一、Facts Material

The petitioners, James Weller and Rosemary Sheppey, were respectively the registered holders of 2,450 and 450 shares in a family company which had been incorporated in 1947 and which had an issued share capital of 18,000 shares. Sam Weller (S), the sole director of the company, and the uncle of the petitioners, held 1,800 shares and his two sons, Anthony (A) and Christopher(C ) who were employees of the company, each held 1,350 shares. Following the deaths of three of the members of the family, the petitioners became interested in further shares making a total of 7,700 of the company's 18,000 issued shares, 42.5% of the issued share capital. The company's certified accounts for the calendar year 1985 showed net assets of nearly £500,000 including £216,969 cash and undistributed revenue profits of £464,623. The company's net profits for 1985 were £36,330 on which a dividend of 14p per share was paid. The dividend was covered 14 times and the same dividend had been paid for at least 37 years.

On 21 January 1987 the petition was presented under s 459 of the Companies Act 1985. The petitioners alleged that their interests as members of the company had been unfairly prejudiced by: (a) the payment on the insistence of S of the same derisory dividend for many years; (b) the purchase at the expense of the company of a flat as a holiday home for A and C; (c) a proposed capital expenditure by the company of £130,000 without any evidence that would prove profitable; (d) the refusal of S to register transfers of the shares to which the petitioners were entitled in equity and (e) the refusal of S to disclose the emoluments payable to himself or to A and C. The company, S, A and C applied to have struck out those parts of the petition alleging that the company's dividend policy and its proposed capital expenditure constituted unfairly prejudicial conduct on the grounds that they affected all the members equally and therefore were not unfairly prejudicial to some part of the members.

二、holding of the Judges

The judges held that the word 'interests' in section 459(1) of the Companies Act 1985 was wider than that of 'rights' and its use suggested that Parliament recognised that members of a company could have different interests even though they shared the same rights. Coupled with this, the use of the adverb 'unfairly' introduced the wide concept of fairness in relation to the prejudice of the interests of a member. Accordingly, even if the rights of all the members were affected equally by the allegedly unfairly prejudicial conduct, the interests of some part of the members may be affected in a way that was unfairly prejudicial to them. The test of whether or not conduct was unfairly prejudicial was an objective one and it was not necessary to show that those responsible for the unfairly prejudicial conduct were acting in bad faith or in the conscious knowledge that what they were doing was unfair: the test was whether the reasonable bystander observing the consequences of the conduct in question would consider that it was unfairly prejudicial. On this reasoning section 459 was not concerned with the consequences of the allegedly unfairly prejudicial conduct on the interests of those responsible for it but rather with its effect on the interests of those who complain of it. On the facts, the interests of the petitioners might have been unfairly prejudiced by low dividend payments and by the proposed capital expenditure and therefore the application to strike out the petition would be dismissed.

This article is transferred from the WeChat official account "Chao Lv Zhi（TRULEGAR）", and thanks for it.