ICAS TC Business Law Module 11 Flashcards
Sidebottom v Kershaw, Leese & Co Ltd 1920
Facts: The articles were altered to enable the directors to purchase the shareholding
of any member who competed with the company for business. The minority who were
affected by this new article did carry on a competing business. They challenged the
alteration on the ground that it was an abuse of majority power to ‘expel’ a member.
Held: This was a justifiable alteration if made bona fide in the interests of the company
as a whole. In this case, it was justifiable.
Dafen Tinplate Co Ltd v Llanelly Steel Co (1907) Ltd 1920
Facts: D was a minority shareholder which had transferred its custom from L to
another supplier. The majority shareholders of L therefore sought to protect its
interests by altering the articles to provide for compulsory acquisition of D’s shares.
Note though the new article was not restricted (as in Sidebottom) to acquisition of
shares on specific grounds where benefit to the company would result; it was simply
expressed as a power to acquire the shares of a member.
Held: This alteration was invalid because it enabled the majority shareholders to
compel any shareholder to transfer his shares. Such a wide power could not be said
to be for the benefit of the company.
Aerators Ltd v Tollit 1902
Facts: Aerators Ltd manufactured a device to aerate liquid in siphons. Tollit
proposed to form a company named Automatic Aerators Patents Ltd to market large
installations for aerating beer in pubs. Aerators Ltd applied for an injunction to
prevent this name being used.
Held: rejecting the application, the word ‘aerator’ was a word in general use and in
the circumstances no confusion was likely to arise.
Ewing v Buttercup Margarine Co Ltd 1917
Facts: The complainant, Ewing, was a sole trader who ran a chain of shops in
Scotland and the north of England through which he sold margarine and tea. He
traded as the ‘Buttercup Dairy Co’. Buttercup Margarine Co Ltd was a company
registered with that name since 1916. It also sold margarine, as a wholesaler in the
London area. The company argued there was unlikely to be any confusion between
the goods sold by the two businesses.
Held: Granting the injunction, Ewing had established connections under the
Buttercup name; he planned to open shops in the south and if the defendants sold
their margarine retail (which was provided for in their memorandum) there could be
confusion between the two businesses.
HFC Bank plc v Midland Bank plc 2000
Facts: The action for passing-off arose out of the re-branding of Midland Bank,
and many other companies within the Hong Kong and Shanghai Banking
Corporation Group, as ‘HSBC’. In order to be successful in its claim to restrain
the defendant, the Midland Bank, from passing off its business, branches or
services as those of the claimant by the use of the name, ‘HSBC’, the claimant,
HFC Bank plc had to prove the following:
a) That it was the owner of goodwill in the UK in the name HFC used in its
business;
b) That the similarity between HFC and HSBC was so likely to cause confusion
that it amounted to a misrepresentation to the public that Midland’s bank
branches and services were connected to HFC or vice versa; and
c) That the misrepresentation had or was likely to damage HFC’s goodwill.
Held: Mere confusion between two traders’ products did not provide the basis
of a passing-off action. The fact that people, including customers, confused the
parties competing and similar brand names was insufficient to prove that the
defendant’s use of its brand name involved a representation that the claimant
and defendant were connected. Thus the passing-off action failed.
Hickman v Kent or Romney Marsh Sheepbreeders Association 1915
Facts: The articles provided that any dispute between a member and the company
must be referred to arbitration. A shareholder who complained that he had been
wrongfully expelled from the company took his case to the
High Court.
Held: He was contractually bound to go to arbitration first.
Pender v Lushington 1877
Facts: A company’s articles provided that a member was not entitled to cast more
than 100 votes regardless of the number of shares he held. P, a shareholder,
transferred shares to nominees to circumvent this provision. The chairman refused to
accept the votes cast by the nominees and a resolution proposed by P was declared
lost.
Held: The company was contractually bound to recognise the votes of its members
(including nominee members) and the chairman’s ruling was invalid.
Eley v Positive Government Security Life Assurance Co 1876
Facts: Solicitor E drafted the original articles and included a provision that the
company must always employ him as its solicitor. E became a member of the
company a few months after its incorporation. E later sued the company for breach
of contract when they ceased to employ him as a solicitor.
Held: E could not rely on the articles since they were a contract between the
company and its members and he was not asserting any claim in his capacity as a
member.
Rayfield v Hands 1960
Facts: The articles of a company required that every director should be a
shareholder and that the directors must dispose of the shares of any member
who gave them notice of his wish to dispose of them. The directors claimed
that a member could not enforce the obligation on them to acquire his shares.
Held: There was a contract in the articles between a member and memberdirectors
in relation to their holdings of the company’s shares, and the memberdirectors
were bound by its terms.
Re New British Iron Co, ex parte Beckwith 1898
Facts: The articles provided that directors’ pay should be £1,000 per year to be
divided between them as they saw fit. By accepting the offer of directorships, the
directors entered into separate contracts between themselves and the company but
nothing more was said about remuneration.
When the company went into liquidation, the directors claimed arrears of their fees.
The liquidator denied the existence of any contract to pay fees.
Held: Although the directors could not rely on the articles as a contract for the
payment of their fees (as their grievance did not relate to a membership matter) they
could refer to the articles to establish the amount payable under the separate
contracts with the company made when they were appointed as company directors.
