Re Elgindata Ltd
Serious mismanagement of a company may amount to unfair prejudice, but the court will not normally interfere with management decisions that are merely poor.
Facts
Mr Rowe and his wife bought shares in a computer software company, Elgindata, and became directors. They fell out with the majority shareholder and managing director, Mr Purslow, and were excluded from management. They petitioned for relief for unfair prejudice, alleging among other things that Mr Purslow had mismanaged the company, causing its value to fall, and had used its assets for his personal benefit.
Legal principle
Warner J held that the petitioners had been unfairly prejudiced by their exclusion and by Mr Purslow's use of the company's assets for his personal benefit, and ordered him to buy their shares. However, he said that the court would not normally regard mismanagement as unfairly prejudicial, unless it was serious, because shareholders take the risk that management decisions may turn out badly, and it is not for the court to sit in judgment on commercial decisions. The poor management in this case was not serious enough to justify relief on its own.
Related cases on unfair prejudice and just and equitable winding up
- Re Bird Precision Bellows Ltd [1986] Ch 658
- Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
- 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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