4.4.5.3.0 Introduction

In the same case (Saul D Harrison), Hoffmann L. J acknowledged that there were cases in which the letter of the articles did not fully reflect the understanding upon which shareholders were associated and in that case, courts could look beyond the written terms. He based his reasoning on the case of Ebrahimi v. Westbourree Galleries.1 Ebrahimi is a milestone case: although petitioned under s. 122 IA 1986, just and equitable winding-up, it had a significant impact on s. 994.2 The concept of unfair prejudice for the purposes of s. 994 was developed from the concept of "just and equitable" in Ebrahimi.

Ebrahimi (the petitioner) and Nazar (the second respondent) had been in partnership since 1945, and in 1958 they incorporated a company to take over the original business of the partnership. Initially, each of them purchased 500 shares. Two years later, each of them transferred 100 shares to G Nazar, son of Nazar. These three men formed the board of the company. Then, in 1969, by virtue of their majority status, the Nazars voted together to exclude E from the board by an ordinary resolution pursuant to their articles of association. The exclusion severely damaged E's interests because all the profits were distributed as directors' remuneration; no dividends were paid though the business was very lucrative. E filed an petition under s. 210 CA 1948 ( later s. 459, now s. 994), the oppression remedy, to ask the Nazars to buy him out, or vice versa and also applied for the winding-up remedy under s. 222 (f) (now s. 122, IA 1986) as an alternative. The winding up order was granted by Plowman J and on appeal, was upheld by the House of Lords. The Ebrahimi case, for the first time, faced the question: in a quasi-partnership company,3 should one apply the partnership-like duties or strictly apply company law with majority rule? This case endorsed utmost good faith as partners.