Ebrahimi v Westbourne Galleries Ltd

Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

*360 Ebrahimi Appellant v Westbourne Galleries Ltd. and
Others Respondents
Positive/Neutral Judicial Consideration

Court
House of Lords

Judgment Date
3 May 1972

Report Citation
[1972] 2 W.L.R. 1289
[1973] A.C. 360

House of Lords

Lord Wilberforce , Viscount Dilhorne , Lord Pearson , Lord Cross of Chelsea and Lord Salmon

1972 March 8, 9, 13, 14; May 3

[On Appeal from In Re Westbourne Galleries Ltd.]

Company—Winding up—'Just and equitable grounds for—Company formed by former partners—Subjection of legal railways to
equitable considerations based on underlying personal relationship—Considerations applicable—Whether 'just and equitable
ground confined to circumstances affecting shareholder in capacity as such—Whether confined to proved cases of mala fides
—'Bona fide in the interests of the company'—'Quasi—partnership' 'In substance partnership'—Whether valid concepts—
Companies Act 1948 (11 & 12 Geo. 6, c. 38), s. 222 (f)

From about 1945 the appellant and N were partners in a business. In 1958 a private company was formed to take the business
over. The appellant and N were its first directors. Under the articles of association the company in general meeting had an
express power to remove a director by ordinary resolution. Soon afterwards, N's son G was made a director; by virtue of
their share holdings N and G had a majority of the votes in general meeting. The company made good profits all of which
were distributed as directors' remuneration. No dividends were ever paid. In 1969, after disagreement between the appellant
and N and G, an ordinary resolution was passed by the company in general meeting by the votes of N and G removing the
appellant as director. The appellant petitioned for an order under section 210 of the Companies Act 1948 that N and G should
purchase his shares in the company or sell their shares to him on such terms as the court should think fit, alternatively for
an order under section 222 (f) 1 that the company be wound up. At the hearing, an assurance was given in evidence that the
practice of not paying dividends would not be continued. Plowman J. refused to make an order under section 210 but held
that N and G had done the appellant a wrong in that it had been an abuse of power and a breach of the good faith which
partners owed to each other to exclude one of them from all participation in the business on which they had embarked on the
basis that all should participate in its management, and that, accordingly, the appellant had made out a case for a winding up
order under section 222 (f). The Court of Appeal allowed an appeal by the respondents, holding that in the case of a quasi-
partnership company the exercise by a majority in general meeting of the power under the articles or section 184 of the Act
of 1948 to remove a director from office and consequently to exclude him *361 from participation in the management and
conduct of the business did not form a ground for holding that it was just and equitable that the company should be wound
up unless it was shown that the power had not been exercised bona fide in the interests of the company or that the grounds
for exercising the power were such that no reasonable man could think that the removal was in the interest of the company,
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

and that, on the facts, the appellant had failed to show that his removal had not been justified and in the best interests of the
company or that no man could have thought so.

On appeal by the appellant:-

Held, allowing the appeal, that a limited company was more than a mere legal entity and the rights, expectations and
obligations of the individuals behind it inter se were not necessarily merged in its structure (post, p. 379B-C); that, while the
'just and equitable' provision did not entitle a party to disregard the obligation which he assumed by entering a company, it
enabled the court to subject the exercise of legal rights to equitable considerations of a personal character arising between
individuals which might make it inequitable to insist on legal rights or to exercise them in a particular way (post, pp. 379D,
386H - 387A); that, in the present case, the appellant and N had joined in the formation of the company on the basis that
the character of the association viz., inter alia, that the appellant was entitled to participate in the management, would, as a
matter of personal relation and good faith, remain the same; and that, N having in effect repudiated that relationship and the
appellant having lost his right to a share in the profits and being in that respect at the mercy of N and G and being unable to
dispose of his interest without their consent, the proper course was to dissolve the association by winding up the company
(post, pp. 380G, 381C-F, 386E - 387A).

Symington v. Symington's Quarries Ltd. (1905) 8 F. (Ct. of Sess). 121 ; In re Yenidje Tobacco Co. Ltd. [1916] 2 Ch. 426 ,
C.A.; Loch v. John Blackwood Ltd. [1924] A.C. 783 , P.C.; In re Straw Products Pty. Ltd. [1942] V.L.R. 222 ; In re Wondoflex
Textiles Pty. Ltd. [1951] V.L.R. 458 and In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051 approved.

Blisset v. Daniel (1853) 10 Hare 493 applied.

In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392 and dictum of Plowman J. in In re Expanded Plugs Ltd. [1966] 1 W.L.R.
514 , 523 disapproved.

Per curiam. (1) It is wrong to create categories or headings under which cases must be brought if the 'just and equitable'
clause is to apply (post, p. 374H).

(2) Where the petitioner is a shareholder, the words are not confined to such circumstances as affect him in his capacity as
such (post, pp. 375A-B, 385H - 386A).

(3) Elements which give rise to the superimposition of equitable considerations may include one, or probably more of the
following: (i) an association formed or continued on the basis of a personal relationship involving mutual confidence; (ii)
an agreement, or understanding, that all, or some, of the shareholders, shall participate in the conduct of the business; (iii)
restriction on the transfer of the members' interest in the company. The fact that the company is a small one, or a private
company, is not enough (post, p. 379E-G).

(4) The expressions 'quasi-partnership' or 'in substance partnership' may be confusing, for a company, however *362 small,
however domestic, is a company, not a partnership or even a quasi-partnership, and the members of it have accepted new
obligations (post, pp. 379H - 380B).(5) The formula 'bona fide in the interests of the company' should not become little more
than an alibi for a refusal to consider the merits of the case; in a situation such as the present it seems to mean little more
than 'in the interests of the majority.' To confine the application of the 'just and equitable' clause to proved cases of mala fides
would be to negative the generality of the words (post, pp. 381F-H, 386C-D).

Per Lord Cross of Chelsea. A petitioner who relies on the 'just and equitable' clause must come to court with clean hands
(post, p. 387G).

Decision of the Court of Appeal [1971] Ch. 799; [1971] 2 W.L.R. 618; [1971] 1 All E.R. 561 reversed.

The following cases are referred to in their Lordships' opinions:
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

Baird v. Lees, 1924 S.C. 83 .
Blisset v. Daniel (1853) 10 Hare 493 .
Bushell v. Faith [1970] A.C. 1099; [1970] 2 W.L.R. 272; [1970] 1 All E.R. 53 , H.L.(E.).
Concrete Column Clamps Ltd., In re [1953] 4 D.L.R. 60 .
Const v. Harris (1824) Tur. &; Rus. 496.
Cooper (Cuthbert) & Sons Ltd., In re [1937] Ch. 392; [1937] 2 All E.R. 466 .
Davis & Collett Ltd., In re [1935] Ch. 693 .
Elder v. Elder & Watson, 1952 S.C. 49 .
Expanded Plugs Ltd., In re [1966] 1 W.L.R. 514; [1966] 1 All E.R. 877 .
Fildes Bros. Ltd., In re [1970] 1 W.L.R. 592; [1970] 1 All E.R. 923 .
Forte (Charles) Investments Ltd. v. Amanda [1964] Ch. 240; [1963] 3 W.L.R. 662; [1963] 2 All E.R. 940, C.A.
K/9 Meat Supplies (Guildford) Ltd., In re [1966] 1 W.L.R. 1112; [1966] 3 All E.R. 320 .
Leadenhall General Hardware Stores Ltd., In re (unreported), February 4, 1971, Brightman J.
Lewis v. Haas, 1970 S.L.T. (Notes) 67 .
Loch v. John Blackwood Ltd. [1924] A.C. 783, P.C.
Lundie Brothers Ltd., In re [1965] 1 W.L.R. 1051; [1965] 2 All E.R. 692 .
Modern Retreading Co. Ltd., In re [1962] E.A. 57 .
Spackman, Ex parte (1849) 1 Mac. &; G. 170 .
Straw Products Pty. Ltd., In re [1942] V.L.R. 222 .
Swaledale Cleaners Ltd., In re [1968] 1 W.L.R. 1710; [1968] 3 All E.R. 619, C.A.
Sydney and Whitney Pier Bus Service Ltd., In re [1944] 3 D.L.R. 468 .
Symington v. Symington's Quarries Ltd. (1905) 8 F. 121 .
Tench v. Tench Bros. Ltd. [1930] N.Z.L.R. 403 .
Thomson v. Drysdale, 1925 S.C. 311 .
Wondoflex Textiles Pty. Ltd., In re [1951] V.L.R. 458 .
Yenidje Tobacco Co. Ltd., In re [1916] 2 Ch. 426, C.A.
The following additional cases were cited in argument:

Burland v. Earle [1902] A.C. 83, P.C.
Furriers' Alliance, In re (1906) 51 S.J. 172 .
Goodman v. Whitcomb (1820) 1 J. &; W. 589. *363
Langham Skating Rink Co., In re (1877) 5 Ch.D. 669, C.A.
North-West Transportation Co. Ltd. v. Beatty (1887) 12 App.Cas. 589, P.C.
Othery Construction Ltd., In re [1966] 1 W.L.R. 69; [1966] 1 All E.R. 145 .
Rica Gold Washing Co., In re (1879) 11 Ch.D. 36, C.A.
Rowe v. Wood (1822) 2 J. &; W. 553.
Shuttleworth v. Cox Brothers & Co. (Maidenhead) Ltd. [1927] 2 K.B. 9, C.A.
Witt v. Corcoran (1872) 21 W.R. 47 .
Wood v. Woad (1874) L.R. 9 Ex. 190 .
APPEAL from the Court of Appeal.

This was an appeal by Shokrollah Ebrahimi by leave of the Court of Appeal (Russell, Megaw and Buckley L.JJ.) from their
decision on December 16, 1970, by which they allowed an appeal by the respondents, Westbourne Galleries Ltd. ('the company')
and Asher Nazar Achoury ('Nazar') and George Alexander Nazar Achoury ('George Nazar'), directors of the company, from
an order of Plowman J. on July 14, 1970 [1970] 1 W.L.R. 1378 by which, on a petition by the appellant, he wound up the
respondent company.

By his petition, the appellant sought an order that Nazar and George Nazar should purchase his shares in the company,
alternatively sell their shares in the company to him, on such terms as the court should think fit, alternatively that the company
be wound up. Plowman J. refused to order a purchase of the appellant's shares but made an order winding up the company
under section 222 (f) of the Companies Act 1948 .

The Court of Appeal allowed an appeal by the respondents against that order.

The appellant appealed.
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

The facts are stated in the opinions of Lord Wilberforce and Lord Cross of Chelsea, further facts may be found in the judgments
of Plowman J., at pp. 1380-1383, 1389-1390, and the Court of Appeal.

Raymond Walton Q.C. and Hedley Marten for the appellant. This appeal raises for the first time in this House the question of
an incorporated partnership: does one apply the partnership rule or the strict company rule of majority? It is now established
that the power of the court under section 222 (f) of the Companies Act 1948 is not in any way limited by the other paragraphs
of the section.

The appellant submits: (1) In a partnership the utmost good faith is required from all the partners, particularly where the other
partners have the right to expel a partner from the business. They may only do so after giving him the fullest notice of the
charges against him and an opportunity to refute them. If it is a question of his conduct of which they are complaining, they
must give him an opportunity of mending his ways. In the present case, no reasons were given for the appellant's removal. The
Court of Appeal [1971] 1 Ch. 799 , 810-812 said that there was nothing to back up Plowman J.'s finding of fact that there was
no sufficient justification for his removal and that the onus of showing that the other partners had not behaved properly was
on the person complaining of their acts. That *364 was a wrong attribution of the onus. An 'incorporated partnership' is still
suffused with the duty of utmost good faith. (2) Exclusion from participation in the conduct of the business of the partnership is
always a most serious breach of the partnership obligations. (3) Where the partners have used the machinery of the Companies
Act for the conduct of their business organisation the same rules and duties apply as if the business had remained a partnership,
so that even though under the general law and the construction of any power conferred to remove minority shareholders from
participation in the firm that power may only be exercised bona fide. (4) To remove a working partner or a director from his
directorship in a case such as the present, which means in practice to exclude him from participation in the bulk of the profits
of the company, is a serious breach of the partnership obligations unless there is justification for such removal. (5) Plowman
J. has rightly found as a fact that there was no sufficient justification. A winding up could hardly be inequitable where, if the
company were a partnership, it would be wound up.

It is easy to recognise a partnership company when one sees it but difficult to formulate a test. The nub is: is it really a working
partnership in the guise of a company? Alternatively, its essential character may be said to be that of a small company in which
there is a relationship between the shareholders and the working directors, the basis being remuneration for work rather than
investment. The company here has never paid a dividend, all the profits being paid out by way of salary. There is no factual
dispute except, as a matter of emphasis, as to how far the appellant was ever really recognised as a partner.

If the House finds that this was a working partnership in the guise of a company it would be unduly restricted by matters of
form if it did not take the view that the partnership rule of good faith applied. There is no suggestion that the Companies Act
does not apply, but the whole of the obligations of everybody in the company is suffused by the obligations of that rule.

It is always a serious breach of partnership duties to exclude a partner from the management of the firm: see Lindley on
Partnership, 13th ed. (1971), p. 331, supported by Goodman v. Whitcomb (1820) 1 J. & W. 589; Rowe v. Wood (1822) 2 J. &
W. 553; and Const v. Harris (1824) Tur. & Rus. 496. Even a wholly unrestricted power of expulsion in a partnership agreement
must be used fairly: see Blisset v. Daniel (1853) 10 Hare 493 . The principle there was approved in, inter alia, Wood v. Woad
(1874) L.R. 9 Ex. 190 . If one starts with uberrimae fidei, natural justice is not far away.

Coming to the partnership company cases, Lord Dunedin in Symington v. Symington's Quarries Ltd. (1905) 8 F. 121 , 129
enunciated the true and correct principle. It might have been possible to decide In re Yenidje Tobacco Co. Ltd. [1916] 2 Ch. 426
on the narrow ground that there was complete deadlock, but Lord Cozens-Hardy M.R. went out of his way to say that whether
that was so or not the circumstances were such that the court should apply partnership law. Pickford L.J. agreed; Warrington
L.J. perhaps took a narrower view, but he recognised clearly the application of the partnership concept. In re Yenidje Tobacco
Co. Ltd. was approved by the Privy Council in Loch v. John Blackwood Ltd. [1924] A.C. 783 , not *365 strictly a partnership
case. See, in particular, per Lord Skerrington in Thomson v. Drysdale, 1925 S.C. 311 , 316, who uses the word 'suffused' with
the obligation of good faith, saying that the partner in question must avoid acting in such a way as to make it impossible for
the other shareholder to co-operate with him. That can only be read into the Companies Act from the partnership aspect of the
matter. The words of Simonds J. in In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392 , 398 were in relation to the facts of the
particular case, where the younger sons were not members of the company and therefore not within the partnership concept;
even so, on the facts, the case has not commanded universal approbation: see per Danckwerts L.J. in In re Swaledale Cleaners
Ltd. [1968] 1 W.L.R. 1710 , 1716 and In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051 .
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

With regard to what the Court of Appeal say in their judgment [1971] Ch. 799 , 808B, it is difficult to think that ordinary
partners converting their business into a limited company would be so suspicious of each other that they would provide for
something so far from the thoughts of any of them as that one would seek to exclude the other from the management of the
company. The vast majority of companies are incorporated without reference to a solicitor.

The appellant in the Court of Appeal was not really going as far as he is represented in the judgment [1971] Ch. 797 , 810B as
having submitted. What he intended to say throughout was that there were really two things: (1) the excluding partner must have
reasonable grounds for exclusion; (2) his action must be bona fide, which is easy to establish if there are reasonable grounds.
Continual complaints might in certain circumstances be a reason for exclusion, but there would have to be something more than
that the business would get on better without the partner in question.

As to onus, one starts with Blisset v. Daniel, 10 Hare 493 ; see at p. 522, which puts it in the right place, as does also Witt v.
Corcoran (1872) 21 W.R. 47 ; see also In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051 , 1057. In In re Expanded Plugs Ltd.
[1966] 1 W.L.R. 514 , which was not a case of an attempt to exclude a partner from taking part in the business of the company
but the contrary, Plowman J. said no more than that one must bring oneself, in either case, within the just and equitable principle.

The evidence shows that neither Nazar nor George Nazar thought of their relationship with the appellant in the partnership
context at all but regarded him as a mere employee. Their actions followed naturally from their view of him as an employee,
but were not bona fide in the context of good faith as partners.

As to the propositions discussed by the Court of Appeal [1971] Ch. 799 , 810-812, the test whether an action is bona fide in
the interests of a company as a whole was evolved with regard to special resolutions to change articles: see Buckley on the
Companies Acts, 13th ed. (1957), pp. 38-39. It does not mean in the interests of the company as distinct from the corporators, but
in the interests of the corporators considered as a body. The test comes in for the purpose of dealing with the general principles
of law and equity dealing with the limitation of the powers of all majorities. It is a pure company law test, not applicable to
relationships between partners who owe each other the utmost good faith. The language of the *366 Court of Appeal at [1971]
Ch. 799 , 811F, comes perilously close to requiring fraud.

No doubt the same consequences as those for which the appellant contends for here in the case of a partnership company should
apply in the case of a similar company where there was not actually a partnership before. One tests the partnership nature of a
company by looking at the current circumstances of the company, and the previous history is irrelevant.

A. J. Balcombe Q.C. and William Stubbs for the respondents. The appellant is tied by his allegations in his petition. In this appeal
he has gone beyond the facts found by Plowman J., and he is not entitled to do this. The respondents do not seek to do so.

A misapprehension underlies the appellant's approach to this appeal. There is a division between the owners of a company and
the people who work in it. There is no such division in a partnership.

The respondents submit: (1) No shareholder in a company can get a winding up order unless his position as a shareholder is
affected. (2) There are no special rules applicable to 'quasi-partnership' companies (this point was not open to the respondents
in the Court of Appeal). (3) Whether or not there is such a thing as a 'quasi-partnership company,' the removal of a director by
itself never justifies a just and equitable winding up. 'By itself' includes those consequences which necessarily flow, including
the fact that the director no longer gets director's fees. (4) In any event, a person in the position of the appellant in this case must
both allege and prove lack of bona fides. (5) The court will not substitute its own judgment for that of the shareholders of the
company unless no reasonable man could have formed the view which the shareholders formed.

As to (1), see those classes of persons who are entitled to petition for a winding up order: Companies Act 1948, s. 224 . It is
notorious by its absence that a director has no such right. A contributory is only entitled to petition in right of his position as a
contributory, and only if his position as a contributory is affected: see the proviso (a) to section 224 (1) ; In re Expanded Plugs
Ltd. [1966] 1 W.L.R. 514 and Elder v. Elder & Watson, 1952 S.C. 49 , parallel decisions under section 210. This is also the basis
of the rule that a fully paid up shareholder petitioning for a winding up must allege and prove that there is a surplus of assets
available. [Reference was made to In re Rica Gold Washing Co. (1879) 11 Ch.D. 36 ; In re Othery Construction Ltd. [1966] 1
W.L.R. 69 ; and In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051 .]

As to (2), there is nothing in the Act of 1948 which talks about there being two types of company. This is odd, since the
Registrar-General's figures show that there are some 519,000 private companies and only some 15,000 public companies; the
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

great majority of companies would thus inferentially fall under the quasi-partnership head. When normal adult people choose
to associate themselves together under one of the heads of company or partnership they do so with their eyes open. There are
advantages and disadvantages either way. [Reference was made to the Partnership Act 1890, ss. 24 (5) and 25 .] It is not right
to say that there is some sort of association halfway between the two to which the rules of partnership as opposed to company
law are applicable. One can on the just and *367 equitable ground take into account the domestic nature of a small company,
but one cannot apply the law of partnership. This would be an unwarranted gloss on the Companies Act . One should simply
look at the Companies Act and ask whether, in all the circumstances, it is just and equitable to wind the company up.

In re Yenidje Tobacco Co. Ltd. [1916] Ch. 426 was a case of deadlock and it would in any case have been just and equitable to
wind up the company there. In the present case, difficulties of cooperation and so on can be solved simply by getting rid of the
director involved. It is conceded that a lack of probity is always regarded as a ground for winding up.

The very difficulty in deciding what is a quasi-partnership supports the view that no such animal exists. One should consider
the difficulty which Brightman J. found in In re Leadenhall General Hardware Stores Ltd. (unreported), February 4, 1971,
of finding a suitable test for determining what was a quasi-partnership. One should have a reasonably certain test. The test
which Brightman J. applied of whether the directors were working directors would produce astonishing results. Often there are
sleeping partners in companies which would otherwise be partnership companies.

Although all the cases cited by the appellant refer to quasi-partnership principles, they can all be justified on the just and
equitable principle without reference to partnership at all. Symington v. Symington's Quarries Ltd., 8 F. 121 was decided on
the just and equitable principle, alternatively the deadlock principle. Loch v. John Blackwood Ltd. [1924] A.C 783 was a case
of lack of probity. So was Thomson v. Drysdale, 1925 S.C. 311 , decided under the Loch v. John Blackwood principle: see
especially at p. 324, where reference is made to the fact that the partners go into a company knowing that there is power under
the Companies Acts to remove directors. In In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392 no order was made and the
petition was dismissed, so no great reliance can be placed on the case. The appellant says that In re Cuthbert Cooper & Sons
Ltd. did not have the approval of Danckwerts L.J. in In re Swaledale Cleaners Ltd. [1968] 1 W.L.R. 1710 , but see Charles
Forte Investments Ltd. v. Amanda [1964] Ch. 240 where the Court of Appeal of which he was a member expressly followed it:
Danckwerts J.J. must have forgotten that. The decision of Plowman J. in In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051 was
wrong. He does not seem to have appreciated the problem, and seems to have assumed that a winding up order could be made
under section 222 even where the director was not affected in his position qua shareholder. It is wrong to assume that because
the appellant was removed as a director of the company he will also be prejudiced as a shareholder by not receiving dividend.

As to (3), a gloss should not be put on section 184 of the Act of 1948. In the vast majority of cases this section would not
be taken literally at all. It would have been easy for Parliament to say that section 184 should not apply to exempt private
companies (introduced by the Act of 1947, s. 54) if it had wanted to do that; the fact that it did not indicates that section 184
was intended to be of universal application.

On points (2) and (3), a further essential difference between a partnership and a company is that the proprietary interest in a
company is transmissible *368 A partnership is characterised by the fact that it is dissolved by the death or bankruptcy of any
of the partners. This highlights the essential difference between a company and a partnership: that in a company the ownership
and the management are separate.

If the members of a company join together in the context of the constitution of the company to remove a director under section
184 it is prima facie neither unfair nor inequitable that the power is exercised. If it got as far as being simply a desire to ruin the
director in question one might get into the field where one would commit a legal wrong by deliberately harming him.

Further on (3), see Bushell v. Faith [1970] A.C. 1099 , per Lord Upjohn, at p. 1108E. The converse question may be posed: is
there an obligation. when a director retires by rotation according to the articles, to re-elect him? See Lindley on Partnership,
at p. 331: an agreement not to continue him as director is perfectly competent within partnership law. See also In re Cuthbert
Cooper & Sons Ltd. [1937] Ch. 392 , 398: the bargain in the present case was that there should be the right to remove a director;
see also In re Expanded Plugs Ltd. [1966] 1 W.L.R. 514 , per Plowman J., at p. 522D. A shareholder can vote his shares as he
wishes: North-West Transportation Co. Ltd. v. Beatty (1887) 12 App.Cas. 589 and Burland v. Earle [1902] A.C. 83 ; his motive
is irrelevant unless it amounts to fraud or oppression, etc. Where, therefore, partners enter into an association on the basis of
articles, the question of bona fides becomes irrelevant. Lewis v. Haas, 1970 S.L.T. (Notes) 67 stresses the point about association
on the terms of the articles and also refers to the refusal to reappoint a director when he retires by rotation. [Reference was
made to Elder v. Elder & Watson, 1952 S.C. 49 .]
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

As to (4), see Wood v. Woad, L.R. 9 Ex. 190 and In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392 . The point that, if it was
not exercised in good faith, the removal might have been invalid has not been taken before. It was not taken in the petition, so
it is neither alleged nor proved, and it must be proved, the onus being on the appellant. The right test is found in In re Expanded
Plugs Ltd. [1966] 1 W.L.R. 514 . Plowman J.'s finding of fact in the present case [1970] 1 W.L.R. 1378 , 1389F, cannot be
interfered with: see also the judgment of the Court of Appeal [1971] Ch. 799 , 811G. In Blisset v. Daniel, 10 Hare 493 Page
Wood V.-C. was not directing himself to the onus of proof. In Witt v. Corcoran, 21 W.R. 47 Bacon V.-C. was considering the
case as if the defendant had to establish something; he was looking at it the wrong way round. Again, that was a partnership
case and again the court was not being asked to deal with the question of onus of proof: see at p. 50. In In re Cuthbert Cooper &
Sons Ltd. [1937] Ch. 392 , Wood v. Woad, L.R. 9 Ex. 190 and In re Expanded Plugs Ltd. [1966] 1 W.L.R. 514 onus was in issue.

On (5), see Shuttleworth v. Cox Brothers & Co. (Maidenhead) Ltd. [1927] 2 K.B. 9 , followed by the Court of Appeal in
Greenhalgh v. Arderne Cinemas Ltd. [1951] Ch. 286 (not cited). The mere fact that there is a difference of opinion as to whether
the removal is for the benefit of the company is not a ground for a just and equitable winding up. In In re Yenidje Tobacco Co.
Ltd. [1916] Ch. 426 the machinery of the company *369 provided no way out of the deadlock; that distinguishes that case
from the present. See also In re Langham Skating Rink Co. (1877) 5 Ch.D. 669 and In re Furriers' Alliance (1906) 51 S.J. 172 .

This has been extremely expensive litigation. No dividend has been declared by the company for some years, and the company
itself may have to pay a considerable sum by way of costs. The House might think that a good reason for not paying any dividend.

Stubbs following. The words of section 222 (f) are ex facie unlimited in scope. There are five considerations which should
be borne in mind in construing it. (1) The court's jurisdiction under section 222 (f) has always been cautiously applied when
invoked at the instance of a shareholder. (2) Particularly in view of the historical context in which section 184 of the Act was
enacted it is inconceivable, reading section 184 in conjunction with section 222 (f), that the intention of the legislature can
have been that a company like that in the present case should be wound up as a result of the exercise of the statutory power
under section 184. (3) It is an accepted principle of our law that pacta sunt servanda, and when one is construing even words
as wide as 'just and equitable' that principle should be borne in mind; it would follow that, certainly in the absence of bad
faith. the majority of the shareholders should not be punished for carrying out a power which, as well as being in the Act, is
part of the express contract between the parties. (4) It is a basic principle of company law that where a general meeting acts
in good faith the shareholder does not have any cause of action consequent upon that. (5) If this appeal should succeed the
result on the commercial community will not merely be something which the legislature never intended but will have effects
which will be disastrous.

As to (1), see Buckley on the Companies Acts, 13th ed., p. 454. The courts initially held that they should apply the ejusdem
generis rule to 222. This is no longer the law, nevertheless, at the instance of the shareholder the jurisdiction has in practice
been exercised under specific heads. The present case does not fall under any specific head.

As to (2), see the arguments for counsel for the respondent in Bushell v. Faith [1970] A.C. 1099 , 1103, in substance accepted by
Lord Upjohn, at p. 1108E. The loss of income suffered by a director removed from office is expressly provided for by section
184 (6) . If the director wishes to protect himself against loss of income on removal from office, he will insist on a service
agreement which gives him security of tenure. In such a case nothing in section 184 will take away the right to damages which
he will have on removal from office.

As to (3), in the absence of agreement to the contrary the tenure of a director's office is determined by reference to the company's
articles of association. The director may resign merely by giving notice in writing to the company, and in such event neither the
company nor the other directors will have any legal ground for complaint. This is inconsistent with any suggestion that there is
any breach of faith or duty or that it is unjust or inequitable if a director is removed under section 184 or not re-elected.

As to (4) this applies whether the company be small or large. There is no reported case to the contrary. The principle binds
together many of the authorities cited, e.g., Shuttleworth v. Cox Brothers & Co. (Maidenhead) Ltd. [1927] 2 K.B. 9 and
North-West Transportation Co. Ltd. v. Beatty, 12 App.Cas. 589 . The judgment of the Court of Appeal in the present case is in
accordance with that long-standing principle and body of authority.

As to (5), this company is not particularly untypical. There are many thousands of small, three-, four-, five-men companies
where the shareholders also constitute the board. It is a frequent occurrence in such companies that members of the board fall
out. There may well be faults not only on one side, as Plowman J. said in the present case, but if the majority shareholders are
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

not entitled to restore harmony to the board without raising the spectre of litigation this will have the most extraordinary result.
Each time a director is removed or not re-elected there will be a winding up, or, at the very least, depending on how the House
frames its opinions in the present case, every removal from office would be reviewed by the Companies Court in the context
of a winding up petition. That would not only be contrary to the principle that the courts will not interfere with the bona fide
decisions of business men but will be positively disastrous to many thousands of small companies. [Reference was made to In
re Leadenhall General Hardware Stores Ltd. (unreported).]

Walton Q.C. in reply. That the appellant made life impossible for the second and third respondents is not what Plowman J.
found: see especially [1970] 1 W.L.R. 1378 , 1381B-D.

As to the respondents' submission (1), this does not mean that so long as the appellant holds shares in the company he cannot get
a winding up order. The court must in all these matters be entitled to look at all the circumstances. It cannot do that against the
settled pattern of distribution of the profits of the company and say that this is irrelevant. The respondents submitted that there
were a large number of cases where it was decided that there should be no winding up where there was insolvency on the part
of the shareholder. The answer to that is simply that it would be a pointless exercise. Of course, this contrasts with partnership,
where there has to be a winding up because the partners are personally liable.

The parallel which the respondents sought to draw with section 210, where undoubtedly only the shareholder can petition, is
not exact or proper because the language of section 210 is different: see per Lord Keith in Elder v. Elder & Watson, 1952 S.C.
49 , 58-59. Under section 210 the shareholder is petitioning qua shareholder; under section 222 the petition is on a wider basis.

As to the respondents' submission (2), the distinction between owners and managers which does not occur in the case of a
partnership is interesting and provides a clue to the nature of the 'quasi-partnership company.' It is the test which should be
applied and is what Warrington L.J. meant in In re Yenidje Tobacco Co. Ltd. [1916] 2 Ch. 426 . The appellant is not suggesting
that any special principles are applicable to quasi-partnership companies, but when considering what is just and equitable in
the context of a small domestic company the owners and managers of which are the same persons the court can find in the
partnership concept a much better guide than that provided by the articles.

As the company in In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392 was a private company there had to be restrictions
on transfers - one of the essential conditions of private companies - and on new members being allowed in. The court could
not simply rely on the fact that new members were not allowed in for making a winding up order. The appellant only cited In
re Swaledale Cleaners Ltd. [1968] 1 W.L.R. 1710 to show that In re Cuthbert Cooper & Sons Ltd. had not escaped without
criticism; they were not saying that it had been overruled.

As to the respondents' submission (3), equally part of the contract was that there should be the power under section 222 (f) to
wind the company up if it became just and equitable to do so. So far as voluntary resignation is concerned, shareholders are
entitled to cast their votes as they think fit, but the court can look and see whether what they have done is not just and equitable
so that a winding up order should be made. No doubt a director can resign, but if he does so it may be in circumstances which it
would be just and equitable to have the company wound up. He could not successfully oppose the winding up of the company
if his resignation resulted virtually in the repudiation of his obligation; he might, of course, want to resign as director but be
prepared to continue his work. As to rotation, if nothing is done a director is automatically re-elected. There is therefore no onus
on the other shareholders to do anything except refrain from opposing the re-election. As to Bushell v. Faith [1970] A.C. 1099
and the background to section 184 of the Act of 1948, a typical case to which section 184 was directed was the case where the
director had little or no real interest in the company. It was that that was thought to be an injustice.

In re Expanded Plugs Ltd. [1966] 1 W.L.R. 514 was a very special case. It was not a case of expulsion. All the acts were for the
benefit of the company. The case does not, however, get one very far at all: all that Plowman J. said has to be read against the
background of the case: that there was no expulsion or serious breach of partnership obligation.

The appellant does not challenge such cases as North-West Transportation Co. Ltd. v. Beatty, 12 App.Cas. 589 or Burland v.
Earle [1902] A.C. 83 : they go not to the validity of the shareholder exercising his votes but to the consequences in law of
the exercise; not to the validity of the resolution but to its consequences. The maxim is not that a person is presumed to know
the law but that ignorance of the law is no excuse. Lewis v. Haas, 1970 S.L.T. (Notes) 67 is distinguishable in that there was
there no question of expulsion.
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

As to the respondents' submission (4), a person must be presumed to intend the consequences of his own acts, and in the present
case Nazar must be presumed to have intended the consequences of his acts in excluding the appellant from any share in the
conduct of the business or taking an effective share in its profits. There is no doubt at all that the Nazars were determined to get
the appellant out of the company. There was no good reason for removing him apart from that. What the Court of Appeal say
[1971] Ch. 799 , 811G is based on the test of what no reasonable man could have considered. It is important to note Plowman
J.'s finding [1970] 1 W.L.R. 1378 , 1389 that 'the faults were not all on one side.' If the faults had all been on the appellant's
side he could not have obtained a *372 winding up order. There is no difference here between the interests of the company
and the interests of the remaining shareholders. It is difficult really to see what bona fide in the interests of the company means
in this context.

One must see what the findings of fact of Brightman J. in In re Leadenhall General Hardware Stores Ltd. (unreported) were
to see the basis on which he was proceeding, right or wrong. He said that it was not a case where he ought to apply the quasi-
partnership concept, so the case is not of great force. The appellant accepts, however, that one does not know from the transcript
of the judgment without going into the evidence what was behind Brightman J.'s statement that the petitioner was appointed
as manager. There, there was no previous partnership.

What the appellant had to allege and prove here were facts rendering the making of a winding up order just and equitable.
He has done this by pointing to acts done to him and the serious financial consequences, those acts being done in the context
of a small domestic company in which he and Nazar were working in equal partnership within the framework of a company.
The suggestion that he must allege and prove lack of bona fides is misplaced. He must allege and prove the facts on which
he relies. 'Bona fide in the interests of the company,' in relation to special resolutions, has a meaning in the context of a large
company, but not in a case such as the present where 'the company' for practical purposes means 'the majority.' The gravamen
of the appellant's charge is the damage done to him. [Reference was made to In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051
.] A variety of views were expressed in Wood v. Woad, L.R. 9 Ex. 190 , but at least two judges thought that it was sufficient
for the plaintiff to plead the facts on which he relied.

The respondents said that the Court of Appeal put a correct gloss on the facts here when they said [1971] Ch. 799 , 811G that
it could not be said that no reasonable men could have considered the appellant's removal justified. That cannot conceivably be
the test, because: (a) it has always been put forward as the test for the validity of a special resolution: see Shuttleworth v. Cox
Brothers & Co. (Maidenhead) Ltd. [1927] 2 K.B. 9 . That being so, naturally the test is a very stringent one because the question
is whether the resolution has been properly passed. The test is in no way directed to the consequences of the special resolution,
and a petition based on the just and equitable principle is put forward on the basis of the consequences of what happens when
the resolution is passed. It is not seen through the eyes of reasonable men, but from the point of view of the person affected.
(b) The test ignores the question of where the blame lies. The Court of Appeal makes no differentiation on this question. The
just and equitable test must make allowance for it. (c) The true test must depend on all the circumstances of the case, including
the pacta sunt servanda principle and conduct of the parties generally.

As to the respondents' submission (5), that principle being directed to the validity of a special resolution, the court does not,
indeed, substitute its own judgment. What the respondents are really trying to do under the guise of it is to do the reverse: to
substitute the judgment of Nazar and George Nazar as to whether the appellant should be removed for the judgment *373 of
the court as to whether it is just and equitable to wind up the company. The cases cited do not carry the matter any further. In
In re Langham Skating Rink Co., 5 Ch.D. 669 where the shareholders were apprehending insolvency - a different case from the
present - all that the Court of Appeal decided was that the minority were not entitled to opt out. The basis of the petition in In
re Furriers Alliance, 51 S.J. 172 was absolute deadlock.

As to junior counsel's submission (1), the jurisdiction will be exercised whenever the court finds it just and equitable to do so.
In Symington v. Symington's Quarries Ltd., 8 F. 121 a winding up order was made.

As to (2), this is pure assertion without any logic to support it.

As to (3), all that pacta sunt servanda means is that if a person goes blindly into a private company the less the court safeguards
him. It must be read in the light of section 222, which provides a longstop. Section 184 (6) covers the case where one has a
service contract as managing director and so the service comes to an end before the end of the period for which it was initially
fixed. That does not give the appellant here - who had no service contract - any rights at all.
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

As to (4), this was a wide proposition. Shuttleworth v. Cox Brothers Co. (Maidenhead) Ltd. [1927] 2 K.B. 9 simply laid down
a test with regard to the validity of a special resolution, and North-West Transportation Co. Ltd. v. Beatty, 12 App.Cas. 589
merely said that in ordinary circumstances if a contract which a director was seeking to foist on the company was fair then a
resolution might be passed by the majority ratifying it.

As to (5), the proof of the pudding is in the eating. In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051 was decided in 1965. It
was the first case in which the simple exclusion of a director as a working partner was held sufficient to justify a winding up.
It stood until the present case. There was no flood of cases. Normally one side buys the other out at a fair price - a desirable
practice which ought to be encouraged.

A winding up order can, if necessary, be stayed.

Balcombe Q.C. If the House were to consider reaching a decision of fact other than that found by Plowman J. it should first
read the whole of the affidavits and the transcript of evidence. With regard to the suggestion that the appellant should be bought
out, in practice such negotiations are common, and they took place here.

Their Lordships took time for consideration. May 3.

LORD WILBERFORCE.

My Lords, the issue in this appeal is whether the respondent company Westbourne Galleries Ltd. should be wound up by the
court on the petition of the appellant who is one of the three shareholders, the personal respondents being the other two. The
company is a private company which carries on business as dealers in Persian and other carpets. It was formed in 1958 to
take over a business founded by the second respondent (Mr. Nazar). It is a fact of cardinal importance that since about 1945
the business had been carried on by the appellant and Mr. Nazar as partners, equally sharing the management and the profits.
When the company was formed, the signatories to its memorandum were the appellant and Mr. Nazar and they were *374
appointed its first directors. Of its issued share capital, 500 shares of £1 each were issued to each subscriber and it was found
by the learned judge, after the point had been contested by Mr. Nazar, that Mr. Ebrahimi paid up his shares out of his own
money. Soon after the company's formation the third respondent (Mr. George Nazar) was made a director, and each of the two
original shareholders transferred to him 100 shares, so that at all material times Mr. Ebrahimi held 400 shares, Mr. Nazar 400
and Mr. George Nazar 200. The Nazars, father and son, thus had a majority of the votes in general meeting. Until the dispute
all three gentlemen remained directors.

The company made good profits, all of which were distributed as directors' remuneration. No dividends have ever been paid,
before or after the petition was presented.

On August 12, 1969, an ordinary resolution was passed by the company in general meeting, by the votes of Mr. Nazar and Mr.
George Nazar, removing Mr. Ebrahimi from the office of director, a resolution which was effective in law by virtue of section
184 of the Companies Act 1948 and article 96 of Part I of Table A. Shortly afterwards the appellant presented his petition to
the court.

This petition was based in the first place upon section 210 of the Companies Act 1948 , the relief sought under this section
being an order that Mr. Nazar and his son be ordered to purchase the appellant's shares in the company. In the alternative it
sought an order for the winding up of the company. The petition contained allegations of oppression and misconduct against Mr.
Nazar which were fully explored at the hearing before Plowman J. [1970] 1 W.L.R. 1378 . The learned judge found that some
were unfounded and others unproved and that such complaint as was made out did not amount to such a course of oppressive
conduct as to justify an order under section 210. However, he made an order for the winding up of the company under the 'just
and equitable' provision. I shall later specify the grounds on which he did so. The appellant did not appeal against the rejection
of his case under section 210 and this House is not concerned with it. The company and the individual respondents appealed
against the order for winding up and this was set aside by the Court of Appeal. The appellant now seeks to have it restored.

My Lords, the petition was brought under section 222 (f) of the Companies Act 1948 , which enables a winding up order to be
made if 'the court is of the opinion that it is just and equitable that the company should be wound up.' This power has existed in
our company law in unaltered form since the first major Act, the Companies Act 1862 . Indeed, it antedates that statute since it
existed in the Joint Stock Companies Winding up Act 1848. For some 50 years, following a pronouncement by Lord Cottenham
L.C. [Ex parte Spackman (1849) 1 Mac. & G. 170 , 174] in 1849, the words 'just and equitable' were interpreted so as only to
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

include matters ejusdem generis as the preceding clauses of the section, but there is now ample authority for discarding this
limitation. There are two other restrictive interpretations which I mention to reject. First, there has been a tendency to create
categories or headings under which cases must be brought if the clause is to apply. This is wrong. Illustrations may be used,
but general words should remain general and not be reduced to the sum of particular *375 instances. Secondly, it has been
suggested, and urged upon us, that (assuming the petitioner is a shareholder and not a creditor) the words must be confined to
such circumstances as affect him in his capacity as shareholder. I see no warrant for this either. No doubt, in order to present a
petition, he must qualify as a shareholder, but I see no reason for preventing him from relying upon any circumstances of justice
or equity which affect him in his relations with the company, or, in a case such as the present, with the other shareholders.

One other signpost is significant. The same words 'just and equitable' appear in the Partnership Act 1892, section 25 , as a
ground for dissolution of a partnership and no doubt the considerations which they reflect formed part of the common law of
partnership before its codification. The importance of this is to provide a bridge between cases under section 222 (f) of the Act
of 1948 and the principles of equity developed in relation to partnerships.

The winding up order was made following a doctrine which has developed in the courts since the beginning of this century.
As presented by the appellant, and in substance accepted by the learned judge, this was that in a case such as this the members
of the company are in substance partners, or quasi-partners, and that a winding up may be ordered if such facts are shown as
could justify a dissolution of partnership between them. The common use of the words 'just and equitable' in the company and
partnership law supports this approach. Your Lordships were invited by the respondents' counsel to restate the principle on which
this provision ought to be used; it has not previously been considered by this House. The main line of his submission was to
suggest that too great a use of the partnership analogy had been made; that a limited company, however small, essentially differs
from a partnership; that in the case of a company, the rights of its members are governed by the articles of association which
have contractual force; that the court has no power or at least ought not to dispense parties from observing their contracts; that,
in particular, when one member has been excluded from the directorate, or management, under powers expressly conferred by
the Companies Act and the articles, an order for winding up, whether on the partnership analogy or under the just and equitable
provision, should not be made. Alternatively, it was argued that before the making of such an order could be considered the
petitioner must show and prove that the exclusion was not made bona fide in the interests of the company.

My Lords, I must first make some examination of the authorities in order to see how far they support the respondents'
propositions and, if they do not, how far they rest upon a principle of which this House should disapprove. I will say at once
that, over a period of some 60 years, they show a considerable degree of consistency, and that such criticism as may be made
relates rather to the application of accepted principle to the facts than to the statements of principles themselves.

The real starting point is the Scottish decision in Symington v. Symington's Quarries Ltd. (1905) 8 F. 121 . There had been a
partnership business carried on by two brothers who decided to transfer it to a private limited company. Each brother was to
hold half the shares except for a small holding for a third brother to hold balance for voting. A resolution was passed in general
meeting by the votes of one brother together *376 with other members having nominal interests that he should be sole director.
The other two brothers petitioned for a winding up under the just and equitable provision and the court so ordered. The reasons
for so doing, given by some of their Lordships of the First Division, are expressed in terms of lost substratum or deadlock -
words clearly used in a general rather than a technical sense. The judgment of Lord M'Laren, which has proved to be the most
influential as regards later cases, puts the ground more generally. He points out, at p. 130, that the company was not formed by
appeal to the public: it was a domestic company, the only real partners being the three brothers:

'In such a case it is quite obvious that all the reasons that apply to the dissolution of private companies,
on the grounds of incompatibility between the views or methods of the partners, would be applicable
in terms to the division amongst the shareholders of this company, ...'

In England, the leading authority is the Court of Appeal's decision in In re Yenidje Tobacco Co. Ltd. [1916] 2 Ch. 426 . This was
a case of two equal director shareholders, with an arbitration provision in the articles, between whom a state of deadlock came
into existence. It has often been argued, and was so in this House, that its authority is limited to true deadlock cases. I could,
in any case, not be persuaded that the words 'just and equitable' need or can be confined to such situations. But Lord Cozens-
Hardy M.R. clearly puts his judgment on wider grounds. Whether there is deadlock or not, he says, at p. 432, the circumstances
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

'are such that we ought to apply, if necessary, the analogy of the partnership law and to say that this
company is now in a state which could not have been contemplated by the parties when the company
was formed ...'

Warrington L.J. adopts the same principle, treating deadlock as an example only of the reasons why it would be just and equitable
to wind the company up.

In 1924, these authorities were reviewed, approved and extended overseas by the Judicial Committee of the Privy Council in an
appeal from the West Indian Court of Appeal (Barbados), Loch v. John Blackwood Ltd. [1924] A.C. 783 . The judgment of the
Board delivered by Lord Shaw of Dunfermline clearly endorses, if not enlarges, the width to be given to the just and equitable
clause. The case itself was one of a domestic company and was not one of deadlock. One of the directors had given grounds
for loss of confidence in his probity and (a matter echoed in the present case) had shown that he regarded the business as his
own. His Lordship quotes with approval from the judgments of Lord M'Laren in Symington v. Symington's Quarries Ltd., 8 F.
121 and of Lord Cozens-Hardy M.R. in In re Yenidje Tobacco Co. Ltd. [1916] 2 Ch. 426 .

I note in passing the Scottish case of Thomson v. Drysdale, 1925 S.C. 311 where a winding up was ordered under the just
and equitable clause at the instance of a holder of one share against the only other shareholder who held 1,501 shares, clearly
not a case of deadlock, and come to In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392 , a case which your Lordships must
consider. The respondents relied on this case which carries the authority *377 of Simonds J. as restricting the force of the
just and equitable provision. The company was clearly a family company, the capital in which belonged to a father and his two
elder sons. After the death of the father leaving his shares to his younger sons and appointing them his executors, his elder
sons, exercising the powers given to directors by the articles, refused to register the executors as shareholders and dismissed
them from employment. The executors' petition for winding up of the company was dismissed. My Lords, with respect for the
eminent judge who decided it, I must doubt the correctness of this. Whether on the facts stated a case of justice and equity was
made out is no doubt partly a question of fact on which, even though my own view is clear enough, I should respect the opinion
of the trial judge; but, this matter apart, I am unable to agree as to the undue emphasis he puts on the contractual rights arising
from the articles, over the equitable principles which might be derived from partnership law, for in the result the latter seem to
have been entirely excluded in the former's favour. I think that the case should no longer be regarded as of authority.

There are three recent cases which I should mention since they have figured in the judgments below. In re Lundie Brothers
Ltd. [1965] 1 W.L.R. 1051 was, like the present, a decision of Plowman J. This was a case where the petitioner, one of three
shareholders and directors, was excluded from participation in the management and from directors' remuneration. Plowman J.
applying partnership principles made a winding up order under the just and equitable clause. If that decision was right it assists
the present appellant. The Court of Appeal in the present case disagreed with it and overruled it, in so far as it related to a
winding up. The respondent argues that this was the first case where exclusion of a working director, valid under the articles, had
been treated as a ground for winding up under the just and equitable clause and that as such it was an unjustifiable innovation.

In re Expanded Plugs Ltd. [1966] 1 W.L.R. 514 was, on the other hand, approved by the Court of Appeal in the present case.
The case itself is a paradigm of obscure forensic tactics and, as such, of merely curious interest; its only importance lies in the
statement, contained in the judgment, at p. 523, that since the relevant decisions were carried out within the framework of the
articles the petitioner must show that they were not carried out bona fide in the interests of the company. I shall return, in so far
as it limits the scope of the just and equitable provision, to this principle but I should say at once that I disagree with it.

In In re K/9 Meat Supplies (Guildford) Ltd. [1966] 1 W.L.R. 1112 there was a company of three shareholder/directors one of
whom became bankrupt; the petitioner was his trustee in bankruptcy. It was contended that the company was a quasi-partnership
and that since section 33 of the Partnership Act 1890 provides for dissolution on the bankruptcy of one of the partners a winding
up order on this ground should be made. Pennycuick J. rejected this argument on the ground that, since the 'partnership' had
been transformed into a company and since the articles gave no automatic right to a winding up on bankruptcy, bankruptcy of
one member was not a ground for winding up of itself. He then proceeded to consider whether the just and equitable provision
should be applied. In my opinion, this procedure was correct and I need not express an opinion whether, on the facts, it was
right to refuse an order.
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

*378

Finally I should refer to the Scottish case of Lewis v. Haas, 1970 S.L.T. (Notes) 67 where the two main shareholder/directors
each held 49 per cent. of the shares, the remaining 2 per cent. being held by a solicitor. Lord Fraser, in the Outer House, while
accepting the principle that exclusion from management might be a ground for ordering a winding up, did not find the facts
sufficient to support the use of the just and equitable clause.

This series of cases (and there are others: In re Davis & Collett Ltd. [1935] Ch. 693 ; Baird v. Lees, 1924 S.C. 83 ; Elder v. Elder
& Watson, 1952 S.C. 49 ; In re Swaledale Cleaners Ltd. [1968] 1 W.L.R. 1710 ; In re Fildes Bros. Ltd. [1970] 1 W.L.R. 592 ;
In re Leadenhall General Hardware Stores Ltd. (unreported), February 4, 1971), amounts to a considerable body of authority
in favour of the use of the just and equitable provision in a wide variety of situations, including those of expulsion from office.
The principle has found acceptance in a number of Commonwealth jurisdictions. Though these were not cited at the Bar I
refer to some of them since they usefully illustrate the principle which has been held to underlie this jurisdiction and show it
applicable to exclusion cases.

In In re Straw Products Pty. Ltd. [1942] V.L.R. 222 Mann C.J. said, at p. 223:

'All that Hinds has done in the past in exercise of his control has been within his legal powers. The
question is whether he has used those powers in such a way as to make it just and equitable that
Robertson should be allowed by the court to retire from the partnership. The analogy of a partnership
seems to me to clarify discussion.'

In re Wondoflex Textiles Pty. Ltd. [1951] V.L.R. 458 was a case where again the company was held to resemble a partnership.
The petitioner, owner of a quarter share, was removed from office as director by the governing director exercising powers under
the articles. Thus the issue, and the argument, closely resembled those in the present case. The judgment of Smith J. contains
the following passage, at p. 467:

'It is also true, I think, that, generally speaking, a petition for winding up, based upon the partnership
analogy, cannot succeed if what is complained of is merely a valid exercise of powers conferred in
terms by the articles: ... To hold otherwise would enable a member to be relieved from the consequences
of a bargain knowingly entered into by him: ... But this, I think, is subject to an important qualification.
Acts which, in law, are a valid exercise of powers conferred by the articles may nevertheless be entirely
outside what can fairly be regarded as having been in the contemplation of the parties when they
became members of the company; and in such cases the fact that what has been done is not in excess
of power will not necessarily be an answer to a claim for winding up. Indeed, it may be said that one
purpose of [the just and equitable provision] is to enable the court to relieve a party from his bargain
in such cases.'

The whole judgment is of value. In New Zealand, the Court of Appeal has endorsed the potential application of the principle
to exclusion cases: Tench v. Tench Bros. Ltd. [1930] N.Z.L.R. 403 ; see also In re Modern Retreading Co. Ltd. [1962] E.A. 57
, also a case of exclusion from management, and cf. In re Sydney and Whitney Pier Bus Service Ltd. [1944] 3 D.L.R. 468 and
In re Concrete Column Clamps Ltd. [1953] 4 D.L.R. 60 (Quebec).

My Lords, in my opinion these authorities represent a sound and rational development of the law which should be endorsed.
The foundation of it all lies in the words 'just and equitable' and, if there is any respect in which some of the cases may be open
to criticism, it is that the courts may sometimes have been too timorous in giving them full force. The words are a recognition
of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room
in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies
Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this
definition is sufficient and exhaustive, equally so whether the company is large or small. The 'just and equitable' provision
does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the
court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable
considerations; considerations, that is, of a personal character arising between one individual and another, which may make it
unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.

It would be impossible, and wholly undesirable, to define the circumstances in which these considerations may arise. Certainly
the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association
is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down
in the articles. The superimposition of equitable considerations requires something more, which typically may include one,
or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship,
involving mutual confidence - this element will often be found where a pre-existing partnership has been converted into a limited
company; (ii) an agreement, or understanding, that all, or some (for there may be 'sleeping' members), of the shareholders shall
participate in the conduct of the business; (iii) restriction upon the transfer of the members' interest in the company - so that if
confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.

It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the
force of the words themselves. To refer, as so many of the cases do, to 'quasi-partnerships' or 'in substance partnerships' may
be convenient but may also be confusing. It may be convenient because it is the law of partnership which has developed the
conceptions of probity, good faith and mutual confidence, and the remedies where these are absent, which become relevant
once such factors as I have mentioned are found to exist: the words 'just and equitable' sum these up in the law of partnership
itself. and in *380 many, but not necessarily all, cases there has been a pre-existing partnership the obligations of which it is
reasonable to suppose continue to underlie the new company structure. But the expressions may be confusing if they obscure,
or deny, the fact that the parties (possibly former partners) are now co-members in a company, who have accepted, in law, new
obligations. A company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it
is through the just and equitable clause that obligations, common to partnership relations, may come in.

My Lords, this is an expulsion case, and I must briefly justify the application in such cases of the just and equitable clause.
The question is, as always, whether it is equitable to allow one (or two) to make use of his legal rights to the prejudice of his
associate(s). The law of companies recognises the right, in many ways, to remove a director from the board. Section 184 of the
Companies Act 1948 confers this right upon the company in general meeting whatever the articles may say. Some articles may
prescribe other methods: for example, a governing director may have the power to remove (compare In re Wondoflex Textiles
Pty. Ltd. [1951] V.L.R. 458 ). and quite apart from removal powers, there are normally provisions for retirement of directors
by rotation so that their re-election can be opposed and defeated by a majority, or even by a casting vote. In all these ways a
particular director-member may find himself no longer a director, through removal, or non-re-election: this situation he must
normally accept, unless he undertakes the burden of proving fraud or mala fides. The just and equitable provision nevertheless
comes to his assistance if he can point to, and prove, some special underlying obligation of his fellow member(s) in good faith,
or confidence, that so long as the business continues he shall be entitled to management participation, an obligation so basic
that, if broken, the conclusion must be that the association must be dissolved. and the principles on which he may do so are those
worked out by the courts in partnership cases where there has been exclusion from management (see Const v. Harris (1824)
Tur. & Rus. 496, 525) even where under the partnership agreement there is a power of expulsion (see Blisset v. Daniel (1853)
10 Hare 493 ; Lindley on Partnership, 13th ed. (1971), pp. 331, 595).

I come to the facts of this case. It is apparent enough that a potential basis for a winding up order under the just and equitable
clause existed. The appellant after a long association in partnership, during which he had an equal share in the management,
joined in the formation of the company. The inference must be indisputable that he, and Mr. Nazar, did so on the basis that the
character of the association would, as a matter of personal relation and good faith, remain the same. He was removed from his
directorship under a power valid in law. Did he establish a case which, If he had remained in a partnership with a term providing
for expulsion, would have justified an order for dissolution? This was the essential question for the judge. Plowman J. dealt
with the issue in a brief paragraph in which he said [1970] 1 W.L.R. 1378 , 1389:

'... while no doubt the petitioner was lawfully removed, in the sense that he ceased in law to be a
director, it does not follow that in *381 removing him the respondents did not do him a wrong. In
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

my judgment, they did do him a wrong, in the sense that it was an abuse of power and a breach of
the good faith which partners owe to each other to exclude one of them from all participation in the
business upon which they have embarked on the basis that all should participate in its management.
The main justification put forward for removing him was that he was perpetually complaining, but
the faults were not all on one side and, in my judgment, this is not sufficient justification. For these
reasons, in my judgment, the petitioner, therefore, has made out a case for a winding up order.'

Reading this in the context of the judgment as a whole, which had dealt with the specific complaints of one side against the
other, I take it as a finding that the respondents were not entitled, in justice and equity, to make use of their legal powers of
expulsion and that, in accordance with the principles of such cases as Blisset v. Daniel, 10 Hare 493 , the only just and equitable
course was to dissolve the association. To my mind, two factors strongly support this. First, Mr. Nazar made it perfectly clear
that he did not regard Mr. Ebrahimi as a partner, but did regard him as an employee. But there was no possible doubt as to Mr.
Ebrahimi's status throughout, so that Mr. Nazar's refusal to recognise it amounted, in effect, to a repudiation of the relationship.
Secondly, Mr. Ebrahimi, through ceasing to be a director, lost his right to share in the profits through directors' remuneration,
retaining only the chance of receiving dividends as a minority shareholder. It is true that an assurance was given in evidence that
the previous practice (of not paying dividends) would not be continued, but the fact remains that Mr. Ebrahimi was thenceforth
at the mercy of the Messrs. Nazar as to what he should receive out of the profits and when. He was, moreover, unable to dispose
of his interest without the consent of the Nazars. All these matters lead only to the conclusion that the right course was to
dissolve the association by winding up.

I must deal with one final point which was much relied on by the Court of Appeal. It was said that the removal was, according
to the evidence of Mr Nazar, bona fide in the interests of the company; that Mr. Ebrahimi had not shown the contrary; that
he ought to do so or to demonstrate that no reasonable man could think that his removal was in the company's interest. This
formula 'bona fide in the interests of the company' is one that is relevant in certain contexts of company law and I do not doubt
that in many cases decisions have to be left to majorities or directors to take which the courts must assume had this basis. It
may, on the other hand, become little more than an alibi for a refusal to consider the merits of the case, and in a situation such
as this it seems to have little meaning other than 'in the interests of the majority.' Mr. Nazar may well have persuaded himself,
quite genuinely, that the company would be better off without Mr. Ebrahimi, but if Mr. Ebrahimi disputed this, or thought the
same with reference to Mr. Nazar, what prevails is simply the majority view. To confine the application of the just and equitable
clause to proved cases of mala fides would be to negative the generality of the words. It is because I do not accept this that I
feel myself obliged to differ from the Court of Appeal.
*382

I would allow the appeal and restore the judgment of Plowman J. I propose that the individual respondents pay the appellant's
costs here and in the Court of Appeal.

VISCOUNT DILHORNE.

My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Wilberforce. I agree with all
he has said, and he has dealt with the matter so comprehensively that there is nothing I wish to add.

I agree that the appeal should be allowed and that the individual respondents should be ordered to pay the appellant's costs
here and in the Court of Appeal.

LORD PEARSON..

My Lords, I have had the advantage of reading the opinion of my noble and learned friend Lord Wilberforce, and for the reasons
given by him I would allow the appeal and restore the judgment of Plowman J.

I agree that the individual respondents should be ordered to pay the appellant's costs here and in the Court of Appeal.
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

LORD CROSS OF CHELSEA.

My Lords, the 'just and equitable' clause first appeared in section 5 of the Joint Stock Companies Winding Up Act 1848 .
Subsections (1) to (6) of that section gave the court jurisdiction to wind up a company in various circumstances indicative of
insolvency; subsection (7) gave jurisdiction if the company had been dissolved or should have ceased to carry on business or
should be carrying on business only for the purpose of winding up its affairs; and subsection (8) added: 'or if any other matter or
thing shall be shown which, in the opinion of the court, shall render it just and equitable that the company should be dissolved.'
The meaning of the subsection was considered by Lord Cottenham L.C. in 1849 in Ex parte Spackman 1 Mac. & G. 170 . In that
case the company, which was a cattle insurance company, was not insolvent and was carrying on business; but the petitioners
who held shares which were not fully paid up considered that its prospects were bad and that it might well become insolvent.
The fact that some shareholders in a company take a pessimistic view of its prospects does not make it 'just and equitable' to
wind it up against the wishes of the majority who take a more optimistic view and it is not surprising that the petition was
dismissed; but in the course of his judgment Lord Cottenham L.C. expressed an opinion as to the scope of the subsection which
had for many years an unfortunate influence on the practice of the Companies Court. He said, at p. 174:

'This clause, was, no doubt, thus worded in order to include all cases not before mentioned; but of
course it cannot mean that it should be interpreted otherwise than in reference to matters ejusdem
generis, as those in the previous clauses. There must be something in the management and conduct
of the company which shows the court that it should be no longer allowed to continue, and that the
concern ought to be wound up.'

It is not in fact easy to see what precisely Lord Cottenham L.C. had in *383 mind - for there may well be matters arising in
the management of a company's affairs which make it 'just and equitable' that it should be wound up but which have no relation
whatever either to insolvency or a cessation of business. Nevertheless, when the subsection reappeared as section 79 (5) of the
Companies Act 1862 the courts, with Lord Cottenham L.C.'s words 'ejusdem generis' in mind, for many years interpreted it
very narrowly and only made orders under it if the substratum of the company had disappeared or it was a 'bubble' company
which had never had a genuine substratum at all. Towards the end of the century the idea that the 'just and equitable' clause
only covered situations which could be said to be somehow 'ejusdem generis' with the situations envisaged in the preceding
subsections was gradually given up, but even in recent times judges have displayed a certain unwillingness to take the words at
their face value and to apply them to new situations, which may well be an unconscious reflection of the restrictive interpretation
which was put on them for so many years. In the present century, when the subsection became in turn section 129 (6) of the
Companies (Consolidation) Act 1908, section 168 (6) of the Companies Act 1929 and section 222 (f) of the Act of 1948,
petitions brought under it have generally related to disputes between rival shareholders or groups of shareholders in private
companies; and in many cases the parties to the dispute have stood to one another in a relationship analogous to that of partners
in an unincorporated business. In some of the reported cases in which winding up orders have been made those who opposed the
petition have been held by the court to have been guilty of a 'lack of probity' in their dealings with the petitioners. Thus in Loch
v. John Blackwood Ltd. [1924] A.C. 783 the managing director and majority shareholder was deliberately keeping the minority
in ignorance of the company's financial position in order to acquire their shares at an undervalue, and in In re Davis & Collett
Ltd. [1935] Ch. 693 the holder of half the shares had used his casting vote as chairman in order to bring in an additional director
who would vote as he wished and then proceeded to oust the owner of the other half of the shares from any participation in the
management of the company's business. But it is not a condition precedent to the making of an order under the subsection that
the conduct of those who oppose its making should have been unjust or inequitable. This was made clear as early as 1905 by
Lord M'Laren in his judgment in Symington v. Symington's Quarries Ltd., 8 F. 121 , 130. To the same effect is the judgment of
Lord Cozens-Hardy M.R. in In re Yenidje Tobacco Co. Ltd. [1916] 2 Ch. 426 , 431-432. It is sometimes said that the order in
that case was made on the ground of 'deadlock.' That is not so. As Mr. Frank Russell K.C., who was counsel for the appellant,
pointed out, although Mr. Rothman and Mr. Weinberg were not on speaking terms they communicated through third parties,
the company's business was flourishing and the articles contained a provision for arbitration to which resort could be had in
the event of their failing to agree on any point. The reason why the petitioner succeeded was that the court thought it right to
make the order which it would have made had Mr. Rothman and Mr. Weinberg been carrying on business under articles of
partnership which contained no provision for dissolution at the instance of either of them. People do not become partners unless
they have confidence *384 in one another and it is of the essence of the relationship that mutual confidence is maintained. If
neither has any longer confidence in the other so that they cannot work together in the way originally contemplated then the
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

relationship should be ended - unless, indeed, the party who wishes to end it has been solely responsible for the situation which
has arisen. The relationship between Mr. Rothman and Mr. Weinberg was not, of course, in form that of partners; they were
equal shareholders in a limited company. But the court considered that it would be unduly fettered by matters of form if it did
not deal with the situation as it would have dealt with it had the parties been partners in form as well as in substance.

The 'just and equitable' clause is, as I see it, an equitable supplement to the common law of the company which is to be found in
the memorandum and articles; but there are some reported decisions which I find difficult, if not impossible, to square with this
view. The most notable of these is that of Simonds J. in In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392 . The company there
was a private company founded in 1913 to take over the business then being carried on by a father and his two elder sons. The
capital was £10,000 divided into £1 shares of which 5,000 were held by the father and 2,500 each by the two sons. The three of
them were the directors of the company. In 1930 the father died having appointed his three younger sons who were employed by
the company his executors and having bequeathed them his shares equally. The articles gave the directors an absolute discretion
to refuse to register as members any person to whom a member executed a transfer of shares or any person who became entitled
to shares by transmission on the death of a member. Such a person had a right to receive any dividends declared on his shares
and a right to share in the surplus assets on a winding up, but no right to attend meetings or to receive accounts. No share could
be transferred either by a member or by a person entitled by transmission to a person not a member so long as a member was
prepared to buy them at a price based on the average rate of dividends over the preceding three years. After the father's death
the younger sons asked their brothers - now the sole directors - to register them as members but they refused to do so. Dividends
were, however, declared and the younger sons - though not entitled to them as of right - received copies of the accounts. In
1936 dissensions arose. The younger sons were dismissed from their employment; the dividend payable for the year ending
June 30, 1936, was reduced; and the directors refused to supply them with the balance sheet for that year. The directors offered
to buy their brothers' shares but only at a price which, so the younger brothers alleged, was far below their real value. In view
of the right of the directors to refuse to register transfers a sale to an outsider was not possible. In these circumstances the
younger sons petitioned to have the company wound up. They complained not that they had no share in the management of the
company but simply that they were not put on the register, the suggestion being that the directors were trying to force them to
sell their half interest in the company at an undervalue by reducing the rate of dividend and refusing to let them see the accounts.
In dismissing the petition the judge said that, although he must be guided by the principles applied by the court in deciding
whether or *385 not to dissolve a partnership, even in a partnership case the court would be guided by the partnership articles
which one must in this case assume to correspond - mutatis mutandis - with the articles of the company. He also said that he
was not prepared to assume that the directors were not acting in good faith in refusing to register the executors as shareholders
and he refused to order them to attend for cross-examination. In effect he simply applied the common law, as laid down in the
company's constitution and told the petitioners that if they wished to impugn their brothers' good faith they must prove their
case by bringing an action against them. One naturally hesitates to dissent from any decision of Lord Simonds; but I cannot
help thinking that on this occasion he took too narrow a view. It is not right to say that in a partnership case the court is tied by
the terms of the partnership articles, for it will decree a dissolution of a partnership for a fixed term if it is 'just and equitable' to
do so. Further, he appears to have taken no account of the fact that the petitioners had made out a prima facie case against their
brothers. Of course, the directors might have been able to show that they had respectable reasons for refusing to register their
brothers as members and were not in the least influenced by any wish to induce them to sell their shares to them at a price which
might be less than their true value; but on the undisputed facts it was for them to establish their good faith. The proper way to
deal with the case would, I venture to think, have been to say that if the directors did not wish to give evidence and submit to
cross-examination the company would have to be wound up. It is to be observed that the judge himself said that he had found
the case a difficult one and in In re Swaledale Cleaners Ltd. [1968] 1 W.L.R. 1710 Danckwerts L.J. expressed the view that it
was wrongly decided. It is true that in the earlier case of Charles Forte Investments Ltd. v. Amanda [1964] Ch. 240 the Court
of Appeal - of which Danckwerts L.J. and I myself were members - had accepted the Cuthbert Cooper decision as correct, but
it was not in any way necessary for our decision in that case to approve it and I think that we were wrong to do so.

What the minority shareholder in cases of this sort really wants is not to have the company wound up which may prove an
unsatisfactory remedy - but to be paid a proper price for his shareholding. With this in mind Parliament provided by section
210 of the Companies Act 1948 that if a member of a company could show that the company's affairs were being conducted in
a manner oppressive to some of the members including himself, that the facts proved would justify the making of a winding up
order under the 'just and equitable' clause but that to wind up the company would unfairly prejudice the 'oppressed' members
the court could (inter alia) make an order for the purchase of the shares of those members by other members or by the company.
To give the court jurisdiction under this section the petitioner must show both that the conduct of the majority is 'oppressive'
and also that it affects him in his capacity as a shareholder. Mr. Ebrahimi was unable to establish either of these preconditions.
But the jurisdiction to wind up under section 222 (f) continues to exist as an independent remedy and I have no doubt that the
Court of Appeal was right in rejecting the submission of the respondents to the effect that a petitioner cannot obtain an order
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

under that subsection *386 any more than under section 210 unless he can show that his position as a shareholder has been
worsened by the action of which he complains. The facts of this case are set out in detail in the judgment of Plowman J. and I
need not repeat them. The essence of the matter is that Mr. Nazar and Mr. Ebrahimi had been carrying on business as partners at
will in equal shares; that the business was transferred to the company in which each had 40 per cent. Of the capital and Nazar's
son George the remaining 20 per cent.; that it was not contemplated that any dividends would be paid but was contemplated
that the profits of the company should be distributed by way of director's fees; and that the result of Mr. Ebrahimi's removal
from the directorship was that instead of his having a share in the management of the business and an income of some £3,000 a
year he was excluded from the management and deprived of any share in the profits save such dividend as might be paid on his
shares if the Nazars thought fit to declare a dividend. The Court of Appeal held that Mr. Ebrahimi could not obtain a winding
up order under the 'just and equitable' clause unless he could show that the Nazars had not exercised the power to remove him
from his directorship 'bona fide in the interests of the company' or that their grounds for exercising the power were such that
no reasonable man could think that the removal was in the interest of the company. With all respect to them I cannot agree that
this is an appropriate test to apply. If one assumes that the company is going to remain in existence it may very well be that a
reasonable man would say that it was in the interest of the company that Mr. Ebrahimi should cease to be a director. 'These two
men,' he might say, 'are hopelessly at loggerheads. If the business is to prosper one or other must go and the company is likely
to do better without Mr. Ebrahimi than without Mr. Nazar.' But these considerations have not, to my mind, anything to do with
the question whether in the circumstances it is right that the company should continue in existence if Mr. Ebrahimi wishes it
to be wound up. The argument upon which counsel for the respondent chiefly relied in support of the decision of the Court of
Appeal was quite different. Mr. Ebrahimi, he said, consented to the conversion of the partnership into a limited company. Even
though he became, because George Nazar was taken in, only a minority shareholder he could have safeguarded his position
by procuring the insertion in the articles of a provision 'weighting' the voting power of his shares on any question touching his
retention of office as director: see Bushell v. Faith [1970] A.C. 1099 . He must, therefore, be taken to have accepted the risk that
if he and Mr. Nazar fell out he would be at Mr. Nazar's mercy. There might be force in this argument if there was any evidence
to show that the minds of the parties were directed to the point; but there is no such evidence and the probability is that no one
gave a moment's thought to the change in relative strength of their respective positions brought about by the conversion of the
partnership into a company. It was not suggested that Mr. Ebrahimi had been guilty of any misconduct such as would justify
one partner in expelling another under an expulsion clause contained in partnership articles. All that happened was that without
one being more to blame than the other the two could no longer work together in harmony. Had no company been formed Mr.
Ebrahimi could have had the partnership *387 wound up and though Mr. Nazar and his son were entitled in law to oust him
from his directorship and deprive him of his income they could only do so subject to Mr. Ebrahimi's right to obtain equitable
relief in the form of a winding up order under section 222 (f). I would, therefore, allow the appeal.

In conclusion, I would refer briefly to three recent decisions under paragraph (f). In re Lundie Brothers Ltd. [1965] 1 W.L.R. 1051
was, like this, an 'exclusion' case. Plowman J. was I think right in that case, as in this, to make a winding up order. In In re K/9
Meat Supplies (Guildford) Ltd. [1966] 1 W.L.R. 1112 the company had an issued share capital of 11,001 shares 3667 of which
were held by each of three men who were the sole directors and each of whom took part in the running of the business. It was
arranged between them that the profits should be divided equally by way of directors' fees. One of the three, a Mr. Darrington,
got into financial difficulties. He resigned his directorship in January 1965, and in April was adjudicated bankrupt. Shortly
afterwards the two remaining directors sold the business for £18,000 and placed the purchase price on deposit. They offered to
buy Mr. Darrington's shares from his trustee in bankruptcy at par but the trustee, taking the view that Mr. Darrington ought to
receive a third share of the purchase price, petitioned under section 222 (f). Pennycuick J. came with regret to the conclusion
that he must dismiss the petition. He thought it deplorable that the two other quasi-partners should retain in their hands assets
to which Mr. Darrington's creditors were in common fairness entitled but he held that as the three had elected to trade together
through the medium of a company instead of as partners there was no ground on which he could properly make the order. In
coming to this conclusion he was, I think, much influenced by In re Cuthbert Copper & Sons Ltd. [1937] Ch. 392 . I think that a
winding up order should have been made since in the absence of any other explanation the inevitable inference was that the two
remaining directors in resisting a winding up and distribution of the surplus assets among the shareholders were putting pressure
on the trustee in bankruptcy to sell them Mr. Darrington's shares at an undervalue. The last case is the decision of Brightman
J. in In re Leadenhall General Hardware Stores Ltd. (unreported), February 4, 1971. His decision not to make a winding up
order was, I think, justifiable - though I cannot agree with the reasons which he gave for it. If the respondents were telling the
truth - and the judge held that they were the almost inevitable inference was that the petitioner had been stealing the company's
money. A petitioner who relies on the 'just and equitable' clause must come to court with clean hands, and if the breakdown in
confidence between him and the other parties to the dispute appears to have been due to his misconduct he cannot insist on the
company being wound up if they wish it to continue. But the judge dealt with the case on the footing that the respondents' loss
of confidence in the petitioner might have been due to a tragic and inexplicable misunderstanding. If it was right in the light of
the evidence to deal with this case on that basis then I would have thought that a winding up order should have been made.
Ebrahimi v Westbourne Galleries Ltd, [1973] A.C. 360 (1972)

I agree with the order proposed by my noble and learned friend Lord Wilberforce with regard to costs.
*388

LORD SALMON.

My Lords, I concur in the opinions of my noble and learned friends Lord Wilberforce and Lord Cross of Chelsea and I would
accordingly allow the appeal.

I agree that the individual respondents should be ordered to pay the appellant's costs here and in the Court of Appeal.

Representation

Solicitors: Arbeid & Co.; Davenport, Lyons & Co .

Appeal allowed. Second and third respondents to pay appellant's costs in House of Lords. Legal aid taxation of appellant's
costs in House of Lords. (M. G. )

Footnotes

1 Companies Act 1948, s. 222 : 'A company may be wound up by the court if - ... (f) the court is of the opinion that it
is just and equitable that the company should be wound up.'