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Mutual Life Insurance Co. of New York v The Rank Organisation Ltd. [1985] BCLC 11 is a UK company law case dealing with "oppression" (or unfair prejudice) under section 20 Companies Act 1948 (now s.994 Companies Act 2006). Goulding J delivered the first instance judgment.
United States and Canadian securities law requires registration of companies for share issues. In 1975 Rank Organisation Ltd, an entertainment company, decided to offer 20 million ordinary shares to the public, with a preference to existing Rank shareholders. This preference offer did not however extended to shareholders based in the United States and Canada (including Mutual Life), because it was thought not to be in the company's interest to have to register there. Rank's articles of association stated that directors could allot, deal with or dispose of company shares "on such terms as they think proper". But the American and Canadian shareholders (they owned shares "beneficially" through nominee companies, who were defendants alongside Rank in the case) were still unhappy. They said they had been discriminated against, and that was a "breach of contract" because s.20 of the Companies Act 1948 implied shareholders deserved equal treatment (this is the "oppression" provision; see now, s 994 unfair prejudice).
Goulding J dismissed the shareholders' complaint. He held that section 20 did not create a term of the corporate contract that shareholders were to be treated equally in respect of a board resolution (or for that matter a resolution of shareholders in general meeting). The duties of the directors were to exercise their powers to issue shares in good faith, bona fide in the interests of the company and exercise them fairly between shareholders (not necessarily treat shareholders identically).
That is what the directors had done. The treatment of the American and Canadian shareholders was not unfair, because their shareholdings and rights had not been affected. Rank shareholders had no right to expect their share interest remain in constant proportion to the others' in the company forever. The counsel for the petitioners had suggested that a "discriminatory" allotment should only be decided on where no other option were available, but this was clearly going too far to constrain business decisions. Goulding J review all the authorities and summarised (at 24, [1985] BCLC 11),
"I turn to the remaining test which I have proposed, namely, that of fairness between different shareholders. It must be borne in mind that in my view the equality of individual shareholders in point of right, does not always require an identity of treatment. Compare the first of the passages that I cited from Lord Macnaghten's speech in the British and American Trustee case. After reflection on all that counsel for the plaintiffs (Mr Curry QC) said in argument I remain of opinion that the North American shareholders were fairly treated on the occasion of the offer for sale, notwithstanding their exclusion from participation along with their compatriots who were not already shareholders. Such exclusion did not in any way affect the existence of a shareholder's shares nor the rights attached to them. I do not know whether the transaction had any effect upon their market price. None has been alleged by the plaintiffs, and counsel for the plaintiffs (Mr Curry QC) disclaimed any suggestion that the terms of the offer for sale were improvident, heavily oversubscribed though it was. In any case, no shareholder in Rank, while its articles of association retain their present form, has any right to expect that his fractional interest in the company will remain forever constant. Moreover, the reason why North American shareholders were excluded was because of a difficulty resulting only from their own personal situation. It was not the fault of Rank that they were nationals or residents of countries whose laws impose onerous obligations. Finally, it is not in my judgment unfair to the North American shareholders that Rank should raise capital in the way which it was advised, and its directors believed, was most advantageous for the purposes of maintaining its investment programme, since the successful fulfillment of the programme would give a prospect of continuing benefit to all members whatever their personal situation. The plaintiffs' main attack, in my opinion, therefore, fails."
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In corporate law in Commonwealth countries, an oppression remedy is a statutory right available to oppressed shareholders. It empowers the shareholders to bring an action against the corporation in which they own shares when the conduct of the company has an effect that is oppressive, unfairly prejudicial, or unfairly disregards the interests of a shareholder. It was introduced in response to Foss v Harbottle, which had held that where a company's actions were ratified by a majority of the shareholders, the courts will not generally interfere.
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to organise and run business. Tracing their modern history to the late Industrial Revolution, public companies now employ more people and generate more of wealth in the United Kingdom economy than any other form of organisation. The United Kingdom was the first country to draft modern corporation statutes, where through a simple registration procedure any investors could incorporate, limit liability to their commercial creditors in the event of business insolvency, and where management was delegated to a centralised board of directors. An influential model within Europe, the Commonwealth and as an international standard setter, UK law has always given people broad freedom to design the internal company rules, so long as the mandatory minimum rights of investors under its legislation are complied with.
Unfair prejudice in United Kingdom company law is a statutory form of action that may be brought by aggrieved shareholders against their company. Under the Companies Act 2006 the relevant provision is s 994, the identical successor to s 459 Companies Act 1985. Unfair prejudice actions have generated an enormous body of cases, many of which are called "Re A Company", with only a six-digit number and report citation to distinguish them. They have become a substitute for the more restrictive conditions on a "derivative action", as an exception to the rule in Foss v Harbottle. Though not restricted in such a way, unfair prejudice claims are primarily brought in smaller, non public companies. This is the text from the Act.
s 994 Petition by company member
(1) A member of a company may apply to the court by petition for an order under this Part on the ground—
(2) The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company.
(3) In this section, and so far as applicable for the purposes of this section in the other provisions of this Part, "company" means—
Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 is a UK company law case, concerning the predecessor of the unfair prejudice provision, an action for "oppression" under section 210 of the Companies Act 1948.
Re Saul D Harrison & Sons plc [1995] 1 BCLC 14, [1994] BCC 475, is a UK company law case on an action for unfair prejudice under s.459 Companies Act 1985. It was decided in the Court of Appeal and deals with the concept of members of a business having their "legitimate expectations" disappointed. Vinelott J at first instance had denied the petition, and the Hoffmann LJ, Neill LJ and Waite LJ in the Court of Appeal upheld the judgment.
Re Blue Arrow plc [1987] BCLC 585 is a UK company law case dealing with unfair prejudice under s 459 Companies Act 1985.
Rock Nominees Ltd v RCO (Holdings) plc[2004] EWCA Civ 118 is a UK company law case dealing with unfair prejudice under section 459 Companies Act 1985. It was decided at first instance by Peter Smith J.
Directors' duties are a series of statutory, common law and equitable obligations owed primarily by members of the board of directors to the corporation that employs them. It is a central part of corporate law and corporate governance. Directors' duties are analogous to duties owed by trustees to beneficiaries, and by agents to principals.
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 is a United Kingdom company law case on the rights of minority shareholders. The case was decided in the House of Lords.
Re Tottenham Hotspur plc [1994] 1 BCLC 655 is a UK company law case concerning unfair prejudice under s 459 of the Companies Act 1985, now s 994 Companies Act 2006.
O'Donnell v Shanahan[2009] EWCA Civ 751 is a UK company law case concerning the strict prohibition on any possibility of a conflict of interest between a company director's duty to promote her company's success and her own gain.
Atlasview Ltd v Brightview Ltd[2004] EWHC 1056 (Ch) is a UK company law case, which concerns a claim for unfair prejudice and raised the question of barring a claim if attempted to recover for reflective loss. The case is a notable precedent because it makes clear that a nominee shareholder is also a legitimate petitioner for unfair prejudice.
Percival v Wright [1902] 2 Ch 401 is a UK company law case concerning directors' duties, holding that directors only owe duties of loyalty to the company, and not to individual shareholders. This is now codified in the United Kingdom's Companies Act 2006, section 170.
Re London School of Electronics Ltd [1986] Ch 211 is a UK company law case concerning unfair prejudice.
Corporate litigation in the United Kingdom is that part of UK company law which gives investors the right to sue the directors of a company, or vindicate another wrong to the company, particularly where the board of directors does not wish to act itself.
Canadian corporate law concerns the operation of corporations in Canada, which can be established under either federal or provincial authority.
BCE Inc v 1976 Debentureholders, 2008 SCC 69 (CanLII), [2008] 3 SCR 560 is a leading decision of the Supreme Court of Canada on the nature of the duties of corporate directors to act in the best interests of the corporation, "viewed as a good corporate citizen". This case introduced the principle of fair treatment as an organizing principle in Canadian corporate law.
Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd [1983] Ch 258 is a leading United Kingdom company law case relating to directors' liability. The case is the principal authority for the proposition that a company will not be able to make any claim against a director for breach of duty where the acts of the director have been ratified by the members of the company.
Wilson v Alharayeri, 2017 SCC 39 is a leading case of the Supreme Court of Canada which significantly extends the application of the oppression remedy under the Canada Business Corporations Act to include non-corporate parties.
The oppression remedy in Canadian corporate law is a powerful tool available in Canadian courts, unique in breadth and scope compared to other examples of the oppression remedy found elsewhere in the world.
