Bushell v Faith
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE HARMAN,LORD JUSTICE RUSSELL,LORD JUSTICE KARMINSKI |
| Judgment Date | 21 February 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0221-1 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 February 1969 |
[1969] EWCA Civ J0221-1
In The Supreme Court of Judicature
The Court of Appeal
(Civil Division)
(From: Mr. Justice Ungoed-Thomas)
Lord Justice Harman
Lord Justice Russell and
Lord Justice Karminski
Mr. MICHAEL WHEELER, Q.C. and Mr. RUPERT EVANS (instructed by Messrs. Laysell, Hayes & Morley-Slinn, London, N.10) appeared on behalf of the Appellant (Defendant).
Mr. G.B.H. DILLON, Q.C. and Mr. D.J. NICHOLLS (instructed by Messrs, White & Leonard & Corbin, Greener) appeared on behalf of the Respondent (Plaintiff).
This was a motion raising a question as to the directorship of the defendant company Bush Court (Southgate) Limited. This was a small private limited company with an issued capital of £300 in £1 shares of which at the relevant time 100 were held by each of the plaintiff, the first defendant and a Mrs. Bayne, a sister of both of them. There is some dispute about the past directors but at the relevant times they were the plaintiff and the first defendant. His sisters had for some time been dissatisfied with the conduct of the business by the first defendant and eventually requisitioned a general meeting with a view to passing a resolution to remove him from his directorship. The meeting was held on the 22nd November last, when on a poll the votes of the plaintiff and her sister Mrs. Bayne were recorded for the resolution removing the first defendant, whereas his votes were recorded against it. It is the contention of the plaintiff that the resolution was passed by 200 votes to 100 and the first defendant therefore ceased to be a director. It is the defendant's contention that, having regard to article 9 of the Articles of Association, the resolution was lost by 200 votes to 300 and that he remains a director. The motion was directed to restraining the first defendant pending trial from acting as a director, and the judge granted the relief asked.
The question turns upon a single section of the Companies Act, 1948, No. 184, whereby it is enacted that "a company may by ordinary resolution remove a director before the expiration of his period of office notwithstanding anything in its articles". The articles here adopt Table A with modifications. One of the adopted articles is No. 62, which provides that, subject to any rights or restrictions for the time being attached to any class or classes of shares on a show of hands, every member present in person shall have one vote and on a poll every member shall have one vote for each share of which he is the holder. Special article 9 provides: "In the event of a resolution being proposed at any general meeting of the company for the removal from officeof any director any shares held by that director shall on a poll in respect of such resolution carry the right to three votes per share and Regulation 62 of Part 1 of Table A shall he construed accordingly".
This special article exactly fits the circumstances of this case. There was a general meeting for the removal of the first defendant as a director and therefore any shares held by him carried on a poll the right to three votes per share. He was thus able to record 300 votes and outvote his sisters, who only recorded 200 votes between them. The plaintiff however argues, and the judge held, that article 9 is a contravention of section 184 of the Act and therefore invalid, and that is the subject of this appeal.
The judge held that a resolution passed (as he put it) "under article 9" is not an "ordinary resolution" within the meaning of section 184 of the Act and therefore it is ineffective to remove a director. I do not myself accede to this reasoning.
It seems to me that the words "ordinary resolution", which are found nowhere in the Act except in section 184, merely connote a resolution depending for its passing on a simple majority of votes validly cast in conformity with the articles. This I think was agreed by both counsel. It was argued by counsel for the defendant that section 184 had as its object only the reduction of the proportion of votes necessary to be cast in order to remove a director. Before the 1947 Act directors could only be removed before the end of their term of office either by an article empowering the general meeting so to do, the power being usually conferred by means of an extraordinary resolution, or by means of a special resolution altering the articles. The object of the section was to increase the powers of the shareholders in general meeting by providing that nothing higher than a simple majority of votes was required.
The defendant's argument goes on to urge that there is nothing in the section or in the Act to prevent the attachment of special voting rights to special shares or classes of shares, andthat this is what has happened here, an ordinary resolution for the removal of the first defendant director being lost because his shares counted three to one for this purpose.
The plaintiff on the other hand argues that an article in this form is invalid as being a mere device for circumventing the section. The judge held that it made a mockery of it, and counsel for the plaintiff advanced the proposition that any provision in the articles having as its object to make more difficult the removal of a director is void, whether operating directly or indirectly. This article 9 operated indirectly. It certainly does in effect make the removal of a director more difficult. It follows, says counsel, that it is invalid. I cannot accept this view because I do not find it in the Act, which merely says that a simple majority of votes will unseat a director. The Act does not, as I see it, prevent certain shares or classes of shares having special voting rights attached to them and on certain occasions. The obvious example is that of preference shares, which usually carry no vote unless their dividend be in arrear or the...
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Bushell v Faith
...special circumstances and particular types of resolution. Accordingly the resolution had been defeated. Decision of the Court of Appeal [1969] 2 Ch. 438; [1969] 2 W.L.R. 1067; [1969] 1 All E.R. 1002, C.A. affirmed. No cases are referred to in their Lordships' opinions. The following cases w......
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...that regulation. 14 However it must be remembered that the agreement was executed not only by all the shareholders but also by T.B.L. In Bushell v. Faith [1969] 2 Ch. 438 one of the articles of a private company provided that in the event of a resolution being proposed at a general meeting ......
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Alan John Muir v John Robert Lampl And Another
...number of authorities were cited by counsel on this point, Mr Smith relied on Russell v Northern Bank [1992] 1 WLR 588; Bushell v Faith [1969] 2 Ch 438 and [1970] AC 1099; Harman v BML Group [1994] 2 BCLC 674 and Mr Whitehead SC, appearing for the Defendants, cited Re Greater Beijing Region......
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Table of Cases
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Removal of Directors Lord Morris' Dissent in Bushell v Faith [1970] AC 1099
...below and is then explored in paragraph 8.4: 7 Quoted by Lord Upjohn, above, n 2, at p 1108. A view later supported by Lord Morris. 8 [1969] 2 Ch 438 at 445. 9 The opinions of Harman LJ and Russell LJ are referred to throughout the chapter in conjunction with the views of the majority of th......
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...Act 1948, 11 & 12 Geo 6, c 38, s 184, quoted in ibid 1099. (114) Bushell v Faith [1970] AC 1099, 1101. (115) Bushell v Faith [1969] 2 Ch 438. (116) [1970] AC 1099. Lord Reid, Lord Guest, Lord Upjohn and Lord Donovan comprised the majority; Lord Morris (117) Even Bernard Cartoon, who sup......