House of Lords laid down guidelines as to when conduct
will be ‘unfairly prejudicial’.
[NB First House of Lords decision on s459].
P, sole shareholder of company, gave O, worker in company,
25% of his shares and appointed him director.
P retired leaving O in control.
Company profitable and issued dividends.
P waived 1/3 of his 75% entitlement in favour of O to
O left some of his entitlement in the company –
Later capitalised by issue of bonus shares in same
proportions as existing holdings.
Company hit trouble and P resumed control.
P paid O only his salary and dividends on 25% holding.
O issued petition under s459.
Lord Hoffman –
Member of company would not normally be entitled to
complain of unfairness unless there had been some breach of terms on which he
agreed company’s affairs would be conducted.
However, equitable considerations might make it unfair
for those conducting affairs of company to rely on their strict legal powers.
That would be so where exercise of power in question conflicted
with promises parties had exchanged.
Was not necessary that such promises should be
enforceable as matter of contract.
However mere fact that trust and confidence between parties
had broken down was not sufficient.
In present case, P had made no promises and therefore
P had not behaved unfairly.