.
The proceedings followed the development of apparently irreconcilable differences between Michael and the other members of the family, who include Michael's sisters Lesa and Mersadie as well as his parents and brother. There are two sets of proceedings, both initiated by Michael. The first relates to the winding up of the three partnerships (the “partnership proceedings”). In the second (the “company proceedings”), Michael seeks orders under ss 994–996 Companies Act 2006 (unfair prejudice) or for winding up under s 122(1)(g) Insolvency Act 1986 (the just and equitable ground) in respect of five family companies. Those companies are Kingsford Caravan Park Limited (“Kingsford”), Breton Park Residential Homes Limited (“Breton Park”), Quatford Park Homes Limited (“Quatford”), Riverside Caravan Park (Stourport) Limited (“Riverside Stourport”) and Bewdley Caravan Sales Limited (“Sales”).
In its earlier decision, Loveridge v Loveridge [2020] EWCA Civ 1104, this court discharged orders made in both sets of proceedings by HHJ McCahill QC (sitting as a High Court judge) that in broad terms had the effect of placing Michael in sole charge of the caravan parks pending trial. A replacement order was made in the partnership proceedings which had the effect of putting different family members in charge of each partnership. No replacement order was made in the company proceedings. The court's decision to that effect was communicated at the end of the hearing, on 29 July 2020, and judgment was handed down on 24 August 2020. Permission to appeal to the Supreme Court was subsequently refused.
The two further appeals the subject of this decision relate to orders made by HHJ Cooke (sitting as a High Court judge) in the company proceedings and partnership proceedings respectively on 1 December 2020, following a three day hearing. Ivy and Alldey appeal in the company proceedings against the judge's decision to allow Michael to amend his petition and refuse their application to strike it out in whole or in part, and against his decision to injunct Ivy and Alldey from demanding repayment of certain inter-company loans or taking enforcement action in respect of them pending trial (the “company appeal”). In the partnership proceedings, Ivy appeals against the judge's decision to make no order for costs following the withdrawal by Michael of a committal application against her (the “costs appeal”). (Another part of that appeal, which related to a refusal to allow the defence and counterclaim to be amended, has already been allowed by consent.)
Permission to appeal was granted by Andrews LJ in respect of the company appeal and by Asplin LJ in respect of the costs appeal. The two appeals were heard together. I will address the company appeal, which raises more issues and submissions on which occupied most of the available time, first.
THE COMPANY APPEAL
Background and the earlier Court of Appeal decision
As already indicated, the company proceedings relate to five family owned companies, Kingsford, Breton Park, Quatford, Riverside Stourport and Sales. The first four of these companies each owns an individual caravan park, either directly or through a subsidiary. The fifth company, Sales, carries on a business of dealing in caravans. The shares in Kingsford, Riverside Stourport and Sales are owned as to one third each by Michael, Ivy and Alldey. All three of them were also the directors of those three companies until Michael was removed as a director of Sales as described below. He has also since been removed as a director of Kingsford. He remains a director of Riverside Stourport.
The ownership of Kingsford, Riverside Stourport and Sales, and their Boards before action was taken to remove Michael, reflects the two main partnerships, Riverside and Redstone. The partners in both of those partnerships are Michael, Ivy and Alldey. Riverside is the oldest partnership and has a number of sites. Redstone has a single, but significant, site. (The third partnership relates to a more modest site that Lesa claims as hers.)
The shares in Quatford are owned equally by Michael and Ivy, and both are directors of it and of the subsidiaries through which it owns a caravan park called Hollins Park. However, it was not disputed that Michael is currently in de facto control of these companies. He currently lives on the Hollins Park site.
The shares in Breton Park are also legally owned equally by Michael and Ivy, but on Ivy and Alldey's case Michael has no beneficial interest in them. Ivy and Audey are the directors.
The background to the company appeal has its origin in the Court of Appeal's earlier decision. Floyd LJ, with whom Lewison LJ and Asplin LJ agreed, concluded that the petition as then formulated, or with the draft amendments put to the court, disclosed no arguable case to support Michael's claim under ss 994–996 or to have the companies wound up on the just and equitable ground.
The pleadings considered by the Court of Appeal averred that Michael had legitimate expectations giving rise to equitable constraints on the use of majority control, and that he had both the right to be involved in management and the sole right to manage the companies without interference from other family members. Floyd LJ said this at [49] to [52]:
“49. I would be reluctant at the interim stage to hold Michael to the form of petition which was before the judge if the facts credibly alleged in the petition or in the evidence supported the existence of some equitable constraint of the kind now contended for by [the proposed amended pleading]. I am, however, entirely unpersuaded that the petition or evidence did support the existence of such a constraint. First, it is to be noted, as Lewison LJ pointed out in the course of argument, that the equitable constraint is said to arise from the history and the circumstances set out in the petition. We asked Mr Stockill [counsel for Michael] to identify the paragraphs of the petition on which the equitable constraint was founded. He pointed us to paragraphs 43 to 49. These paragraphs recite the history of the development of the business. I hope I do not do injustice to these paragraphs if I summarise them as allegations that Michael was the driving force behind the more recent expansion of the business through the corporate vehicles of Kingsford (from 2004), Breton Park (from 2014), Riverside, Stourport (from 2016) and Quatford (from 2017). His efforts in expanding the business were “to the exclusion of his parents” who are and were not so business minded. These efforts included sourcing sites, liaising with local authorities on planning and building regulations and licensing, arranging finance and dealing where necessary and appropriate with professionals such as solicitors and accountants. Further, Michael ran the companies on a day to day basis, including the organising, maintenance and servicing of the sites, liaising with staff, employees and contractors and arranging for the collection of rents.
50. All this is of course the subject of challenge. What matters for present purposes is whether, taking these allegations at their highest, they are capable of supporting the existence of the right to continue to carry on these functions if a company, acting through its constitutional rules, wishes to change those arrangements. Mr Stockill accepted that there was no express agreement or understanding that Michael would have that right, but submitted that such an understanding was to be inferred. In my judgment, no such agreement or understanding or any form of equitable restraint can properly be inferred from these facts. It is not the law that progressive and energetic managers, however well they perform their duties to the benefit of the company, acquire entrenched rights not to be removed from their positions if the constitution of the company permits their removal. Such a principle would act as a significant but unjustified restriction on countless companies with dynamic executives from operating their companies in accordance with their constitutions.
51. Mr Ashworth coined the phrase “the driving force fallacy”, by which he meant...
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