ICAS TC Business Law Module 13 Flashcards
Bushell v Faith 1970
Facts: This case concerned a private company with a
capital of 300 £1 shares held equally by B and F (who were both directors) and their sister. The articles provided that on a resolution for the removal of a director, the voting rights
attaching to that director’s shares would be increased from one vote per share to three votes per share. B and her sister purported to remove F from office.
Held: The House of Lords upheld the validity of the
provision in the articles and the resolution to remove F was
therefore defeated.
Ebrahimi v Westbourne Galleries 1973
Facts: E and N had run a successful partnership business
selling carpets. They decided to incorporate, and the
business flourished. N introduced his son, G into the
business and some shares were transferred from E and
some from N. N and G then excluded E from the business
and removed him as director. Further, considerable profits
of the business were paid out as directors’ salaries rather
than dividends. E’s exclusion as director, therefore, meant
he had no share of the profits. He sought a winding up
order.
Held: The House of Lords held unanimously that his petition
would be granted in the circumstances of this case.
Note: In most circumstances now, director-members in such
a situation would petition under s.994, instead of using the
sledgehammer remedy of winding up on the just and
equitable ground
Hogg v Cramphorn Ltd 1967
Facts: The directors, acting in good faith and in what they thought was the
best interests of the company and its staff, issued shares with special voting
rights to the trustees of a scheme set up for the benefit of the company’s
employees, in order to forestall a takeover bid. A minority shareholder brought
an action on the basis that the directors had acted in breach of duty.
Held: The court decided this was an improper use of the directors’ power to
issue shares. However, an opportunity was given to the members in general
meeting to ratify the actions of the directors, which they did, since the directors
had acted in the best interests of the company. An undertaking was also given
that the wrongly issued votes would not be used.
Dorchester Finance Co Ltd v Stebbings 1989
Facts: An executive director and 2 non-executive directors were all
accountants. The two non-executive directors signed blank cheques which the executive director then used for his own purposes. The company sued all three
directors but the two non-executive directors argued that as they were non executive
they had no liability.
Held: The three directors had been negligent. The non-executive directors
had been negligent in signing blank cheques and, by so doing, not showing
the necessary skill and care. The judge made it clear that the duties owed by
non-executive directors were the same as those owed by executive directors.
IDC v Cooley 1972
Facts: Cooley was the managing director of IDC, a company which provided
services to gas companies. C realised that IDC was unlikely to be awarded a
particular contract but thought that if he went out on his own he, personally,
might be awarded it. He told the board that he was ill and was allowed to leave
his job for that reason. Once he has ceased to be the MD of IDC, he pursued
and obtained the contract with the gas company in his own name. IDC sued
him and successfully recovered the profits he had made.
Held: C was held accountable to the company for the profit he had made for
himself.
