Re A Company [1986] BCLC 376

Key Point

  • Although a claim for unfair prejudice must concern the interests the claimant in his capacity as a member, wider considerations may be taken into account, such as his entitlement of a managerial role in the company, if it is sufficiently connected to his membership

Facts

  • The petitioners held all the shares in A Ltd which they sold to O plc, which was controlled by the individual respondents, in exchange for shares in O plc 
  • The petitioners alleged that at the time they transferred their shares in A Ltd, the individual respondents represented that the relationship between them and the petitioners would be one of ‘partnership’. 
  • The petitioners alleged that contrary to the agreement with O plc, one of them, Mr S, had been asked to resign as managing director of A Ltd in breach of his service contract and also to resign from the board of O plc.
  • The petitioners claimed that they had suffered unfair prejudice by Mr S having been deprived of the benefit of the service contract as managing director of A Ltd and bought a petition under petition under s 459 of the Companies Act 1985 (now s 994 Companies Act 2006)
  • The respondents applied to strike out the petition on the grounds that the allegations constituted wrongs to the petitioners as vendors of shares and Mr S as an employee but not as members of O plc.

Held (High Court)

  • Motion to strike out petition dismissed. 

Hoffmann J

  • In principle, the court’s jurisdiction to grant relief on a petition under s 459 of the Companies Act 1985 was limited to conduct which was unfairly prejudicial to the interests of members as members and not in some other capacity. 
  • But the interests of a member were not necessarily limited to his strict legal rights under the constitution of the company, since the use of the word ‘unfairly’ in s 459 enabled the court to have regard to wider equitable considerations.
  • Evidence could be brought in support of this petition which might satisfy a court that Mr S’s employment as a director of A Ltd was part of his legitimate expectations as a member of O plc.