Re Sam Weller [1990] Ch 682

Key Point

  • The failure of the majority shareholders to pay reasonable dividends, whilst continuing to draw directors’ fees and to accumulate reserves, could amount to conduct unfairly prejudicial to the interests of the minority shareholders.

Facts

  • A company making a healthy profit had paid the same relatively low dividends to its members for 37 years
  • The petitioners held 2,850 shares and became entitled to more on the death of members of the family. 
  • S, the company’s sole director, declined to register the additional shares in the names of the petitioners. 
  • The petitioners sought an order requiring S to purchase or procure the purchase of their shares, on the grounds that their interests in the company had been unfairly prejudiced by 
    1. S’s refusal to register their shares
    2. the persistent failure to pay higher dividends
    3. the purchase of a seaside flat and 
    4. S’s refusal to disclose emoluments
  • S sought to have the petition struck out as the conduct alleged affected all members of the company equally and so would not amount to any unfair prejudice to one part of the company.

Held (High Court)

  • S’ application dismissed; “interests” was a wider term than “rights” and members of a company might have different interests even though their rights were identical. 
  • Conduct that affected all members’ rights equally might unfairly prejudice the interests of some members. 
  • The fact that the conduct complained of prejudiced the interests of those responsible for it was irrelevant and in this case the conduct was capable of amounting to unfair prejudice.