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Ebrahimi v Westbourne Galleries Ltd

[1973] AC 360, [1972] 2 All ER 492, [1972] 2 WLR 1289, 116 Sol Jo 412 Court: HL Judgment Date: 03/05/1972 Catchwords & Digest | Case History | Cases referring to this case | Cases considered by this case

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COMPANIES - CORPORATE INSOLVENCY - WINDING UP BY THE COURT - GROUNDS FOR WINDING UP - JUST AND EQUITABLE - IN GENERAL - QUASI-PARTNERSHIP - REMOVAL OF DIRECTOR

Since about 1945 applicant and N had carried on in partnership a business as carpet dealers. As partners they had an equal share in the management and profits. In 1958 they formed a company to take over the business. Applicant and N were the signatories to the companys memorandum and were appointed its first directors. Of the issued share capital of 1,000 1 shares, 500 were issued to each of the subscribers. Under the articles shares could be transferred without the directors consent. Soon after the companys formation, Ns son, G, was appointed a director and each of the two original shareholders transferred to him 100 shares. The company made good profits, all of which were distributed by way of directors remuneration. No dividends were ever paid. Differences arose between applicant and N, with whom G sided, about the running of the business. In August 1969, at a general meeting N and G, b means of an ordinary resolution which was legally effective under Companies Act 1948 s 184 and the companys articles, removed applicant from the office of director and thereafter excluded him from any share in the conduct of the companys business. Applicant petitioned for an order under s 210 of 1948 Act that N and G purchase his shares in the company and in the alternative, for an order under s 222 (f) of 1948 Act that the company be wound up on the ground that it was just and equitable to do so. The trial judge rejected most of the allegations of oppression and misconduct made by applicant and found that such complaint as he had made out did not amount to such a course of oppressive conduct as to justify an order under s 210. He held however that, although applicant had been lawfully removed from office, N and G had done him a wrong in the sense that it was an abuse of power and a breach of the good faith that partners owed to each other to exclude one of them from all participation in the business on which they had embarked on the basis that all should participate in its management. He held therefore that a case had been made out for a winding-up order under s 222 (f). The Court of Appeal allowed an appeal by N and G against the order holding that applicant had failed to establish, as was incumbent on him, that the action of N and G in removing him, had not been taken bon fide in the interest of the company. On appeal: Held: The appeal would be allowed for the following reasons: (1) the just and equitable provision in s 222 (f) was an equitable supplement to the common law of the company to be found in its memorandum and articles; it recognised that there might be circumstances in which the mutual rights of the members were not exhaustively defined in the articles, e.g. where they had entered into membership of the company on the basis of a personal relationship involving mutual confidence or an understanding as to the extent to which each of the members was to participate in the management of the companys business; although the just and equitable provision did not entitle one party to disregard the obligations he had assumed by entering the company, nor entitle the court to dispense him from them, it did entitle the court to subject the exercise of legal rights to equitable considerations, ie considerations of a personal character arising between one individual and another which might make it unjust or inequitable to insist on legal rights or to exercise them in a particular way; thus a director member might be able to prove some underlying obligation of his fellow member(s) in good faith, or confidence, that so long as the business continued he should be entitled to management participation, and the obligation was so basic that, if broken, the conclusion must be that the association should be dissolved; (2) in petitioning for a winding-up on the just and equitable ground a member was not confined to such circumstances as affected him as a shareholder; he was entitled to rely on any circumstances of justice or equity

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which affected him in his relations with the company or with the other shareholders; (3) there was no obligation on the petitioning member to establish that the steps taken by the other members which were alleged to constitute grounds for winding up under s 222 (f) were not carried out bon fide in the interest of the company; to confine the just and equitable provision to proved cases of mala fides would be to negative the generality of the words; (4) in the circumstances it was apparent that a potential basis for a winding-up order on the Just and equitable ground existed since, after a long association in partnership, during which he had had an equal share in the management, applicant had Joined in the formation of the company; the inference was indisputable that he and N had done so on the basis that the character of the association would, as a matter of personal faith, remain the same; applicant had established that N and G were not entitled, in justice arid equity, to make use of their legal powers of expulsion; that was supported (a) by the fact that N had by making clear that he did not regard applicant as a partner, thereby, in effect, repudiated the relationship between them and (b) by the fact that, by ceasing to be a director, applicant had lost his right to a share in the profits through directors remuneration, retaining only a chance of receiving dividends; furthermore, he was unable to dispose of his interest in the company without the consent of N and G; all those matters led to the conclusion that the right course was to dissolve the association by winding up. Per Lord Cross of Chelsea: it is not a condition precedent to the making of an order under s 222 (f) that the conduct of those who oppose it should have been unjust or inequitable. A petitioner for an order who relies on the just and equitable ground must come to the court with clean hands, and if the breakdown in confidence between him and other parties to the dispute appears to have been due to his misconduct he cannot insist on the company being wound up if they wish it to continue.

Case History

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Annotations

Case Name Ebrahimi v Westbourne Galleries Ltd

Citations [1973] AC 360, [1972] 2 All ER 492, [1972] 2 WLR 1289, 116 Sol Jo 412 [1971] Ch 799, [1971] 1 All ER 561, [1971] 2 WLR 618, 115 Sol Jo 74 [1970] 3 All ER 374, [1970] 1 WLR 1378, 114 Sol Jo 785

Court HL

Date 03/05/1972

Signal

Reversing

Westbourne Galleries Ltd, Re

CA

16/12/1970

Reversing

Westbourne Galleries Ltd, Re

Ch D

14/07/1970

Cases referring to this case

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Sort By: Treatment Applied

Judgment Date (Latest First) Case Name Eaton v Caulfield Citations [2011] EWHC 173 (Ch), [2011] All ER (D) 63 (Feb) [2007] VSC 40, 10 ITELR 536 [2006] SGCA 23, [2007] 3 LRC 120 [2006] EWCA Civ 13, [2006] 2 BCLC 555, [2006] BCC 320, [2006] 06 LS Gaz R 30, [2006] All ER (D) 106 (Jan) [2005] All ER (D) 34 (Feb) [2003] EWHC 2790 (Ch), [2003] All ER (D) 210 (Nov) [2002] EWCA Civ 1740, [2003] 1 BCLC 76, [2003] BCC 11, [2003] 05 LS Gaz R 29, (2002) Times, 11 December, [2002] All ER (D) 405 (Nov) [2002] EWHC 591 (Ch), [2002] 2 BCLC 556, [2003] BCC 11, Court Ch D Date 04/02/2011 Signal

Distinguished

Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd

Vic SC

23/08/2007

Dicta of Lord Wilberforce Applied Applied

Sim Yong Kim v Evenstar Investments Pte Ltd

Sing CA

18/07/2007

Strahan v Wilcock

CA

19/01/2006

Considered

Shine Styling Ltd, Re

Ch D

02/02/2005

Considered

Company, a (No 5758 of 2003), Re

Ch D

14/11/2003

Applied

Phoenix Office Supplies Ltd, Re, Phoenix Office Supplies v Larvin

CA

27/11/2002

Applied

Phoenix Office Supplies Ltd, Re

Ch D

10/04/2002

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[2002] All ER (D) 10 (Apr) Considered Guidezone Ltd, Re [2000] 2 BCLC 321, [2001] BCC 692 [2000] 2 BCLC 321, [2001] BCC 692 [1999] 2 All ER 961, [1999] 1 WLR 1092, [1999] 2 BCLC 1, [1999] 23 LS Gaz R 33, [1999] NLJR 805, 143 Sol Jo LB 155 [1986] Ch 658, [1985] 3 All ER 523, [1986] 2 WLR 158, [1985] BCLC 493, [1986] PCC 25, 130 Sol Jo 51, [1986] LS Gaz R 36 [1984] 3 All ER 754, [1984] 1 WLR 1249, [1984] BCLC 375, 128 Sol Jo 783 [1983] 2 All ER 854, [1983] 1 WLR 927, [1983] BCLC 151, 127 Sol Jo 508, [1983] LS Ch D 13/07/2000

Applied

Guidezone Ltd, Re

Ch D

13/07/2000

Applied

Company, a (No 00709 of 1992), Re, O'Neill v Phillips

HL

20/05/1999

dictum Lord Cross Applied

Bird Precision Bellows Ltd, Re

CA

01/07/1985

Applied

Zinotty Properties Ltd, Re

Ch D

circa 1984

dictum Lord Wilberforce Applied

Company, a (No 002567 of 1982), Re

Ch D

circa 1983

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Gaz R 2133 Distinguished Chesterfield Catering Co Ltd, Re [1977] Ch 373, [1976] 3 All ER 294, [1976] 3 WLR 879, 120 Sol Jo 817 [1976] 2 All ER 268 [1975] 1 All ER 1017, [1975] 1 WLR 579, 119 Sol Jo 233 [1974] 2 All ER 653, [1974] 1 WLR 638, 118 Sol Jo 345 Ch D circa 1977

Applied Applied

Clemens v Clemens Bros Ltd A and BC Chewing Gum Ltd, Re, Topps Chewing Gum Inc v Coakley

Ch D Ch D

circa 1976 circa 1975

Explained

Bentley-Stevens v Jones

Ch D

circa 1974

Cases considered by this case Filter By Treatment: All Cases Sort By: Treatment Considered

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Judgment Date (Latest First) Case Name K/9 Meat Supplies (Guildford) Ltd, Re Citations [1966] 3 All ER 320, [1966] 1 WLR 1112, 110 Sol Jo 348 [1966] 1 All ER 877, [1966] 1 WLR 514, 110 Sol Jo 246 [1965] 2 All ER 692, [1965] 1 WLR 1051, 109 Sol Jo 470 [1964] Ch 240, Court Ch D Date circa 1966 Signal

Considered

Expanded Plugs Ltd, Re

Ch D

circa 1966

Considered

Lundie Bros Ltd, Re

Ch D

circa 1965

Considered

Forte (Charles) Investments Ltd v Amanda

CA

circa 1964

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Not Followed

Cooper (Cuthbert) & Sons Ltd, Re

[1963] 2 All ER 940, [1963] 3 WLR 662, 107 Sol Jo 494 [1937] Ch 392, [1937] 2 All ER 466, 106 LJ Ch 249, [19361937] B & CR 219, 81 Sol Jo 338, 157 LT 545, 53 TLR 548 [1924] AC 783, 93 LJPC 257, [1924] B & CR 209, [1924] All ER Rep 200, 68 Sol Jo 735, 131 LT 719, 40 TLR 732 (1849) 18 LJ Ch 261, 1 H & Tw 229, 13 Jur 415, 1 Mac & G 170, 13 LTOS 358

Ch D

circa 1937

Explained

Loch v John Blackwood Ltd

PC

circa 1924

Considered

Agriculturist Cattle Insurance Co, Re, ex p Spackman

preSCJA 1873

circa 1849

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