Court dismissed winding up petition as director's management failures lacked probity and did not constitute oppression.

[*488] 1974 November 16

(PIKIS,AG.P D.C., ARTEMIS, D.J.)

IN THE DISTRICT COURT OP LARNACA

Bedros Karaoglanian & Sons Ltd.,and Others,

Applicants,

and

Hagop Karaoglanian and Another,

Respondents.

(Company Petition No.7/1972)

Company - Winding up - Principle of "just and equitable" winding up of a Company - Section 211(f) of the Companies Law, Cap. 113 - Principles upon which the Court may act to wind up a company on the ground that it is "just and equitable" so to do - Private Company - Petitioner managing separately some of the assets of the company for his own ends - Failed to make out a case justifying the Court to order the winding up of the Company under the above principle.

Company Oppression of minority shareholders - Section 202 of the Companies Law, Cap. 113 - Before a member of the Company may avail himself of the provisions of this section he must first establish that the Company should be wound up - Ingredients of oppression.

L. Papaphilippou, for the Petitioner.

A. Anastassiades with M.Kramvis, for Respondent No.1.

JUDGMENT

The judgment of the Court was delivered by:

PIKIS, AG.P.D.C.: Bedros Karaoglanian was the [*489] father of seven children, five males and two females. Bedros and his sons were engaged in several businesses and apparently there was an enterprising spirit in the family. In 1953, Bedros and his sons set up a private company for the purpose of amalgamating all family interests and joining their efforts for the good of the family. In this way there came to life Bedros Karaoglanian & Sons Limited, a private company incorporated

under the provisions of the Companies Law, Cap. 113. The purposes of the company appear in the memorandum of association

and include several objects, mostly designed to enable the company to carry on with the business of its various members. Other ancillary purposes are mentioned that, the company might consider expedient to engage in, in the course of time. The articles of association regulate the manner in which the company should be run and the relationship between the shareholders and the company. Provision is made in the articles of association that Bedros Karaoglanian and his elder son, Vartkes, be appointed permanent directors of the company. The directors of the company should be,at the maximum, three and at the minimum, two. The appointment of Bedros and Vartkes Karaoglanian to the position of permanent directors reflects their predominance in the family undertakings and an appreciation on the part of other members of the family that these two should best be left to run the company. Despite the formation of

the company in 1953, shares were not allotted until 6th March, 1958, when in consequence of a resolution, 20,000 one-pound

ordinary [*490] shares were issued to members of the company treated as fully paid up in consideration of the transfer by members of the company of the assets of their business to the company. An inventory of the plant and machinery that members Of the company gave to it in accordance with this agreement, appears in exhibit 8 and the schedule attached thereto. Thereafter the shareholders of the company became fully paid up shareholders, as follows:-

Bedros Karaoglanian : 24 per cent

Vartkes Karaoglanian: 20 per cent

Zohrab Karaoglanian : 16 per cent

Krikor Karaoglanian : 16 per cent

Hagop Karaoglanian : 16 per cent

The wife of Bedros Karaoglanian and mother of the remaining shareholders, Arousiak Karaoglanian, became the sixth shareholder of the company and acquired a shareholding of 8 per cent.

In 1958, the company was convicted for failure to comply with certain provisions of the Companies Law, in particular failure on the part of the company to submit returns to the Registrar of Companies, whereupon the company was fined £150.- The conviction caused consternation to members of the company, Vartkes Karaoglanian in particular, the managing director, and reminded them of their obligations under the Companies Law. Certain resolutions were passed, set out in exhibit 8, purporting to normalise the affairs of the company and avoid, in future, possible pitfalls in the management - [*491] of the affairs of the company.

In May 1966, Bedros Karaoglanian met with his death, a fact that spread the seeds of dissension among members of the family who have since been engaged, in one form or another, in acrimonious litigation. At first Zohrab Karaoglanian took his disputes before the Court, to be followed soon afterwards by Hagop Karaoglanian, the petitioner in the present proceedings.

On 18th November, 1972, Hagop Karaoglanian filed the present petition, petitioning the Court, inter alia, to wind up the company. For reasons appearing on the record of the Court, the petition was not proceeded to hearing until the 25th October, 1974. The case was heard by the Court on 25th, 26th and 30th October, 1974.

A number of factual allegations are made in the petition, verified by an affidavit of the petitioner, mostly accusing Vartkes and Krikor Karaoglanian, the managing director and chairman of the company respéctively, of managing the affairs of the company in a manner unfair and prejudicial to the interests of the petitioner, in their effort to exploit the business of the company for their personal benefit. In particular, the charge is made, that the directors never called members of the company to a company meeting or held a shareholders’ meeting for that. The contention of the petitioner is that he was never summoned to attend a meeting of the shareholders of the company and that no such meeting ever took place. In the [*492] event of winding up there will be, according to the petitioner, surplus assets to be distributed among the members.

The petitioner makes three prayers to the Court:-

That the company be wound up on the ground that it is just and equitable to wind it up in accordance with the provisions of s.211, Cap. 113.

Two other prayers are made alternative to prayer one -

1 (a) An order that the company purchases the shares of the petitioner at a price to be fixed by the Court. No price is indicated in the petition; and

1(b) an order that the shares of the petitioner in the company be purchased by the remaining shareholders of the company at a price to be fixed by the Court.

As in the case of prayer l(a), no mention is made of any amount and it is common ground that the shareholders of the company have not been made party to these proceedings.

2. An order directing the alteration of the articles and memorandum of association in any way what the Court considers appropriate.

In the course of his final address, counsel for the petitioner abandoned the prayer set out in paragraph 1(b) above. This is a sound course, in our view, reflecting [*493] that parties with an interest in the fate of this prayer are not parties to the proceedings before the Court. We shall not concern ourselves any further with prayer 1(b) which is in consequence dismissed.

No reference is made in the petition to the enactments relied upon in support of the remedies sought in these proceedings. It is apparent, however, and as much emerged in the course of the proceedings, that the prayer for the winding up of the company is based on the provisions of s. 21, Cap. 113, whereas the alternative prayers are grounded on the provisions of s.202, Cap. 113, that part of the law that purports to protect minority shareholders from any oppressive conduct of the majority.

In his final address Mr. Papaphilippou laid stress on two sub-sections of s.211, Cap. 113, in aid of his argument that the company should be wound up, namely s. 211(b) and s.211(f), Cap. 113. Section 211(b) provides that a company may be wound up if there has been default in delivering the statutory report or in holding the statutory meeting. Firstly, no complaint is made in the petition of any failure to deliver a statutory report or hold a statutory meeting and in as much as it is well settled that the Court cannot entertain any matter raised by the petitioner that is not specifically included in the petition and made the subject matter of it, this contention is doomed to failure (see Re Lundie Brothers Limited,(1965) 2 All E.R.692 and Re Cuthbert Cooper & Sons Limited, (1937) [*494] 2 All E.R., 466). To uphold the argument of Mr.Papaphilippou that s.211(b), Cap. 113, is nothing other than an instance of a case where it is just and equitable to wind up the company and, therefore, sustain his argument that by petitioning the winding up of the company on the principle of just and equit ble we are invited, inter alia, to have

regard to all the provisions of s.211, would be tantamount to doing violence to the very provisions of the law. In our view

the five sub-sections of s.211, Cap. 113, afford separate and distinct grounds that may justify the winding up of a company. In fact there is authority supporting the proposition that the provisions of s.211(f) should not be read and interpreted ejusdem generis, the preceding subsections of s.211 (see Ebrahimi v. Westbourne Galleries

Limited, (1972) 2 All E.R., 492, 503). Finally, and this is conclusive, the requirement to deliver a statutory report

or hold a statutory meeting does not apply to private companies as it is specifically laid down in s. 124(10), Cap. 113.

The case presents two main aspects:-

(a) Whether it is just and equitable to wind up the company under the provisions of s.211(f), Cap. 113; and

(b) whether, in the event of no winding up order being made, an order should be made under the provisions of s.202, Cap.113, for the protection of the petitioner, a minority shareholder in the private company of Bedros Karaoglanian & Sons Ltd. [*495]

The main witnesses in the case, whose testimony has shed light on the background of the dispute and the way the company has been run, are the petitioner himself, Hagop Karaoglanian, the youngest son of the family and Vartkes Karaoglanian, the managing director of the company, the eldest son of the family. Two other witnesses to fact testified for the petitioner, namely Mr.Franceskides, an accountant who, at times, audited the books of the company and Zohrab Karaoglanian, a brother of the petitioner.

Before analysing the evidence, we may make brief reference to the enterprises in which the various shareholders were engaged in, before the incorporation of the company:-

(a) Agricultural business involving the use of agricultural machinery for the cultivation of land;

(b) a foundry and machine shop;

(c) an ice factory.

After incorporation fishing was added to the business of the company and a trawler was purchased for the purpose.

In his evidence before the Court Hagop Karaoglanian repeated the allegations made in the petition and complained that the failure of the directors to convene a meeting of the company, their failure to furnish him with accounts as well as their failure to distribute dividend among the shareholders, coupled with the suggestion that the directors [*496] are seeking to run the company for their own ends, make it just and equitable to wind up the company and constitute acts of oppression of the minority at the instance of the majority, conduct meriting the intervention of the Court. The petitioner admitted in cross-examination that after the death of his father, in 1966, he started business of his own, taking over for the purpose the agricultural side of the business of the company. There developed, in the course of the trial, a heated controversy as to the number and type of machines, company property, that Hagop Karaoglanian took over. In the contention of Hagop Karaoglanian he assumed control of three machines, namely an international crawler tractor, a Fiat tractor as well as ore disc plough with a seeder box. To this, one must add a water pump and a water tank that Hagop Karaoglanian admitted to have been in his possession.

The agricultural machinery of the company was purchased at a price of £10,000. In cross-examination the petitioner put the present value of company machinery in his possession at £2,000.- a statement that he modified in re-examination, contending that the value of such machinery is in the region of £1,000.- . In the allegation of Vartkes Karaoglanian, in addition to the machinery that Hagop admitted to have come in his possession, the petitioner had also taken control of a combined tractor, a Massey Harris plough, a Leturno grader, three trailers and a mobile petrol welding set. [*497]

In the course of cross-examination of Hagop Karaoglanian, it transpired that the petitioner had served for a period

as secretary of the company, a fact that does, prima facie, indicate,some participation on his part in the management of

the affairs of the company. He was very vague as to the period during which he served as secretary of the company. The petitioner admitted being a signatory in the capacity of a secretary to two resolutions passed by the company in the years 1959 and 1966, evidenced by exhibits 6 and 7. respectively, a piece of evidence that lends support to the testimony of Vartkes Karaoglanian that his brother, Hagop, had served as secretary of the company for a whole decade, that is from 1959 to 1968. The presence of the resolutions, embodied in exhibits 6,7 and 8(a), does indicate that, at least, occasionally meetings of the board of directors were convened and decisions were taken with the consent and approval of all members of the company, including the petitioner. One may mention in passing the allegation of the petitioner that he may have signed some of the resolutions, at least one of them, without reading its contents.

The petitioner admits that he never accounted to the company for the use and exploitation by himself of company property for the reason, if one is to make a fair assessment of his evidence, that his brothers Vartkes and Krikor, the directors of the company, failed to account to him for company profits. Hagop was evasive in giving a reply to questions, suggesting to him that Vartkes had [*498] invited him to account to the company for the use made by him of company property. His reply at first was that he had no recollection of such a request; then his

reply was modified to "possibly, a lot of time has elapsed since". In earlier proceedings, instituted by Zohrab Karaoglanian, in the

cause of the administration of the estate of their deceased father (Probate Application No.35/66), the petitioner is recorded, in the minutes of the Court, as saying on 3rd March, 1970: "Whenever he asked (meaning Vartkes), he was just seeking for the money to keep for his own pocket and not for the sake of the company", a statement that tends to confirm the evidence of Vartkes Karaoglanian that the petitioner had been asked to account to the company but failed to do so. The petitioner denied that the company ever demanded of him by an oral request to deliver to the company the agricultural machinery in his possession. Speaking of his willingness to account for profits made by his use of company property, Hagop Karaoglanian maintained that in the year 1966 he supplied accountant Franceskides, who had been engaged to prepare the accounts of the company, all necessary information for the compilation of the accounts. He is contradicted by Mr. Franceskides, a witness called by the petitioner, who stated in evidence, after refreshing his recollection by reference to the accounts he prepared for the year 1966, produced at the instance of the petitioner, that Hagop Karaoglanian had refused to collaborate and refrained from furnishing him with an account of the proceeds from the exploitation of

the agricultural side of the business. On the other hand, [*499] Mr. Franceskides states that Vartkes Karaoglanian co-operated with

him for the preparation of the accounts and supplied him with all necessary information.

Zohrab Karaoglanian, called by the petitioner, stated that whilst a shareholder of the company he never received any dividend and, like Hagop Karaoglanian, complained that neither did he attend a meeting of the company nor did he receive a notice to do so. In his testimony, he ceased being a shareholder in the year 1968, but had lost all contact with the management of the affairs of the company since 1958, the year in which he resigned from his secretaryship of the company. Therefore he was unable to enlighten us as to events subsequent to the year 1958 and, more so, the events that followed the death of their father.

Neither Hagop nor Zohrab were in a position to give any clear indication of the net profits of the company for any one year or the value of its assets.They did, however, give evidence about the gross earnings from the use of the fishing trawler, in an effort to establish that given the size of gross profits net profits from the use of the fishing trawler must have been substantial. A report submitted by Mr. Franceskides to the administrators of the estate of Bedros Karaoglanian gives some indication of the value of the assets of the company, at several dates, including their value at the date of death of Bedros Karaoglanian. The accounts for the year

1966, if they are to be treated as giving a clue to the state of [*500] profits of the company, show a net operating loss of £297.466 mils.

These accounts, produced at the instance of the petitioner, far from supporting the contention of the petitioner that the company business was flourishing, are more in accord with the picture given by Vartkes Karaoglanian, who, asked to comment on the general state of the company business and its profitability, replied with the word "metria".

Vartkes Karaoglanian disputed in his evidence every allegation of Hagop Karaoglanian, that was meant to cast aspersions on his motives and intentions in running the company and managing its affairs. He gave an outline of the history/company and what emerges from this account is that the company was primarily operated as a family concern for the immediate and long-term benefits of its members. It is his testimony that directors' and members meetings had been convened on a number of occasions and were advised for the purpose by lawyers. However the witness was not very explicit on the matter of members’ meetings and failed to produce the minute book of the company. In fairness he has never been asked to do so, though he might consider it his duty in proceedings of this nature, to make the minute book available himself. A

perusal of exhibits 6,7 and 8 does reveal that meetings did take place from time to time and resolutions were passed. It is noteworthy to refer to

article 11 of the articles of association of the company where a substitute procedure is envisaged for holding members' meetings, dispensing, under certain [*501] circumstances, with meetings of members of the company where resolutions are signed by all members of the company. The picture as to members’ meetings is not altogether clear;the impression we gained is that the directors of the company were not meticulous in convening members’ meetings.

Books and accounts were kept by the company, according to Vartkes Karaoglanian, prepared on the advice of experts. Here again the picture is ambiguous. It seems that the company is indebted to a bank and according to Vartkes all surplus money has, so far, been applied towards the discharge, wholly or in part, of the obligations of the company. Since 1966 a total amount of £3,500.- has been paid for the purpose, whereas additional amounts had been paid towards the payment off, of debts, prior to 1966. Vertkes Karaoglanian is drawing a salary of £1 ,800.- a year for the services he is rendering to the company in his capacity as managing director whereas his co-director and chairman of the company, Krikor Karaoglanian, is drawing a salary of £1,500.- a year. It is admitted that both directors, parallel to their management of the affairs of the company, are engaged in business of their own wherefrom they supplement their earnings. If the evidence of Vartkes is to be accepted, he has been devoting many hours a week for the transaction of the business of the company, spending, at times, as many as 80 hours a week to run the affairs of the business.

Contrary to the evidence of Hagop Karaoglanian, his brother Vartkes testified that Hagop took over the entire

agricultural side of the business, including all the [*502] machinery and accessories, assumed full control over them and has

been using them for his personal benefit for the past many years. According to Vartkes this began happening as far back as 1958 and was completed by the year 1960,as from which date Hagop Karaoglanian set up business on his own, exploiting the agricultural side of the company's business. In his contention their father, Bedros Karaoglanian, protested and a letter was written to Hagop with no results. Thus, according to Vartkes, the petitioner branched off in

business on his own, using for the purpose company assets as from the year 1960 and continued so doing up until today. Some support for the

evidence of Vartkes Karaoglanian may be derived from a statement made by Mr. Franceskides in the accounts where he describes Hagop Karaoglanian as "non collaborating shareholder". Oral requests addressed to Hagop Karaoglanian, after the death of their father, to surrender company assets to the company and account for profits made from their exploitation fell in a vacuum. Far from responding to such demands, so the evidence of Vartkes runs, Hagop Karaoglanian reacted with insolence. The fact remains that the directors never took legal steps to recover company property in the hands of Hagop Karaoglanian. The reason for such attitude, according to Vartkes, is that he did not wish to disrupt family unity, a disruption that might be precipitated by the initiation of ,a law suit.

In making an assessment of the evidence and an evaluation of the conflicting allegations, we may begin [*503] with a reference to some indisputable facts that may serve pave the path for the making of our findings. Hagop Karaoglanian was, for a whole decade, the secretary of the company and cannot legitimately complain that during that period, at least he had been shut off from the management of the affairs of the company. On his admission, Hagop Karaoglanian started working on his own as from the year 1966 onwards, using for the purpose company property. This situation, and this is our finding, was tolerated by the directors with some displeasure. Hagop Karaoglanian gave us the impression of a man who wants the best of both worlds. Evidently Hagop Karaoglanian was, for many years, content to run a side of the business for his own ends. And at a time when he is still in possession, for purposes of his own, of assets of the company, he is seeking its dissolution allegedly on the ground that the directors of the company want to shut him off from the management of the company with a view to exploiting company assets for their benefit. In the light of the facts before us we feel that it does not lie very much to the mouth of the petitioner to complain that other members of the company, a family company, have been exploiting company assets with a view to earning a living. It has been indicated in the course of this judgment that Hagop Karaoglanian fell into a number of contradictions in his evidence; he did not, on the whole, leave us with a very favourable impression. The impression we gained is that Hagop Karaoglanian,feeling, in the course of time, dissatisfied with the side of the business [*504] that he was running, chose to raise battle with the company in the hope of putting himself in a better position.

We find that the company was, on the whole, run as a close company concern and that the directors were not unduly concerned to observe standards of modern management. The arrangements that had been made for the keeping of books, preparation of accounts and the holding of meetings were loose. However, this arrangement was not the result of any effort on the part of the directors to secure advantage to themselves by obscuring the affairs of the company. Vartkes Karaoglanian gave us the impression of a conscientious and hardworking man probably misguided at times as to how the company should be run, sharing apparently the oldfashioned view that all the debts of the company must be paid first before any dividend is distributed to shareholders, but in no way motivated to exploit the company for his personal advantage. He did not give us the impression that he entertains any sinister motives to oust any of his brothers from the company. These are our findings and what we must first decide is whether with this background in mind it is just and equitable that the company should be wound up.

The Principle of "Just and Equitable" - Winding Up of a

Learned counsel made laborious submissions on the history and implications of the principle of "just and equitable" winding up of a company and the circumstances under which the Court may justifiably decree the winding up of a company. The principal submission of Mr. PapaPhilippou [*505] for the petitioner, is that the firm of Bedros Karaoglanian & Sons Limited is a company / the nature of a quasi partnership and in as much as it ceased to function as a partnership and members of it have lost confidence in one another, confidence that should ordinarily be reposed by one partner in another, the company has ceased to serve the purpose of its existence, the elements of partnership have gone and so the Court should, as we have been invited, order the burial of the company by winding it up. This submission is primarily based on the principles enunciated and observations made in Re Yenidje Tobacco Company Ltd., (1916 - 1917 - Reprint), All E.R., 1050. In Re Yenidje there is.an analysis of the nature of a private company, a legal entity that has, as the Court observed, many features in common with a partnership. The similarity in their substratum makes it just that a private company, in the nature of a partnership, should be wound up in the same way that a partnership may be dissolved. The ratio decidendi of the above case is that a private company should be wound up in all cases where a private company, despite its separate entity, is primarily the result of a partnership arrangement between its members and there has developed a deadlock in the management of its affairs.

Another submission made on behalf of the petitioner is that the directors of the company have, by abusing their power, gained control of the business for purposes of their own and they are accused of lacking in probity in directing its affairs. In the light of our findings this submission is untenable and cannot succeed. [*506]

Mr. .Papaphilippou pressed before the Court as an additional reason for the winding up of the company the fact that its affairs have been managed, in the petitioner's allegation, in a careless manner and in as much as this state of affairs should not be allowed to continue, the most exp e ditious manner of remedying the situation is to wind up the company.

Mr. Anastassiades, for the respondents, submitted that the principles that found favour in Re Yenidje have no application to the facts of the present case because of -

(a) the differences in the percentage of shareholding of the petitioner in the present case and the petitioner in Re Yenidje Tobacco Company Ltd. ;

(b) the absence of any deadlock in the management of Bedros Karaoglanian & Sons Ltd.

Also it was argued on behalf of the respondents that the behaviour of the petitioner has been such as to disentitle him from seeking an equitable remedy. The contention is that the petitioner has not come to the Court with clean hands because of his failure to account to the company for profits made from his use of company property. In support of this argument reliance was placed on the unreported case of LeadenhaIL General Hardware Stores Ltd., decided on 4th

February, 1971, referred to with approval in the judgment of Lord Cross in Ebrahimi v. Westbourne Galleries Limited, (l972) 2 All E.R., 492 (H.L.). The

[*507] above unreported case is authority for the proposition that for a petitioner to avail himself of the remedy under s.2ll(f), Cap. 113, he must, like every person who seeks an equitable remedy, come to the Court with clean hands.

The decision in Ebrahimi (supra) is undoubtedly the most modern authority, emanating from high quarters, on the application of the principle of "just and equitable” winding up of a company. The opinions of the learned Law Lords contain both an exposition of the principle as well as a narrative of the history of the rule. Lord Cross points out (p.503) that the "just and equitable" clause in s.211 (f) must not be read ejusdem generis, the preceding sub-sections of the enactment but must be read on its own as a independent provision of the law, giving power to the Court to order the winding up of a company in all cases where the Court finds this course just and equitable.

According to Lord Wilberforce, delivering the first opinion to the House, the "just and equitable" clause enables the Court to subject the exercise of

“legal rights to equitable considerations; that is of a general 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”.

In the light of the principles underlying the application of the "just and equitable" clause in the

Companies Act, a member of the company may successfully [*508] petition its winding up where he establishes that some basic

understanding between its members, fundamental to the incorporation of the company, has gone and the confidence reposed by one member in another has ceased to exist. The application of the principle is not, as it was observed in Ebrahimi (supra), confined to cases where the petitioner is able to establish mala fides on the part of other members of the company.

The modern judicial trend of which Ebrahimi's case (supra) is an instance is that Courts are more than ready, where justice so requires, to remove the corporal veil of the company, go to its roots and if the substratum of the company has gone, demolish the company because in such circumstances so to do is both just and equitable.

We have studied with great care the rival submissions of counsel; before we proceed to our deliberations we shall make brief reference to some other authorities that may have a bearing on the matter so that we may be further assisted in our task. In Charles Forte Investments v. Amanda, (1963) 2 All E.R., 940, the Court of Appeal granted an injunction to restrain a member from petitioning the Court to wind up a company for the admitted refusal of the directors to register a transfer of shares. It was held that to allow the petition to be presented would be an abuse of the rights of a member and might cause the company irreparable damage at a time when the petitioner had an alternative remedy against the company that would not upset its functioning. Cross J., as he [*509] then was (p.950), clearly draws a distinction between a two-membered company and a company with more members, an observation that is not irrelevant to the facts of the present case.

The petitioner was successful in Davis & Collett, Limited In Re., 104 Law Journal Reports Chancery, p. 340, and obtained an order for the winding up of a company on the ground that the directors had been found guilty of irregularities committed for the purpose of putting themselves in complete control of the company. Crossman J. referred with approval to the principle enunciated in Yonidje and applied it to the facts of the case before him. However, as Simonds J. observed in Re Cuthbert Cooper & Sons Ltd.(1937) 2 All E.R., 466, the invocation of the partnership principle should invariably raise as the first question the accertainment of the contractual rights and relationship of members of the company as they are set out in the articles of association. These dicta, weighty as they are, coming from Simonds J., militate against upholding the present petition as there is no suggestion whatever that the petitioner had either a contractual or an equitable right, for that, to participate in any way in the management of the company. On the contrary, judging from the articles of association, it is evident that it was within the contemplation of all members of the company at the time of its inception, that their father and their eldest brother, Vartkes, should be the dominant partners of the company, a fact evidenced from their appointment as permanent directors of the company. [*510]

In Re Westbourne Galleries Limited,

(1971) 1 All E.R., 561, the Court of Appeal held that the removal of a director from office and his exclusion from participation in the management and conduct of the business of the company despite the fact that the company was in the nature of a quasi partnership "does not form a ground for holding

"that it is just and equitable that the company be wound up, unless it be shown that the power was not exercised bona fide in the interest 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".

Behind this statement of the law lies the principle that it is the right of the majority to manage the affairs of the company.

In Re Filde-s Brothers Limited, Magarry J. held that in deciding whether it is just and equitable to wind up a company the Court must have regard not only to the articles of association, which normally contain the contractual relations of the parties, but also to any settled and accepted course of conduct between the parties, whether or not cast into the mould of a contract. The settled and accepted course of conduct of the parties in this case has been, for members, as it emerges from, the findings of the Court, to manage separately some of the assets of the company, therefore, it hardly lies to the petitioner to complain that the directors of the company have in any way

violated any settled practice of the company. In Re Fildes [*511] (supra) it is also pointed out that the test of "just and

equitable" must be applied with reference to the state of the facts at the date of the hearing of the petition, but limited to those heads of complaint that are set out in the petition.

In Re Cuthbert (supra) it was decided that the directors of the company are under no obligation, in the absence of express provision to that effect in the articles of association, to supply members of the company with copies of balance shetts.

In the light of our findings and the principles upon which the Court may act to wind up a company on the ground that it is just and equitable so to do, we find that the petitioner failed to make out a case justifying the Court to order the winding up of Bedros Karaoglanian & Sons Ltd. and in consequence the petition must be dismissed.

In the light of the above finding it would be unnecessary to go any further and examine the alternative remedies sought in the petition, considering that before a member of the company may avail himself of the provisions of s.202, he must first establish that the company should be wound up. However, as the matter may go higher, we propose to give the matter detailed consideration.

Oppression of Minority Shareholders in a Company (s.202, Cap. 113)

In Re Five-Minute Car Wash Service,Limited, (1966)1 All E.R., 242, Buckley

J. enumerates the ingredients, if we may borrow this term from the Criminal Law, of oppression. [*512] Firstly, it must be established that at the time when the petition was presented, the affairs of the company were being conducted in a manner oppressive to the petitioner or a class of members of the company, including the petitioner. The grievance must relate to members of the company, in their capacity as such. Secondly, the matters complained of must relate to the conduct of the affairs of the company. And thirdly, they must be such as not only to make the winding up of the company just and equitable but so as to lead to the conclusion that the affairs of the company have been conducted in a manner which can properly be described as oppressive to the petitioner. Dissatisfaction or disapproval with the conduct of the company’s affairs, on grounds relating to policy or efficiency, however well founded, will not sustain the petition. The learned Judge adopted with approval what was said of oppressive conduct by Lord Keith, in the House of Lords, (1959) A.Co 324:-

"..... Oppressive involves, I think, at least an element of lack of probity or fair dealing to a "member in the matter of his proprietary rights as a shareholder".

The above definition of oppressive conduct was equally approved by the Court of Appeal in Re Harmer, Limited, (1958) 3 All E.R., 689. Inefficiency and carelessness in the performance of one’s duties as a managing director do not constitute oppressive conduct. These dicta are particularly relevant in relation to the complaint of the [*513] petitioner in the present case as his complaints amount, at most, in accordance with our findings, to careless management on the part of the directors in the discharge of their duties as directors of the company.

In Re Jermyn Street Turkish Baths Ltd., (1971) 3 All E.R., 184, the Court of Appeal cited with approval the expression adopted by Viscount Simonds, in Scottish Co-operative Wholesale Society Ltd. v. Meyer (1958) 3 All E.R., 66, as to the elements that make up oppression. For conduct to be properly described as oppressive it must be "burdensome, harsh and wrongful to the other members of the company or some of them, and lacks that degree of probity which they are entitled to expect in the conduct of the company’s affairs". Buckley J., giving the judgment of the Court of Appeal in Re Jermyn (supra) observes that -

"Oppression must, we think, import that the oppressors are being constrained to submit to something which is unfair to them as the result of some overbearing act or attitude on the part of the director."

In the case of Re Jermyn (supra) it is observed that the drawing by a director of a salary where he is entitled to receive no remuneration or the drawing of a salary by the director above the permitted limit, though they may afford grounds for misfeasance proceedings, can never amount to oppressive conduct. Thus the complaint [*514] of the petitioner in the present case that the directors, are drawing a salary can be of no assistance to his case, more so as there is nothing to suggest that the directors are not entitled to receive remuneration or that their remuneration is in any way excessive.

In the case of Re Yenidje (supra) on which the petitioner has mostly relied to support his case, it is stated that failure to pay dividend does not, per se, disclose oppressive conduct. Thus the non payment of dividend to members of the company, in the absence of any evidence to suggest a motive on the part of the directors to make a personal gain by so withholding payment of dividend to members, cannot amount to oppressive conduct.

In the light of the evidence before us, there is nothing to suggect that the payment of dividend to members was feasible or that the directors failed to distribute dividend for any improper motive.

For all the above reasons we find that the petitioner failed to make out a case of oppression under s.202, Cap. 113.

In the result, the petition is dismissed, with costs for one advocate. Costs to be taxed by the Registrar.

Petition dismissed with costs for one advocate.