Minority Protection

Question 1

Wishart v Castlecroft Securities Ltd [2009] CSIH 65; 2010 SC 16, IH

(Derivitive proceedings)
(s.265 CA 2006)

Answer 1

 Wishart refers to an alleged corporate opportunity case
 Wishart and B owned 40% of shares in Castlecroft Ltd.
 Mrs B owned 20% of the shares, W B, Mrs B and a Mrs S where directors.
 The company was involved in the purchase and lease of commercial property.
 CS chose 3 properties it wanted to buy and lease.
 Later, B entered into a joint venture with L who was a property developer to acquire and develop the properties.
 B and L formed a company (SJB) to give effects to this purpose.
 Soon afterwards SJB bought to of the properties and leased the third one
 The price paid was 2.7 million, the properties were leased out profitably.
 They were allegedly valued at 3.50 million in SJB’s accounts.
 Wishart alleged that B was in breach of the fiduciary duty to CS Ltd as he should have been procuring this business opportunity for CS ltd, not diverting it to SJB. So Wishart alleged the resultant proceeds should be given to CS.
 Secondly, W alleged that B had falsely claimed that CS ltd.’s bankers would not supply CS Ltd. with the funding to buy the properties. W claimed that the relationship with bankers was good and they had never refused to give funding.
 B argued 5 things:
 - that the sale of properties was in the public domain.
 - that the bank would not supply CS Ltd. with the funding.
 - claimed that W knew about SJB creation
 - W knew that SJB intended to buy the properties.
 - W’s application was not in good faith.

 Held that the application should succeed, leave was granted accordingly.

Question 2

Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (HL(E))

Just and Equitable Winding up
(S.122 Insolvency Act 1986)

Answer 2

• The majority shareholders ad directors of Westbourne Galleries removed a member (Ebrahimi) under what was then the equivalent of s.168 of the companies Act 2006.
• Contrary to an understanding that E would be involved in the running of the company when he became a shareholder.
• The company was originally a partnership and E was one of the Two partners.
• When they became a company from a partnership E was one of the two director shareholders, N was the other.
• Shortly afterwards N,s son X was admitted as the 3rd director shareholder with E and N both giving him some of their shares.
• As a result N had 400 shares, X had 200 shares and they could outvote E as E only had 400 shares.
• 10 years later there was a disagreement and N and X voted to get rid of E.
• HELD, that it was just an equitable to wind the company up as a result of an initial understanding of management participation between E and N when the company was formed.
• ***They must also prove that there is “something more”. ( one of the three must be shown)

Question 3

**O’Neill v Phillips [1999] 1 WLR 1092

Unfair Prejudice
(s.996 CA 2006)

Answer 3

 They had one final disagreement and Phillips said that O’Neill was not entitled to 50% of Pectel’s profit any longer as O’Neill was no longer its managing director and would not be entitled to 50% of its Dividends, only 25% of the dividends which was consistent with the amount of shares he had (25%).
 O’Neill brought an unfair prejudice petition. It related to the decrease in the amount of profits he was paid and it brought up the alleged contract that was supposed to give him 50% of the shares.
 The trial judge dismissed the claims as there had been no contract regarding O’Neill having a 50% stake had been made.
 The HOL recognised that you must be a “member to bring the petition but that the courts would not construe “member” in an overly legalistic way. They would give it a broad and non-legal interpretaon.
 Held that O’neill was effected as a shareholder as he had put money into Pectel and given security on his behalf.