Joseph Mark Taylor v James Lee Taylor: Unfair prejudice found in family property company dispute

The High Court has upheld an unfair prejudice petition brought by Joseph Mark Taylor against his brother James Lee Taylor concerning Jamett Properties Limited, a family property company in which Joseph held 40% of the shares and James 60%.

Jamett Properties Limited was incorporated in 1962 and had been run as a family business. From 2002, following share purchases and gifts, the company became owned 60/40 by the two brothers, who were both directors. The business involved buying, renovating, selling and letting commercial and residential properties, primarily in east London and Essex. Between 2002 and 2013, the company expanded significantly with mortgage funding, growing from about four properties to approximately 15.

The relationship between the brothers broke down completely in early 2013 following a dispute at their other company, Mixit Concrete Ltd, where Joseph was employed. Joseph brought a successful unfair dismissal claim against Mixit, after which James sought to remove him as a director of the property company.

Key findings on quasi-partnership

Nicola Rushton KC, sitting as a Deputy High Court Judge, found that the company had been operated as a quasi-partnership between the brothers from 2002 until late 2012. This was based on an express oral agreement that both would be actively concerned in management and operations. The arrangement imported equitable obligations akin to a partnership, with the company run informally through discussions between the brothers rather than formal board meetings.

The court found that both brothers were involved in running the business according to their respective skills: Joseph undertook building works and tenant relations, whilst James focused on financial decisions and organising renovation works using Mixit's employees and subcontractors.

Invalid removal as director

The court concluded that Joseph had not been validly removed as a director in April 2013. Whilst James had sent a requisition letter proposing Joseph's removal, no properly convened general meeting took place. Even if a meeting had been called for 17 April 2013, it would not have been quorate as Joseph did not attend. The court found no evidence that Joseph had acquiesced to his removal, noting he had consistently maintained it was wrongful. Companies House records were therefore incorrect in showing his resignation.

Exclusion from the company

The court found overwhelming evidence that from March 2013 onwards, James had excluded Joseph not only from management but from any involvement in the company's affairs. Joseph received no material information other than most (but not all) statutory accounts. No annual general meetings were held. Requests for information from Joseph, his sisters and his advisers were consistently refused. When Joseph obtained bank statements directly from NatWest, James instructed the bank to remove him from the mandate.

Financial misconduct

The judgement identified extensive financial misconduct by James in managing the company for his own benefit and that of his associated companies, particularly Mixit and Fleetwood Trading Limited.

In 2016, James caused the company to borrow £4 million from Lloyds Bank. Of this, £1,755,818 was paid to Mixit, discharging what had been an interest-free loan on which Mixit had agreed not to demand repayment. This was replaced with a five-year commercial loan at 2.6% above base rate, clearly disadvantageous to the company.

In 2022, James arranged a £5.5 million loan from NatWest. Of this, £1,694,600 was transferred to Mixit as an unsecured, interest-free loan in October 2022. Between October 2022 and Mixit's administration in May 2024, numerous cash transfers continued from the company to Mixit, derived from rental income. According to intercompany accounts, Mixit owed the company £3,501,976.28 when it entered administration. The company did not prove as a creditor in the insolvency.

James also borrowed personally from the company through his director's loan account, totalling £575,364.52 according to ledgers. He had a practice of annually transferring his personal debt to Mixit's intercompany account, totalling £402,649 over various years. This converted personal debts into corporate debts of an insolvent company and obscured them from statutory accounts.

The court found James had failed to account for any of these transactions and failed to declare his conflicts of interest. An indemnity executed by James in April 2025 regarding Mixit's shortfall did not cure the unfair prejudice.

Other problematic transactions

The company paid £16,800 to valuers for work relating to a proposed rights issue in 2020, which James admitted was designed to dilute Joseph's shareholding below 25% to facilitate lending without his consent. These costs were incurred for James's personal benefit, not the company's.

Substantial recharges were made from Mixit to the company (totalling £1,886,900 from 2012 to 2023) and later from Fleetwood, without proper documentation, explanation or accounting. Whilst some related to legitimate expenses, the court found the lack of proper accounting rendered them unfairly prejudicial in principle, though James would have opportunity to justify them at a quantum trial.

The company also borrowed from James's pension fund (the Mixit Pension Fund), on which interest was charged, growing from £149,977.29 in 2013 to £649,462.25. No explanation was given for maintaining this borrowing when the company could have repaid it, particularly as it was latterly collecting rent for pension-owned properties without payment.

Legal principles applied

The court applied the principles from O'Neill v Phillips regarding fairness in the context of company relationships. It noted that conduct perfectly fair between competing businessmen may not be fair between family members. In quasi-partnerships, there are equitable constraints superimposed on legal rights, requiring trust and confidence between members.

Citing Re Tobian Properties, the court noted that non-compliance by respondent shareholders with their directors' duties will generally indicate unfair prejudice has occurred. The court also applied the principle from Re Elgindata (No. 1) that misapplication of company assets for a director's benefit or that of their associates is inherently prejudicial to minority shareholders, even if retrospectively corrected.

Following Mitchell v Al Jaber, the court held that as a fiduciary, James bore the burden of explaining transactions and establishing that he had not derived significant benefit at the company's expense, recognising the information asymmetry between fiduciary and principal.

Conclusions on unfair prejudice

The court found unfair prejudice established in five main respects: exclusion from management and involvement contrary to the quasi-partnership agreement; breach of rights under the Articles by failing to hold AGMs; exclusion from profits through inappropriate lending to associated companies; refusing to provide information; and managing the company for James's benefit and that of his associates rather than for members.

These findings covered the loans to Mixit, personal loans to James (subsequently transferred to Mixit), unexplained recharges from Mixit and Fleetwood, pension fund arrangements, the sale of 565 Romford Road without proper accounting, valuation fees for the rights issue, and failure to account for services regarding personally-owned properties.

The court dismissed certain heads of claim, including alleged payments to solicitors for non-company files, council tax enforcement payments, rental income from properties legally owned by James personally, and an alleged theft by cheque.

An application by James to strike out the petition on the basis of his offer to purchase Joseph's shares was dismissed, as all offers had been withdrawn and in any event were not sufficiently firm or informed.

The matter will proceed to a quantum trial to determine appropriate relief, with directions to be given following this liability judgement. The court indicated that more complete financial disclosure would be required to enable comprehensive findings on quantum.

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