Lothian Borders and Angus Co-operative Society Ltd v Scottish Borders Council
| Jurisdiction | Scotland |
| Judgment Date | 18 December 1999 |
| Date | 18 December 1999 |
| Court | Court of Session (Outer House) |
Court of Appeal
Before Lord Justice Roch, Lord Justice Peter Gibson and Lord Justice Henry
Company - shareholders - majority cannot force minority to sell
Majority shareholders in a company who had the power to procure the passing of any resolution of the company and so could bring to an end any prejudicial state of affairs in the company and in fact had done so by stopping a minority shareholder from conducting any of the company's affairs, were not entitled to bring a petition under section 459 of the Companies Act 1985 to force the minority shareholder to give up his investment.
The Court of Appeal so stated when dismissing an appeal against an order of Mr Peter Goldsmith, QC, sitting as a deputy judge in the Chancery Division, on June 3, 1998 striking out the petition of Geoffrey Vernon Morris, Samir Kumar Thaker and Paul Ian Turner brought pursuant to section 459 of the 1985 Act.
In early 1995, Mr Morris, Mr Thaker and Mr Turner, formed a partnership which Mr Brian Hateley joined later that year.
A company, Legal Costs Negotiators Ltd, was incorporated in 1995 and when the partnership ceased trading its assets were transferred to the company which carried on the partnership's former business.
Each man held 25 per cent of the shares in the company. Each was a director and employee.
In 1997 Mr Hateley was dismissed from his employment and resigned as director. He remained the holder of 25 per cent of the shares.
The petitioners, who were the majority shareholders in Legal Costs Negotiators, sought an order compelling Mr Hateley to transfer or sell his shares. Mr Hateley successfully applied to strike out their petition.
Mr Matthew Collings for the petitioners; Miss Laura Garcia-Miller for Mr Hateley; Legal Costs Negotiators did not appear and was not represented.
LORD JUSTICE PETER GIBSON said that the issue raised was whether the majority shareholders had a sustainable case for obtaining relief under sections 459 and 461 of the 1985 Act against the holder of the remaining 25 per cent of the shares.
Relying on In re Saul D Harrison and Sons plcUNK ([1995] 1 BCLC 14, 22), the judge scrutinised the allegations in the petition with care. He drew two points of significance for the case from the authorities.
The first was that the starting point was to consider what the parties had agreed between themselves as their commercial relationship, although he recognised that that need not always be contained in the articles of association.
The second was that the essence of the powers under section 459 was to give a remedy where there was complaint about the way the company's affairs were being conducted through the use of, or failure to use powers in relation to the conduct of the company's affairs provided by its constitution.
He regarded the section as concerned with the company's affairs rather than the affairs of individuals and to be concerned with acts done by the company or those authorised to act as its organs.
He found that the cases showed a reluctance by the court to act where the petitioner was able to control the relevant conduct by his own powers and that the cases where relief was granted were concerned with situations in which the petitioner was otherwise powerless to stop the conduct by powers which he had under the company's constitution.
That was...
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