Ebrahimi v Westbourne Galleries [1973]

Petitioner and N had been in partnership for many years
and decided to incorporate.
Petitioner and N became directors of company.
Soon afterwards, N’s son became director and shareholder.
Petitioner then in minority position in voting.
Following disagreement, N and son removed petitioner
as director, in accordance with articles.
Petitioner commenced proceedings under Companies Act
1948, s210 [forerunner to Companies Act 1985, s459] and Companies Act 1948,
s222(f) [forerunner to IA 1986, s122(1)(g)].
House of Lords ordered company to be wound up under Companies
Act 1948, s222(f).
Lord Wilberforce –
Stressed wide discretionary power which provision
confers on court.
Stated that tendency to create categories or headings
under which cases must be brought if the clause is to apply was wrong.
Then considered whether power under order could be
exercised where members of company were in substance partners and court would,
if there had been partnership, have ordered partnership be dissolved under Partnership
Act 1890, s35 [which also allows dissolution on just and equitable grounds].
Stated company more than a legal entity.    
Courts will subject exercise of legal rights to equitable
considerations – considerations of a personal character arising between one individual
and another which may make it inequitable to insist on legal rights.
Not possible to give exhaustive definition of circumstances
in which such equitable considerations might arise, but might include:
(i) Association based on personal relationship,
involving mutual confidence, eg where partnership converted into limited company.
(ii) Agreement or understanding that all or some shareholders
shall participate in conduct of business.
(iii) Restriction upon transfer of members’ interest
in company, so that if confidence is lost or one member removed from management,
he cannot take out his stake and go elsewhere.
In present case, although petitioner had been removed
from directorship under power valid in law, circumstances were such that N and
his son were not entitled in equity to make use of their powers.
Only just and equitable course was for company to be
wound up.