Re Saul D Harrison & Sons plc
Conduct is unfairly prejudicial only if it departs from the terms on which the member agreed the company should be run, and a member's legitimate expectations are normally found in the articles.
Facts
A family company manufactured industrial cleaning cloths. It was making losses, but had substantial assets. Ms Harrison, a minority shareholder, petitioned for relief for unfair prejudice, claiming that the directors, who were her cousins, should have closed the business and distributed the assets to the shareholders, and that they were continuing the business to keep their salaries.
Legal principle
The Court of Appeal struck out the petition. Hoffmann LJ said that the requirement that the prejudice should be unfair is applied objectively, and that, in deciding what is fair or unfair, it is important to have in mind that fairness is being used in the context of a commercial relationship. The starting point is the articles of association, which set out the terms on which the members agreed that the company's affairs would be conducted. There was no evidence that the directors had acted in bad faith or for an improper purpose, and the decision to continue the business was within their powers.
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
- 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
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