Ebrahimi v Westbourne Galleries Ltd; Re Westbourne Galleries Ltd

CourtHouse of Lords
JudgeLord Wilberforce, Viscount Dilhorne, Lord Pearson, Lord Cross of Chelsea, Lord Salmon
Judgment Date03 May 1972
JurisdictionEngland & Wales

[1972] UKHL J0503-2

House of Lords

Lord Wilberforce

Viscount Dilhorne

Lord Pearson

Lord Cross of Chelsea

Lord Salmon

Ebrahimi (A.P.)
and
Westbourne Galleries Limited and Others

Upon Report from the Appellate Committee, to whom was referred the Cause Ebrahimi (A.P.) against West-bourne Galleries Limited and others, that the Committee had heard Counsel as well on Wednesday the 8th, as on Thursday the 9th, Monday the 13th and Tuesday the 14th, days of March last, upon the Petition and Appeal of Shokrollah Ebrahimi (Assisted Person), of 32, St. John's Wood Court, London, N.W.8, Carpet Merchant, praying, That the matter of the Order set forth in the Schedule thereto, namely an Order of Her Majesty's Court of Appeal of the 16th of December 1970 might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioner might have the relief prayed for in the Appeal, or such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of Westbourne Galleries Limited and Asher Nazar and George Alexander Nazar, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause.

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal of the 16th day of December 1970, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Judgment of the Honourable Mr. Justice Plowman of the 14th day of July 1970, thereby Set Aside, be, and the same is hereby, Restored: and it is further Ordered, That the Second and Third Respondents, Asher Nazar and George Alexander Nazar, do pay, or cause to be paid, to the said Appellant the Costs incurred by him in the Court of Appeal, and also the Costs incurred by him in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is further Ordered, that the Costs of the Appellant in this House be taxed in accordance with the provisions of the Third Schedule to the Legal Aid and Advice Act 1949, as amended by the Legal Aid Act 1960: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Lord Wilberforce

My Lords,

1

The issue in this appeal is whether the Respondent company Westbourne Galleries Ltd. should be wound up by the court on the petition of the Appellant who is one of the three shareholders, the personal Respondents being the other two. The company is a private company which carries on business as dealers in Persian and other carpets. It was formed in 1958 to take over a business founded by the second Respondent (Mr. Nazar). It is a fact of cardinal importance that since about 1945 the business had been carried on by the Appellant and Mr. Nazar as partners, equally sharing the management and the profits. When the company was formed, the signatories to its Memorandum were the Appellant and Mr. Nazar and they were appointed its first directors. Of its issued share capital, 500 £1 shares of £1 each were issued to each subscriber and it was found by the learned judge, after the point had been contested by Mr. Nazar, that Mr. Ebrahimi paid up his shares out of his own money. Soon after the company's formation the third Respondent (Mr. George Nazar) was made a director, and each of the two original shareholders transferred to him 100 shares, so that at all material times Mr. Ebrahimi held 400 shares, Mr. Nazar 400 and Mr. George Nazar 200. The Nazars, father and son, thus had a majority of the votes in general meeting. Until the dispute all three gentlemen remained directors.

2

The company made good profits, all of which were distributed as directors' remuneration. No dividends have ever been paid, before or after the petition was presented.

3

On 12th August, 1969, an ordinary resolution was passed by the company in general meeting, by the votes of Mr. Nazar and Mr. George Nazar, removing Mr. Ebrahimi from the office of director, a resolution which was effective in law by virtue of section 184 of the Companies Act, 1948, and Article 96 of Part I of Table A. Shortly afterwards the Appellant presented his petition to the Court.

4

This petition was based in the first place upon section 210 of the Companies Act, 1948, the relief sought under this section being an order that Mr. Nazar and his son be ordered to purchase the Appellant's shares in the company. In the alternative it sought an order for the winding up of the company. The petition contained allegations of oppression and misconduct against Mr. Nazar which were fully explored at the hearing before Plowman J. The learned judge found that some were unfounded and others unproved and that such complaint as was made out did not amount to such a course of oppressive conduct as to justify an order under section 210. However, he made an order for the winding up of the company under the "just and equitable" provision. I shall later specify the grounds on which he did so. The Appellant did not appeal against the rejection of his case under section 210 and this House is not concerned with it. The company and the individual Respondents appealed against the order for winding up and this was set aside by the Court of Appeal. The Appellant now seeks to have it restored.

5

My Lords, the Petition was brought under section 222 ( f) of the Companies Act, 1948, which enables a winding up order to be made if "the Court is of opinion that it is just and equitable that the company should be wound "up". This power has existed in our Company law in unaltered form since the first major Act, the Companies Act, 1862. Indeed, it antedates that statute since it existed in the Joint Stock Companies Winding-up Act, 1848. For some fifty years, following a pronouncement by Lord Cottenham in 1849, the words "just and equitable" were interpreted so as only to include matters ejusdem generis as the preceding clauses of the section, but there is now ample authority for discarding this limitation. There are two other restrictive interpretations which I mention to reject. First, there has been a tendency to create categories or headings under which cases must be brought if the clause is to apply. This is wrong. Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances. Secondly, it has been suggested, and urged upon us, that (assuming the petitioner is a shareholder and not a creditor) the words must be confined to such circumstances as affect him in his capacity as shareholder. I see no warrant for this either. No doubt, in order to present a petition, he must qualify as a shareholder, but I see no reason for preventing him from relying upon any circumstances of justice or equity which affects him in his relations with the company, or, in a case such as the present, with the other shareholders.

6

One other signpost is significant. The same words "just and equitable" appear in the Partnership Act, 1892, section 25 as a ground for dissolution of a partnership and no doubt the considerations which they reflect formed part of the common law of partnership before its codification. The importance of this is to provide a bridge between cases under section 222( f) of the Companies Act and the principles of equity developed in relation to partnerships.

7

The winding up order was made following a doctrine which has developed in the courts since the beginning of this century. As presented by the Appellant, and in substance accepted by the learned judge, this was that in a case such as this, the members of the company are in substance partners, or quasi-partners, and that a winding up may be ordered if such facts are shown as could justify a dissolution of partnership between them. The common use of the words "just and equitable" in the company and partnership law supports this approach. Your Lordships were invited by the Respondent's counsel to restate the principle on which this provision ought to be used; it has not previously been considered by this House. The main line of his submission was to suggest that too great a use of the partnership analogy had been made; that a limited company, however small, essentially differs from a partnership; that in the case of a company, the rights of its members are governed by the Articles of Association which have contractual force; that the court has no power or at least ought not to dispense parties from observing their contracts; that, in particular, when one member has been excluded from the directorate, or management, under powers expressly conferred by the Companies Act and the Articles, an order for winding up whether on the partnership analogy or under the just and equitable provision, should not be made. Alternatively, it was argued that before the making of such an order could be considered the petitioner must show and prove that the exclusion was not made bona fide in the interests of the company.

8

My Lords, I must first make some examination of the authorities in order to see how far they support the Respondents' propositions and, if they do not, how far they rest upon a principle of which this House should disapprove. I will say at once that, over a period of some sixty years, they show a considerable degree of consistency, and that such criticism as may be made relates rather to the application of accepted principle to the facts than to the statements of principles themselves.

9

The real starting point is the Scottish decision in Symington v. Symingtons' Quarries Ltd. 1905 8 F. 121. There had been a partnership...

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