O'Neill and Another v. Phillips and Others

LORD HOFFMANN

My Lords,

This appeal raises, for the first time in your Lordships' House, a question on the scope of the remedy which Part XVII (sections 459-461) of the Companies Act 1985 provides for a member of a company, typically holding a minority of the shares, who considers that the company's affairs are being conducted in a manner unfairly prejudicial to his interests.

1. The statute

Section 459(1) (as amended by the Companies Act 1989, Schedule 19, paragraph 11) reads:

 "A member of a company may apply to the court by petition for an order under this Part on the ground that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or of some part of its members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial."

Section 461(1) provides that if the court is satisfied that a petition under Part XVII is well founded, it may make "such order as it thinks fit for giving relief in respect of the matters complained of." Without prejudice to the generality of this jurisdiction, the court may make all or any of a number of orders specified in subsection (2). These include orders regulating the future conduct of the company's affairs, requiring the company to do or refrain from doing some act and, the remedy most commonly sought, an order under section 461(2)(d) providing for the purchase of the petitioner's shares by other members of the company or the company itself.

2. The facts

The issue in this appeal is whether the company's affairs were conducted in a manner "unfairly prejudicial" to the petitioner's interests within the meaning of section 459(1). Since on any view this must depend upon the particular facts of the case, I must start with a summary of the findings of Judge Paul Baker Q.C., who heard the petition.

Pectel Ltd. ("the company") operates in the construction industry, providing specialist services for stripping asbestos from buildings. In 1983 it employed the petitioner Mr. O'Neill as a manual worker. The respondent to the petition and appellant before your Lordships is Mr. Phillips, an accountant. In 1983, having bought out another shareholder, he held the entire issued share capital of 100 £1 shares. Mr. Phillips was impressed by Mr. O'Neill's energy and ability and advanced him rapidly to foreman, site supervisor and contracts manager. In January 1985 Mr. Phillips gave Mr. O'Neill 25 shares and appointed him a director. In May of that year they had an informal discussion at which Mr. Phillips expressed the hope that Mr. O'Neill would be…