Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, [1972] 2 All ER 492, HL
In this case a company had operated effectively as a partnership between two and then later three directors. During this time no dividends had ever been paid, but the directors had however received salaries. One director was removed and sought an order for the other to purchase his shares, or alternatively for the company to be wound up on the just and equitable grounds required. The company had promised to begin to pay dividends.
Held: In the case of a small company the rights and obligations went beyond that of bare company law requirements. The applicant had been excluded from being involved in the management of the company against his reasonable expectations and this equated to him being effectively unable to dispose of his interest.
Equitable considerations can come to be applied where the association has personal characteristics and rests on a relationship of trust and confidence, and all members are expected to take an active part and share transfers are restricted thus the company should be wound up.
Lord Wilberforce: "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 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."
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