Ebrahimi v Westbourne Galleries Ltd
A company may be wound up on the just and equitable ground where it is a quasi partnership and a member is excluded from management in breach of the understanding on which it was formed.
Facts
Mr Ebrahimi and Mr Nazar had been partners in a business selling carpets, which they later converted into a company, of which they were the only directors and shareholders. Mr Nazar's son later became a director and shareholder. The profits were paid out as directors' remuneration, not dividends. After a disagreement, Mr Nazar and his son used their majority to remove Mr Ebrahimi as a director, as they were entitled to do under the articles and the Companies Act. Mr Ebrahimi petitioned for the company to be wound up on the just and equitable ground.
Legal principle
The House of Lords held that the company should be wound up. Lord Wilberforce said that the just and equitable provision enables the court to subject the exercise of legal rights to equitable considerations, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights. Such considerations may arise in a company formed or continued on the basis of a personal relationship involving mutual confidence, an understanding that all or some of the shareholders shall participate in the conduct of the business, and restrictions on the transfer of shares. The company was a quasi partnership, and Mr Ebrahimi's removal was in breach of the understanding on which he had joined.
Related cases on unfair prejudice and just and equitable winding up
- Re Bird Precision Bellows Ltd [1986] Ch 658
- Re Elgindata Ltd [1991] BCLC 959
- Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855, [2012] Ch 333
- Grace v Biagioli [2005] EWCA Civ 1222, [2006] 2 BCLC 70
- Re Harmer (HR) Ltd [1959] 1 WLR 62
- Loch v John Blackwood Ltd [1924] AC 783
- O'Neill v Phillips [1999] 1 WLR 1092
- Re Sam Weller & Sons Ltd [1990] Ch 682
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