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Mixing Business and Personal Relationships Can Have Bitter Results

Residential propertyIn a resounding warning to entrepreneurs that personal relationships are not always a solid foundation for business success, the High Court has tackled a bitter dispute between a former couple whose foray into property development yielded little profit and ended in intractable conflict.

The couple had, whilst together, put much of their income, but not their assets, into ‘the communal pot’ for various purposes and had each contributed cash sums to the establishment of a deadlocked property development company in which they owned equal shares. The breakdown of the relationship signalled the start of acrimonious wrangling over the company’s finances and their respective entitlements.

The woman sought a winding up order in respect of the company on the basis that her former partner had, in a number of ways, operated it in a manner which was unfairly prejudicial to her interests. It was submitted, amongst other things, that the couple’s formal business relationship of trust and confidence had gone the same way as their personal relationship.

In rejecting the unfair prejudice claim, the Court noted that the woman had not taken up the man’s ‘entirely honest and open’ offer to have the company professionally valued and to pay her the full value of her share forthwith. He had done nothing that was calculated to undermine his ex-partner’s interest in the business.

The Court found on the evidence that the company was in any event insolvent and that the woman’s only entitlement was as a creditor in respect of her interest in its directors’ loan account. Taking into account the company’s financial position and sums that she had already received, her entitlement came to less than £10,000.

Ruling that it would be unreasonable to order the winding up of the company in the circumstances, the Court directed it to pay £10,000 to the woman in respect of her interest by a particular date. The Court further ordered that, on receipt of that payment, the woman must transfer her share of the company to her ex-partner.