Re Weller (Sam) & Sons Ltd
| Jurisdiction | England & Wales |
| Date | 1989 |
| Year | 1989 |
| Court | Chancery Division |
Company - Oppression - Conduct of affairs - Management of family company by sole director - Director in receipt of emoluments - Failure to pay reasonable dividends - Whether conduct unfairly prejudicial to interests of some members -
A family company with an issued share capital of £18,000 in £1 shares had net tangible assets at the end of 1985 of nearly £500,000 including cash £216,969, and undistributed revenue profits of £464,623. The profit for that year was £36,330, out of which was paid a dividend of 14 pence per share, the same as had been paid for some 37 years past. S., the company's sole director, held 1,800 shares. His two sons, employees of the company, each held 1,350 shares. The petitioners, a nephew and niece of the sole director, registered holders of 2,450 and 450 shares respectively, each became entitled to further shares on the demise of other family shareholders, giving them a total of 7,700 shares, 42.7 per cent., of the issued capital. In July 1986, solicitors acting for S. told the petitioners that registration of the additional shares in their names would be declined. In January 1987 the petitioners sought an order under sections 459 and 461 of the Companies Act 1985 requiring S. as sole director to purchase or procure the purchase of the 7,700 shares on the grounds that their interests as members of the company and as beneficially entitled to the additional shares had been and were unfairly prejudiced by S.'s refusal to register the additional shares to which the petitioners were entitled in equity, his refusal to approve the payment of larger dividends each year, the purchase by the company of a seaside flat for the two sons costing £22,000, a proposed capital expenditure by the company of £130,000 and his refusal to disclose the emoluments of himself and his two sons. In their petition they pleaded that S. was conducting the company's affairs for the exclusive benefit of himself and his sons and in breach of his duty to the other shareholders, including the petitioners.
On the application of the company, S., and his two sons under
Held, dismissing the application, that on the true construction of section 459 of the Companies Act 1985 “interests” was a wider term than “rights” and members of a company might have different interests even if their rights as members were the same; that conduct could be unfairly prejudicial to the interests of some of the members of a company notwithstanding that, prima facie, it affected all the members equally in the sense that it affected their rights equally; and that even where all members were prejudiced it might be that the interests of some only were unfairly prejudiced; that the test whether the company's affairs were being conducted in a prejudicial manner was an objective one, and the fact that the conduct complained of prejudiced the interests of those responsible for it was irrelevant; that, in the circumstances, the payment of low dividends and the proposed capital expenditure were capable of amounting to conduct unfairly prejudicial to the interests of some of the members, including the petitioners; and that, accordingly, the application to strike out the petition would be dismissed (post, pp. 929A–C, C–D, 931A–C, 932B–C, E–F).
The following cases are referred to in the judgment:
Bovey Hotel Ventures Ltd., In re (unreported), 31 July 1981, Slade J.
Company (No. 002612 of 1984), In re A [
Company (No. 002612 of 1984), In re A (
Company (No. 007623 of 1986), In re A [
Company (No. 00370 of 1987), In re A, Ex parte Glossop [
Cumana Ltd., In re [
Meyer v. Scottish Textile and Manufacturing Co. Ltd.,
Meyer v. Scottish Co-operative Wholesale Society Ltd.,
Noble (R. A.) & Sons (Clothing) Ltd., In re [
Scottish Co-operative Wholesale Society Ltd. v. Meyer [
The following additional cases were cited in argument:
Greenhalgh v. Arderne Cinemas Ltd. [
Piercy v. S. Mills & Co. Ltd. [
Punt v. Symons & Co. Ltd. [
Smith (Howard) Ltd. v. Ampol Petroleum Ltd. [
MOTION
The petitioners, John James Weller and his sister, Rosemary Elizabeth Sheppey, then registered owners of 2,450 and 450 shares respectively in Sam Weller & Sons Ltd., of Bradford, West Yorkshire, a company having an issued capital of 18,000 in fully paid £1 shares, presented a petition dated 21 January 1987 under section 459 of the Companies Act 1985 seeking, inter alia, an order under section 461 of the Act requiring Mr. Sam Weller, the sole director of the company, to purchase or procure the purchase of the shares held by the petitioners and the purchase of additional shares to which they had become beneficially entitled following the demise of other shareholders in the company, their total entitlement now being 4,850 and 2,850 shares respectively.
By notice of motion dated 2 February 1989, the company, Sam Weller & Sons Ltd., the sole director, Sam Weller, and his sons Christopher Samuel Weller and Anthony Weller, applied for an order that the petition be struck out on the ground, inter alia, that it disclosed no reasonable cause of action either pursuant to the provisions of
The facts are stated in the judgment.
W. B. Spalding for the applicants.
R. B. S. Instone for the petitioners.
13 July. PETER GIBSON J. read the following judgment. This is an application to strike out a petition presented under section 459 of the Companies Act 1985. It raises a question of some importance on the construction and scope of the section. The petitioners are James Weller and his sister Rosemary Sheppey, who are the registered owners of 2,450 and 450 shares respectively in the company. The applicants are some of the respondents to the petition, namely the company, Mr. Sam Weller and his sons Christopher and Anthony. Mr. Sam Weller is the uncle of the petitioners. He is the sole director of the company, holding 1,800 shares. Christopher and Anthony are employees of the company, each holding 1,350 shares.
There are four further holdings in the company. Mr. Sam Weller's sister, Miss E. H. Weller, who died on 24 May 1985, held 4,900 shares; a Mr. Green is the sole executor of her will. Each of the petitioners has become absolutely entitled to 1,225 of the shares in her estate. The trustees of the will of another deceased sister of Mr. Sam Weller, Mrs. Keighley, hold 2,900 shares; under the trusts of that will, upon the death of Miss E. H. Weller each of the petitioners became absolutely entitled to 725 of such shares. 2,700 shares are held by the trustees (“the Weller trustees”) of the will of the late Sam Weller, the father of Mr. Sam Weller and the founder of the company. Upon the death of Miss E. H. Weller, under the trusts of that will, each of the petitioners has become absolutely entitled to 450 shares. Accordingly, the petitioners say that they hold or are beneficially interested in 7,700 of the 18,000 shares in the company.
The company was incorporated...
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