Colman Coyle’s Matt Champ, and Barnaby Hope of Selborne Chambers, have been successful in the High Court in relation to a claim against his client’s (“Miss Ross”)(“the Old LLP”) ex business and romantic partner, Mr Phillips and various corporate entities under Mr Phillips’ control.
After securing permission from the High Court to bring such a derivative claim (under the more stringent Foss v Harbottle test for LLPs which requires a prima facie case of fraud and/or dishonesty) HHJ Johns KC (Sitting as a High Court Judge) after a 5-day trial found that Mr Phillips, without Miss Ross’ knowledge or consent, executed a deed to transfer out all of the assets of the Old LLP in which they both had 50/50 control. Mr Phillips then transferred said assets into other entities which Mr Phillips had sole control so as to keep them from Miss Ross.
Mr Phillips took various dishonest steps to achieve this. Those steps included attempting to add a company to the Old LLP in which he falsely claimed that Miss Ross had agreed to a share dilution in that company from 50/50 to 95 shares to Mr Phillips. Mr Phillips did that improperly by way of undue influence over Miss Ross so as to obtain voting control within the company. That in turn was done so that he could sign the ‘transfer’ of the assets out of the Old LLP himself personally and as a director of the company and thus keep it secret from Miss Ross (needing only 2 out of the supposed 3 members to sign the deed). Mr Phillips also changed the registered address of the Old LLP and company so that Miss Ross would not receive documents in relation to the same. The Old LLP was, unbeknownst to Miss Ross, eventually struck off for failure to file accounts but restored via the courts by Colman Coyle.
HHJ Johns KC found that, under the LLP Regulations 2001, Regulation 7(6) required unanimous consent of the members to change the ‘ordinary business’ of the Old LLP. Whilst there was no previous authority as to what that meant in relation to LLPs (before this decision), the judge agreed with Miss Ross’ submissions that the same had been found to be true of limited companies and normal partnerships and so there was no reason for it not to be the same with regards to LLPs. By taking all of the assets and leaving the Old LLP as a shell, Mr Phillips had, indeed, changed the ordinary business of the LLP and so required unanimous consent which, even on his own case, he did not have.
In any event, HHJ Johns KC also found that, even if only a majority of members’ consent was needed, that was still not met because the limited company had only been added to the Old LLP because of documents obtained by Mr Phillips as a result of his applying undue influence to Miss Ross and so Mr Phillips didn’t even have that.
HHJ Johns KC also rejected Mr Phillips’ arguments that there was an issue estoppel or a Henderson v Henderson abuse on the basis that Miss Ross should have brought this derivative claim within family proceedings in 2019. HHJ Johns KC found those arguments to be simply unrealistic for numerous reasons. The end result is that the assets were declared to be held on trust by Mr Phillips and his various entities for the benefit of the Old LLP. A quantum phase of the proceedings will now take place to determine the level of relief offered to the Old LLP.
A copy of the judgement can be accessed via https://caselaw.nationalarchives.gov.uk/ewhc/ch/2025/2058
Colman Coyle have extensive experience of litigating complicated multi-party actions relating to commercial transactions, property, fraud and a mixture of all of the aforementioned. If there is a matter we can help you with, please reach out and help us to help you.
