Class Notes 2014/2015
The Principle of Majority Rule and Minority Protection
The principle of majority rule has its roots in the rule in Foss v Harbottle (1843) 2 Hare 461,
where two minority shareholders brought an action against the company’s directors alleging that
they had defrauded the company in a number of ways, including selling land to the company at
an exorbitant price. The action failed, the court holding that the alleged wrong was done to the
company and only the company can sue.
The rule in Foss v Harbottle is expressed in two forms. These are:
(a)
non-interfere by the courts in the internal management of a company to cure
irregularities which can be cured by the majority by ordinary resolution.
This referred to as the Internal Management Rule or the Majority Rule Principle;
and
(b)
for a wrong done to the company, it is only the company which can sue.
This is referred as the Proper Plaintiff Rule.
Appenteng v Bank of West Africa [1961] 1 GLR 196
PS Investments v Central Regional Development Corporation & ors.
The rule in Foss v Harbottle, is essentially procedural in character allowing only the majority
to decide the future of the company by deciding whether or not action should be brought for
some wrong done to the company. In Edwards v Halliwell, [1950] 2 All ER Jenkins J held as
follows:
"The rule in Foss v Harbottle, as I understand it, come to no, more than this. First, the
proper plaintiff in an action in respect of a wrong alleged to be done to a company
or association of persons is prima facie the company or the association of persons itself.
Secondly, where the alleged wrong is a transaction which might be made binding on the
company on the company or association and on all its members by a simple majority of
the members, no individual member of the company is allowed to maintain an action in
respect of that matter for the simple reason that, if a mere majority of the members of the
company or association is in favour of what has been done, then cadit quaestio"
The rule also has its basis in the fundamental separation of the company from its members.
In Prudential Assurance vs. Newman, the court held that the rule:
“is not merely a tiresome procedural obstacle placed in the path of the shareholder
by a legalistic judiciary. The rule is the consequence of the fact that a corporation is
a separate legal entity. Other consequences are limited liability and limited rights.
The company is liable for its torts. The shareholder has no such liability. The company
acquires causes of action for breaches of contract and for torts, which damage the
company. No cause of action vests in the shareholder.”
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The rule also prevents double recovery and multiplicity of actions.
The classic statement of the internal management rule is the statement of Mellish L.J. in
MacDougall v. Gardiner (1875) 1 Ch.D. 13 at p. 25, C.A.:
"if the thing complained of is a thing which in substance the majority of the company are
entitled to do, or if something has been done irregularly which the majority of the
company are entitled to do regularly, or if something has been done illegally which the
majority of the company are entitled to do legally, there can be no use in having a
litigation about it, the ultimate end of which is only that a meeting has to be called, and
then ultimately the majority gets its wishes."
In Pinamang v Abrokwa [1991] 2 GLR 384, the court commenting on the internal
management rule held that:
" … in this respect the courts have held that the rule in Foss v. Harbottle (1843) 67
E.R. 189 must be observed by the trial court and it must not inquire into matters of
internal management or, at the instance of a shareholder, interfere with transactions
which though prima facie irregular and detrimental to the company, are capable of
being rectified by an ordinary resolution of the company in a general meeting." @ p
189
See also Burland v Earle [1902] AC 83 at 93 and Harben v Phillips [1883] 23 CH D14,
The justification for the rule lies in the need to preserve the right of members with
majority voting power to determine the conduct of the company's affairs. At common law,
the internal management rule applies only where the majority can by ordinary resolution
cure the alleged irregularity or illegality.
Prudential Assurance v Newman Industries (No. 2) [1982] Ch 204 to 211;[1982] 1 All ER
354 at 358; Stein v Blake [1998] BCLC 1 573
It is doubtful whether the first part of the rule in Foss v Harbottle is applicable under Ghanaian law,
though Ghanaian courts seem to have upheld the rule. Apart from the C ou rt of Appeal
decision in Pinamang v Abrokwa, the internal management rule was also upheld by Taylor J
in Lugetrah v Northern Engineering Co. Ltd [1978] GLR 477 C, 503 where his Lordship
stated that:
"If the manner of their alleged acquisition of shares in N.E.C. can be said to be a
procedural or mere irregularity I think the rule in Foss v. Harbottle (1843) 2 Hare 461,
would have prevented the applicant from maintaining his action."
His Lordship went on to cite the case of MacDougal v Douglas in support of his view.
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Professor Gower’s statements in page 159 Gower’s Report seems to throw some doubt on this
view. In his comments on section 217 of the Companies Act, after citing the case of
MacGougall v Gardiner, he expressed the view that:
"The fact that an irregularity could be rectified does not mean that no action
should be possible to attack an irregularity which has not been put right. For
myself I can see no valid reason why a member should not be allowed to institute
proceedings attacking any irregularity-remediable or not. This is by far the best
method of assuring that the rectification does take place if the majority is prepared
to rectify. If the rectification duly takes place, obviously the litigation will become
futile and will be discontinued. If no rectification takes place the action will continue
and should succeed. If the law refuses to allow a member to litigate it may well be that
the irregularity will never be rectified and no one will be able to take steps to restrain
the company from acting on it. Hence this section abolishes the exception."
On the basis of section 217 of the Companies Act and Professor Gower's interpretation of
the section, the first part of the rule in Foss v Harbottle should no longer be applicable in
Ghana. Under section 217 of the Companies Act, a member can bring an action to
challenge any illegality or irregularity whether curable by ordinary resolution or not. The key
issue to note is that the language of section 217 allows a member to challenge any infraction of
the Companies Act or the Regulations of the Company. The materiality of the infraction is not an
issue. It does not matter whether the alleged breach is a breach of substantive legal requirements
or a breach of procedural requirements. Therefore under section 217, the inquiry as to whether or
not the alleged wrong can be remedied by ordinary resolution is not necessary.
The recent Supreme Court decision in PSI Investment seems to suggest that Ghanaian courts can
still apply the internal management rule (the majority rule principle). At page 24 of the decision
the court held as follows:
“the overall effect of these statutory provisions is that the proper plaintiff leg of the rule
has been whittled away significantly. A member is allowed to bring an action where is it
alleged that the member’s right has been violated. The Act even allows members to bring
representative actions. Section 324 of Act 179 provides procedures with which members
must comply. Be that as it may, on the basis of decisions like Appenteng v Bank of West
Africa and Pinamang v Abrokwa, supra, the courts will still uphold the majority rule,
upon finding that the irregularity or act complained of is one that can be remedied or
regularized by an ordinary resolution.
The view of the court is troubling when considered against the clear language of section 217,
which contradicts the internal management rule. It is difficult to reconcile the internal
management rule with section 217.
Common Law Exceptions to the Rule in Foss v Harbottle
At common law there are four exceptions to the rule in Foss v Harbottle, these are:
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(i)
an irregularity in the passing of a resolution, which requires a specified majority;
(ii)
an act, which is ultra vires the company;
(iii)
an act which constitutes a fraud against the minority and the wrongdoers themselves
are in control of the company; and
(iv)
an act, which infringes the personal rights of an individual member.
Edwards v Halliwel [1950] 2 All ER 1064
Prudential Assurance v Newman
PSI Investments
An act requiring a specified majority
Where an act by statute requires a specified majority, failure to comply is not a mere
irregularity. Bailee v Oriental Telephone and Electric Co Ltd [1915] 1 Ch 503
In Edwards v Halliwell [1950] 2 All ER 1064, where the rules of the defendant trade union
provided that the contributions of members shall only be altered by a ballot with a two third
majority voting in favour of the alteration. At a delegates meeting of the union, without the
taking of any ballot a resolution was passed increasing the amount of contributions. The
plaintiffs brought action to challenge the validity of the resolution. Counsel for the trade
union argued that the failure to comply with the regulations of the trade union was mere
irregularity and was a matter of internal management and the courts will not, as a rule,
intervene. The court disagreed and held that the failure to comply with the rules was not a
mere irregularity but was a matter of substance, coloured with oppression.
Ultra vires and illegal acts
At common law, one of the accepted exceptions to the majority rule principle was where the act
was ultra vires. Because shareholders even acting unanimously could not ratify an ultra
vires act by the company. It would seem however from the cases that it was not in all cases of
ultra vires that the individual member was able to maintain an action. In Smith v Croft [1987]
3 All ER 909, even though the act complained of was ultra vires the company, the individual
member could not maintain the action because majority of the independent shareholders, not
involved in the wrongdoing, were opposed to the action.
Luguterah v Northern Engineering [1978] GLR 477
Under Ghanaian law there is clear basis of for a member to bring an action to challenge
an ultra vires or illegal act. Refer t o section 25 and section 217 of the Companies Act.
For ultra vires acts note the difference between section 25 and section 217. Under section
25debenture holders may sue to prevent ultra vires acts whilst under section 217 it is only
members who can sue.
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Fraud on the Minority
This exception to the principle of majority rule allows a member to bring an action where
the majority of the members acting in manner that amounts to a fraud on the minority.
Note that fraud here is not used in the sense of deceit but embraces a wider equitable
meaning. In Eastmanco v Greater London Council [1982] 2 GLR 437@ 445, the court
held that fraud has a wider meaning than fraud in the Derry v Peek sense.
In fact the
inequitable acts of the minority complained of are not acts against the minority but
against the interest of the company. In Burland v Earle, [1902] AC 83 @93, the court
defined fraud as embracing all cases where the wrongdoers are "endeavoring, directly or
indirectly, to appropriate to themselves money, property or advantages which belong to
the company or in which the other shareholders are entitled to participate." In short it
must involve an unconscionable use of majority voting power resulting in financial loss to
the company or in unfair and discriminatory treatment of the minority.
Negligent acts can however not be the basis of an action under this exception. Pavlides v
Jensen [1956] Ch 565.
In Daniels v Daniels [1978] 1 Ch 406; [1978] 2 All ER 89, the board sold an asset at an
undervalue to one of the directors who later sold it for more than 28 times the price she
bought it for. The court held that the use of the power of the directors intentionally or
unintentionally, fraudulently or negligently in a manner, which benefits themselves at the
expense of the company, was a fraud on the minority. The court distinguished Pavlides v
Jensen on the basis that in Pavlides the directors did not profit from their negligence but in
Daniels v Daniels though fraud was not proved, the directors benefited from their own
negligence.
Another example of fraud on the minority is the case of Menier v Hooper's Telegraph
[187419 Ch 35, where a company was formed to lay transatlantic cables made by the
defendant company, who was the majority shareholder. The defendant company found
out that it could make greater profit be selling the cable to another company but the
new company did not have a government concession to lay the cables. The defendant
arranged for the concession to be transferred from the cable company to the new
company, who then bought the cables from the defendant. To prevent the cable
company from suing, the defendant obtained a resolution for the voluntary winding up
of the company. The plaintiff who was a minority shareholder brought action for
against Hooper for the losses suffered by the company. The court held that the act of
the defendant was a blatant abuse of power tinged with fraud and oppression.
In the case of Owusu v Agyei, [1991] 2 GLR 493 see judgment of Osei Hwere J in page
512, the Supreme Court recognized this exception to the rule in Foss v Harbottle and
compared it to the rules applicable under customary law enunciated in Kwan v Nyeini
[19571 GLR 67
To base an action on this exception, the plaintiff must prove that the wrongdoers are in
control of the company. Birch v Sullivan [1957]1 WLR 1247 (See Gower's Report, page
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152). Refer to the case of Prudential Assurance v Newman , where the court was prepared
to take a wider view of control, extending it to influence over other shareholders.
The fraud on the minority exception arose from the fact that under the common law
where wrongs are done against the company it was only the company that could bring an
action. The result being that in cases where directors were in breach of their duty the
action must be brought on behalf of the company by the board. Shaw v Shaw.
The result being that unless the board was removed that action would not be brought. This
led to the exception that members in general meeting could validly resolve to bring an
action or pass a resolution to adopt an action which was instituted without authority. Section
137(5); Danish Mercantile v Beaumont [1951] Ch 680. This was also ineffective since as
is often the case, the directors or those who appointed them hold the majority voting
power.
The problems encountered by minority shareholders in attempting to enforce breach of
directors duties at common law, influenced the drafting of section 210 of the Companies
Act, to allow a member to bring an action for a breach of director's duties.
Personal rights of members
A fundamental aspect of the principle of majority rule is that a member cannot sue for a
wrong done to the company. Appenteng v Bank of West Africa [197211 GLR 153. The
courts however make distinction between a cause of action falling within the proper plaintiff
rule and situations where there is an infringement of the personal rights of members.
In Heron International v Lord Grade [1983] BCLC 244, Lawton LJ held that:
“ Foss v Harbottle .. has nothing to do with a shareholder;s right of action for a direct
loss caused to his own pocket as distinct from a loss caused to the coffers of a
company in which he holds shares.”@ 263
It has been argued since a shareholder has a general right to have the affairs of the company
conducted in accordance with the Regulations of the Company, any breach of the regulations
by the company would amount to a breach of the shareholder’s personal rights. See section 21
of the Companies Act and section 217. In the view of the writers of Gowers’ Company Law
(6th Edition) page 662:
“ … there is a conflict … between proper recognition of the contractual nature of the
company’s constitution and the traditional policy of non-interference by the courts in
the internal affairs of companies”
This view finds support in the dictum of Taylor J in Luguterah v Northern Engineering
[1979] GLR 477@504 where relying on Re H.R Harmer [1958] 3 All ER 689, he held that :
“… shareholders have a right as members of the company to have the affairs of a
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company conducted in accordance with the regulations of the company. On the facts of
this case what was done was ultra vires the regulations and contrary to the Companies
Code.”
Where a breach of the regulations or the Companies Act affects the shareholder in his
individual right as a shareholder then he has a cause of action against the perpetrators of that
act. See judgment of Jessel MR in Pender v Lushington (1877) 6 ChD 70. In Edwards v
Halliwell, [1950] 1064@ 1067 Jenkins LJ held that:
“ The gist of the case is that the personal and individual rights of membership of each
of them have been invaded by a purported, but invalid, alteration of the tables of
contributions. In those circumstances, it seems to me the rule in Foss v. Harbottle has
no application at all, for the individual members who are suing sue, not in the right of
the union, but in their own right to protect from invasion of their own individual rights
as members.”
This view was also approved by Taylor J in Luguterah v Northern Engineering where he
held that a member of a company in the position of the applicant has a right to maintain an
action in order to prevent the company from invading his individual right as a member. This
was in relation to issuing shares without complying with the pre-emption rights of
shareholders under section 202(1) (b) of the Companies Act.
A member will not have a personal right of action where his loss was merely reflective of
the company's loss. In such cases the loss will only be recoverable by the Company.
Prudential Assurance v Newman
Johnson v Gore Wood [2001]1 All ER 481; [2001] 1 BCLC 313
Ellis v Property Leeds [2002] 2 BCLC 175
Statutory Protections for the Minority
Section 210
At common law, the rule in Foss v Harbottle prevented shareholders from bringing action
against directors for breach of their fiduciary duties because the duty was owed to the company
and therefore any cause of action arising from the breach of the duty belonged to the company.
The resulting position was that it was primarily the board that could take action for breach of
directors’ duties. See Shaw v Shaw [1935] 2 KB 113.
In practice this was unlikely to happen, as the board would ordinarily be filled with sympathizers
of the errant director. It was generally recognized that if the directors failed to sue it was possible
for the members in general meeting to bring action. This was also impractical since in reality the
directors would have some form of control over the majority of members.
As a result of these problems, section 210 allows member to bring action to enforce directors’
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duties. An action brought under section 210 is a derivative action because the cause of action is
derived from the company. The action is brought in a representative capacity on behalf of the
plaintiff and all other members. See section 324 on representative actions. The Company is
joined as a defendant to the action so that the judgment of the court will be binding on the
company.
Section 217
The action under section 217 is an action brought against the company. In Luguterah v
Northern Engineering, where an injunction was granted to restrain the Respondent from
acting as managing director, counsel for the respondent raised a preliminary objection to
the jurisdiction of this court to grant an injunction, interim or perpetual against the
respondent on the ground that section 217 of Act 179, the provision under which the
applicant was proceeding, is only available to a member against a company and so the
court has no jurisdiction to restrain any person except the company. He submitted further
that the court can only grant a relief under section 217 by declaring any act, transaction or
resolution of the company to be void and of no effect. Taylor J held that the simple result
of the order will be that the company is restrained from operating with the respondent as
its managing director.
As regards the scope of the operation of section 217, in Asafu Adjaye v Agyekum [198486]
1 GLR 382, the court held that:
"section 217 of the Companies Code, 1963 (Act 179) was a useful weapon to
restrain a company by an injunction from doing certain acts or declaring such acts
to be of no effect. But the scope of those provisions were clear. They could only be
effectuated if the act, transaction or resolution complained of was illegal or
beyond the power or capacity of the company or infringed any provisions of its
regulations."
Note that under section 217, a member sues in his own right and not in a representative
capacity. This reinforces the view that the purpose of the section 217 is to protect the
personal right of a member to ensure that the business of the company is conducted in
accordance with the Company’s Regulations and with applicable law.
Section 218
(i) Capacity to bring action
The action can only be brought by:
(a)
Members, see Aboagye v Tetevi [1976] 1 GLR 217, Adams v Tandoh,
“where the court held that a director who was not a member cannot sue
under section 218 to challenge his dismissal.” Mahama v Soli [1977] GLR
215;
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(b)
Debenture holders; and
(c)
The Registrar under section 225.
(ii) Capacity in which the acts complained off should affect the Plaintiff:
For an action by members or debentureholders to succeed they must prove that the act
complained of has affected them in their interest as members, debentureholders,
shareholders or officers of the company.
In Mahama v Soli [1977] GLR 215@ 237 the court held that:
“although section 218 of the Companies Code, 1963 (Act 179), which provides
remedy against oppression has its origin in section 210 of the English Companies
Act, 1948, and relief under that Act can only be granted if the complaining
members show that they were oppressed qua members, the ambit of our section 218
is wider and clearly designed. While the complainants must be members or
debentureholders, they are entitled to relief even if the act complained of is also
oppressive of them as shareholders or officers of the company.”
Some Ghanaian courts have taken a wrong turn in their application of section 218
in relation to the capacity in which the acts complained has affected the plaintiff.
In Asafu Adjaye v Agyekum held that:
“To bring the petition at all under section 218 (1) there must be proof that
the conduct complained of is oppressive to one or more of the members:
see Okudjeto v. Irani [p.395] Brothers (supra) … there has been some
element of lack of probity or fair dealing to him in his capacity as a
shareholder: see Scottish Co-operative Wholesale Society Ltd. v. Meyer [
1959] A.C. 324 and In re Lundie Brothers Ltd. [1965] 2 All E.R. 692 at
698-699, per Plowman J. In the latter case it was held that the ousting of
the petitioner as a working director related to his status as director and
not as shareholder and no oppression was established thereby to entitle
him to relief under the relevant section 210 of the Companies Act, 1948.
For the same reason conduct which was inefficient or careless would not
in general amount to oppression; to do so it would be necessary to show
that it was designed to achieve an unfair advantage over those claiming to
be oppressed: see In re Five Minutes Car Wash Service Ltd. [1966] 1 All
E.R. 24 @p396
Further in Okudjeto v Irani Borthers [1975] 1 GLR 96, Anin JA considering the
scope of section 218 relied on the English case of Elder v. Elder and Watson, Ltd.
1952 S.C. 49 to hold that Section 218 of Act 179 was intended to meet the case of
the oppression of the members of the company in their character as such and not in
their character as directors or secretary or manager, as in the instant case, [p.98]
where the allegations made affected the respondents qua directors and not as
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members, or shareholders, or debentureholder. See page 115-116 of the report.
This view was expressly overruled by the Supreme Court in the Dupaul Wood
Treatment v. Asare. See page 691 of the report. See also page 161 of Gower’s
Report.
(ii) The act complained of
Section 218(a):
The act complained of must involve the conduct of the company's affairs or the
exercise by directors of their powers.
The act complained of must be oppressive. In Mahama v Soli, the court held
that The word "oppressive" in section 218 (1) of Act 179 is not a term of art, it was
said the word must be construed in its ordinary sense and means, burdensome,
harsh and wrongful and held that a director who though being a minority
shareholder had arrogated to himself the power of the board and run company for
the benefit of himself was liable for oppressive conduct.
In Re H. R. Harmer Ltd. [1958] 3 All ER 689 that to assume power that one
does not possess and to exercise that against the wishes of shareholders who
have major beneficial interests but a minority of votes, is prima facie oppression.
In Asafu Adjaye v Agyekum the court after defining oppression as meaning
burdensome, harsh and wrongful held that to establish oppression a petitioner
must establish not only that the affairs of the company have been conducted
in an oppressive manner in this sense, but also that there has been some
element of lack of probity or fair dealing to him in his capacity as a
shareholder. The court further held that the mere holding of majority shares
does not amount oppression, unless this majority is used to discriminate
against the minority or is used to secure an unfair advantage.
Elder v. Elder and Watson, Ltd. 1951 S.C. 49, Lord Cooper considered that the
oppression envisaged by section 210 of the English Companies Act, 1948 (11 &
12 Geo. 6, c. 38), must involve conduct which should, at the lowest, involve a
visible departure from the standard of fair dealing and a violation of the
conditions of fair play on which every shareholder who entrusts his money to a
company is entitled to rely.
The matters complained of as oppressive must continue right up to the time relief
is being sought. An isolated event will not suffice to ground an action under section
218. Adams v Tandoh. Osei Hwere J’s judgment and Pinamang v Aborkwa
See Gower's Report page 161, where it is stated that oppression will only be
found when there is course of oppression or abuse and not where some isolated
act of misfeasance has occurred in the past. For isolated events the remedy is in
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sections 210, 217 or 218(b).
Conduct that is inefficient or careless would not in general amount to
oppression; to do so it would be necessary to show that it was designed to
achieve an unfair advantage over those claiming to be oppressed. Asafu -Adjaye
v Agyekum [1984-86] 1 GLR 382 @ 396
In Pinamang v Abrokwa, the court held that to bring an action under section 218:
(i)
the petition must be made with the genuine object of
obtaining the relief claimed and not for exerting pressure in
order to achieve a collateral purpose; and
(ii)
the applicant must adduce evidence seeking to show a chain of
events and occurrences of harsh and burdensome conduct which
continued up to the date of presentation of the petition.
Action may also be brought under section 218 (1) (a) where the act complained of is
in disregard of the interest of the plaintiff as member or debenture holder. In
Mahama v Soli the court held that where defendant conducted the affairs of the
company in such a manner as to deny shareholders their legitimate expectation that
the company would make profit to enable it declare dividends then the affairs of
company would be deemed to be conducted in disregard of their interest as
members.
Section 218(b)
Here if an act is done or threatened to be done or a resolution has been passed which
unfairly discriminates against the member or is otherwise unfairly prejudicial to one
of the member or debentureholders, an action would lie at the suit of the injured party.
Subsection (b) is intended to codify the common law on fraud against the minority.
See Gower's Report page 161. A major difference between (a) and (b) is that here a
single isolated act can ground an action. See Boohene v Ghana Union Assurance.
The test of whether or not the conduct of a company amounts to unfairly prejudice is an
objective one. In Re RA Noble & Sons (Clothing) Ltd [1983] BCLC 273 at page 290230,1 the court considered section 75 of the English Companies Act of 1980, which is in
pari material with section 218(1)(b) of the Companies Act, and cited with approval the
decision in Re Bovey Hotel Ventures (unreported), where it was held that:
“The test of unfairness must, I think, be an objective one, and not a subjective one,
in other words it is not necessary for the petitioner to show that the persons who
have de facto control of the company have acted as they did in the conscious
knowledge that this was unfair to the petitioner or that they were acting in bad
faith; the test, I think, is whether a reasonable bystander observing the
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consequences of their conduct, would regard it as having unfairly prejudiced the
petitioner’s interest.”
In Re a Company [1983] 2 All ER 36, the court held that “prejudicial may be defined in
its ordinary meaning as “causing prejudice, detrimental to rights, interests, unfair and that
which is not just, unbiased, equitable, legitimate.”
Where is it is established that a resolution is illegal in the context of the regulations of a
company or the Companies Act, then the implementation of that resolution will be
unfairly prejudicial to a dissentient shareholder. In the English case of Re Saul D.
Harrison & Sons plc [1995] 1 BCLC 14,2 the court considered section 459 of the
English Companies Act of 1985, which allows a shareholder to bring action where:
“the company’s affairs are being or have been conducted in a manner which is
unfairly prejudicial to the interest of its members generally or some part of its
members (including at least the petitioner).”
The court held at page 17 that:
“In deciding what is fair or unfair for the purposes of s 459, it is important to have
in mind that fairness is being used in the context of a commercial relationship. The
articles of association… are the contractual terms, which govern the relationships
of the shareholders with the company and each other. They determine the powers of
the board and the company in general meeting and everyone who becomes a
member of a company is taken to have agreed to them. Since keeping promises is
probably the most important element of commercial fairness, the starting point in
any case under s 459 will be to ask whether the conduct, which the shareholder
complains of, was in accordance with the articles of association.”
Re Saul Harrison & Sons [1995] 1 BCLC 14
Re a Company [1986] BCLC 376
Re Sam Weller & Sons Ltd [1990} Ch 682
Reliefs to be granted
The court is not limited to the reliefs provided under section 218 (2). It has a wide discretion to
order various reliefs as it deems fit to bring to an end the matters complained of.
In Vambaris v. Altuna /1973] 2 GLR 47, the court held that:
“The only question remaining is whether this court can make an order setting
aside an improper appointment as a director or an invalid acquisition of shares
on an
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application made under section 218 of the Companies Code, 1963 (Act 179), or
this
can only be made in an action.
The section gives the court wide
judicial discretion
to make such order as it thinks fit with a view to bringing
to an end the matters
complained of Pennycuick J. in In re Jermyn Street
Turkish Baths Ltd. [1970] 1
W.L.R. 1194 at p. 1208 said the judicial
discretion given in a similar [p.47] section under the English Companies Act,
1948 (11 & 12 Geo. 6, c. 38), is unlimited. Our Code definitely gives power to
the court to direct or prohibit any act or cancel or vary any transaction or
resolution: see section 218 (2).”
In Okudjeto v Irani Bros (No 2) 1974 GLR 389@ 392, the court held that :
“ … in view of the wording of section 218 (2) it is for the court to find a solution and
impose it on the parties with the view of bringing the oppressive or discriminatory
practices to an end. The court is empowered to make any order it thinks fit, and the
orders specified [p.392] in the section are only examples of the sort of orders that the
court may make. I do not see anything in the section that says that a specific or any
order must be asked for.”
The Court of Appeal in Asafu –Adjaye v Agyekum criticized this view and held that:
“We note that in Okudjeto v. Irani Brothers [1975] 1 G.L.R. 96 at 115 this court said that
under our section 218 it is not necessary to set out the relief sought in the application
itself. That observation, we may remark, was obiter dictum. The petitioner in the
Okudjeto case carefully set down his reliefs and, indeed, one of the questions that fell for
determination on appeal in that case was whether the court below could grant a relief in
favour of the respondent before it who had not prayed for it. The answer was "no." We
dare say that it will be quite irregular for a petitioner to come to court with a blank
sheet and expect the court to hear him in the hope of writing out his reliefs for him”
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