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EBRAHIMI V WESTBOURNE GALLERIES LTD AND OTHERS (ON APPEAL FROM IN RE WESTBOURNE GALLERIES LTD): HL 3 MAY 1972

References: [1975] 235 EG 901, [1973] AC 360

Coram: Lord Wilberforce, Viscount Dilhorne, Lord Pearson, Lord Cross of Chelsea and Lord Salmon

Ratio: A company had operated effectively as a partnership between two and then three directors. No dividends had been paid, but the directors had received salaries. One director was removed and sought an order for the other to purchase his shares, or alternatively for the company to be wound up on the just and equitable ground. The company had promised to begin to pay dividends.

Held: In the case of a small company the rights and obligations of a company went beyond bare company law requirements. The applicant had been excluded from being involved in the management of the company against his reasonable expectations. Since he was unable effectively to dispose of his interest, the company should be wound up. The term ‘quasi-partnership’ is dangerously misleading. Equitable considerations can come to be applied where the association has personal characteristics and rests on a relationship of trust and confidence, and all members are expected to take an active part and share transfers are restricted.

Lord Wilberforce said: ‘A limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The ‘just and equitable’ provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.’

Statutes: Companies Act 1948 220 222(f)

This case cites:

• Approved – In re Wondoflex Textiles Pty Ltd ([1951] VLR 458)

The court contrasted the literal meaning of the company’s articles with the true intentions of the parties: ‘It is also true, I think, that, generally speaking, a petition for winding up, based upon the partnership analogy, cannot succeed if what is . .

• Approved – In re Straw Products Pty Ltd ([1942] VLR 222)

The court considered the requirement on a partner to retire under a ‘just and reasonable’ provision: ‘All that Hinds has done in the past in exercise of his control has been within his legal powers. The question is whether he has used those powers . .

• Approved – Loch v John Blackwood Ltd PC ([1924] AC 783, 93 LJPC 257, [1924] B&CR 209, 131 LT 719, 68 SJ 735, 40 TLR 732)

The section gave five grounds upon which a company may be wound up and a ‘just and equitable’ ground.

Held: the latter was not to be construed restrictively by ejusdem generis with the other grounds. A company could be wound up if a . .

• Approved – In re Yenidje Tobacco Co Ltd CA ([1916] 2 Ch 426, [1916-17] All ER 1050)

A company had been set up by two tobacco manufacturers, Mr Rothman and Mr Weinberg. The relationship between them had broken down to the extent that the two shareholders were not on speaking terms and that no business which deserved the name of . .

• Approved – Symington v Symington’s Quarries Ltd IHCS ((1905) 8 F (Ct of Sess) 121)

• Applied – Blisset v Daniel ((1853) 10 Hare 493)

The court considered the limits on a power of expulsion from a partnership.

Held: (Page-Wood V-C) Construing the articles, two-thirds of the partners could expel a partner by serving a notice upon him without holding any meeting or giving any . .
(This list may be incomplete)

This case is cited by:

• Cited – O’Neill and Another v Phillips and Others; In re a Company (No 00709 of 1992) HL (Gazette 09-Jun-99, Times 21-May-99, Gazette 02-Sep-99, House of Lords, Bailii, [1999] UKHL 24, [1999] 1 WLR 1092, [1999] BCC 600, [1999] 2 All ER 961, [1999] 2 BCLC 1)

The House considered a petition by a holder of 25 of the 100 issued shares in the company against the majority shareholder. The petitioner, an ex-employee, had been taken into management and then given his shares and permitted to take 50% of the . .

• Cited – CVC/Opportunity Equity Partners Limited and Opportunity Invest II Limited v Luis Roberto Demarco Almeida PC (PC, PC, PC, Bailii, PC, Appeal No 4 of 2001, [2002] UKPC 16, (Appeal No 4 of 2001), [2002] 2 BCLC 108, [2002] BCC 684)

(Cayman Islands) The respondent was a minority shareholder. An offer was made to buy out his interest. He petitioned for the winding up of the company on the just and equitable ground. The claimants obtained an injunction to prevent him doing so, . .

• Cited – Bermuda Cablevision Limited and others v Colica Trust Company Limited PC (Times 31-Oct-97, Bailii, [1997] UKPC 44)

(Bermuda) An alternative remedy to winding up is available to a shareholder where oppressive conduct is alleged, though the main thrust is that the conduct is unlawful. . .

• Cited – In the Matter of Pectel Limited; Mark Anthony O’Neill; Linda Ann O’Neill v Michael Phillips; LiSA Phillips and Pectel Limited CA (Bailii, [1997] EWCA Civ 1591)

The petitioners sought either the purchase of their shares, or the winding up of the company alleging unfair prejudice in the management of the company. The defendants argued that what was complained of did not fall within section 459 since it was . .
(This list may be incomplete)

Last Update: 18 February 2017

Ref: 174274

 

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