| Re London School of Electronics Ltd | |
|---|---|
 | |
| Court | High Court |
| Citation(s) | [1986] Ch 211, [1985] 3 WLR 474, (1985) 1 BCC 99394 |
| Court membership | |
| Judge(s) sitting | Nourse J |
| Keywords | |
| Derivative claim | |
Re London School of Electronics Ltd [1986] Ch 211 is a UK company law case concerning unfair prejudice.
Mr Charles Lytton, a teacher, director and 25 per cent shareholder in the London School of Electronics Ltd which taught electronics courses, alleged that two other directors had acted in an oppressive manner under the Companies Act 1980 section 75 (now the unfair prejudice remedy in Companies Act 2006 section 994). Mr Lytton had been dismissed as a director. He then found out that the other directors had agreed with an American university to recognise a BSc course to the other 75 per cent shareholder, a company called CTC Ltd, without any benefit to the company. Mr Lytton told his students that he would be setting up a new college. He was dismissed as a teacher. He managed to get 12 students to follow him.
Nourse J held that although CA 1980 section 75 did not say anything about clean hands, and there was no requirement that it be just and equitable to grant relief, it could be considered in the extent of the award made. Here, the breakdown was due to CTC's decision to take the American contract for itself and deprive Lytton of 25 per cent of the benefit, and even though he subsequently took 12 students, this did not make CTC's actions no longer unfair. His shares should be purchased at a fair value, the date of which should be the date of the petition as if the students removed by Lytton had remained with the company.
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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.
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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—
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