Re Williams Group Tullamore Ltd

• Jurisdiction: Ireland
• Judgment Date: 15 November 1985
• Date: 15 November 1985
• Docket Number: [1985 No.
• Court: High Court

High Court

[1985 No. 4946P]

In re Williams Group Tullamore Ltd.

In the Matter of Williams Group Tullamore Limited And in the Matter of The Companies Acts

1963-1983

Cases mentioned in this report:—

Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] A.C. 324; [1958] 3 W.L.R. 404; [1958] 3 All E.R. 56.

In re Jermyn Street Turkish Baths Ltd. [1971] 1 W.L.R. 1042; [1971] 3 All E.R. 184.

In re Greenore Trading Company Ltd. [1980] I.L.R.M. 94.

In re Westwinds Holding Company Ltd. (Unreported, High Court, Kenny J., 21st May, 1974).

Greenhalgh v. Aderne Cinemas Ltd. & Ors. [1950] 2 All E.R. 1120; [1950] W.N. 564.

Company - Shareholders - Share capital divided into ordinary non-voting shares and 8% non-participating voting preference shares - Directors deciding to allow preference shareholders to participate in profits - Ordinary shareholders objecting - Resolution passed by preference shareholders - 'Oppression' - Conduct not burdensome, harsh or wrongful - Individual transaction - Affairs of company being conducted in disregard of interests of members - Companies Act, 1963 (No. 33), s. 205.

Petition.

At the time of its incorporation in 1966 the share capital in Williams Group Tullamore Limited was £250,000, divided into 250,000 shares of £1 each. The founder members, two brothers, had run the business in effect as a partnership but when their children inherited their snares confusion arose which adversely affected the business. To deal with this a managing director was appointed and in November, 1972, a major reorganisation of the capital structure of the company took place with the object of consolidating control of the company in the hands of those members of the Williams family most intimately concerned with its management. The capital of the company after the reorganisation was £400,000, divided into 250,000 ordinary shares of £1 each, of which 133,540 were issued and fully paid, and 150,000 8% preference shares of £1 each, of which 133,540 were issued and fully paid.

The preference shares conferred a right to a fixed 8% non-cumulative preferential dividend and a preferential right to repayment of capital on winding up but without a right to participate in any surplus. The articles provided that so long as any preference shares were outstanding the ordinary shareholders should have no right to receive notice of, attend or vote at any general meeting.

Over the years the company prospered and the ordinary shareholders received very substantial dividends. By contrast the real value of the fixed dividends of the preferential shareholders was eroded by inflation. Early in 1985 the board of the company decided to allow the preference shareholders to participate in the distribution of a sum of £267,080 arising from export sales. On the 19th April, 1985, notice was served on the preference shareholders of an extraordinary general meeting to be held on the 13th May, 1985, to consider a series of resolutions whereby 5,000 of the unissued preference shares would be converted into 500,000 'A' shares of 1p each, which shares would confer the right to a fixed dividend of £1 each out of the profits of the company resolved to be distributed in the company's financial year ending 31st August, 1985. A sum of £2,670.80 undistributed profits in the company's reserve account would be capitalised and used to pay in full 267,080 'A' shares of 1p which would then be allotted to the holders of ordinary and preference shares in the proportion of one 'A' share for each share held. The resolutions were passed by 120,013 votes to 57.

On the 4th June, 1985, a number of the ordinary shareholders presented a petition to the High Court seeking a declaration that the passing of those resolutions amounted to an oppression of the ordinary shareholders and was in disregard of their interests as members of the company, as well as various ancillary reliefs. The petitioners claimed that the passing of the resolutions conferred a substantial benefit on the preference shareholders in that the new 'A' shares allowed them to participate in profits to a greater extent than previously, to the immediate and direct detriment of the petitioners, and constituted an oppression and fraud on them by the majority shareholders.

At the time of its incorporation in 1966 the share capital of W. Ltd. was £250,000, divided into 250,000 shares of £1 each of which 133,540 were issued and fully paid. The founder members, two brothers, had run the business in effect as a partnership but when their children inherited their shares confusion arose and the business suffered. The business was reorganised by the appointment of a managing director and in 1972 the capital structure of the company was reorganised by providing for a capital of £400,000, divided into 250,000 ordinary shares of £1 each and 150,000 8% preference shares of £1 each. Of both the ordinary and the preference shares 133,540 were issued and fully paid.

The preference shares carried a right to a fixed 8% non-cumulative dividend and voting rights; the ordinary shares, so long as any preference shares were outstanding, conferred no voting rights. The company prospered and the ordinary shareholders received very substantial dividends and fared very much better than the preference shareholders.

The board of directors decided that it would be fair to allow the preference shareholders to participate in the accrued profits earned from a particular part of the company's business. To this end a scheme was devised and passed in general meeting (which the ordinary shareholders were not entitled to attend) to allow the distribution of a sum of £267,000 between all the shareholders. A number of the ordinary shareholders objected, claiming that the action of the preference shareholders was oppressive and had been taken in disregard of their rights, and petitioned the High Court for relief under s. 205 of the Act of 1963.

Held by Barrington J., in granting the relief sought, 1, that while this case involved an individual transaction rather than a...