Whether the claimant is able to prove that there is

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whether the claimant is able to prove that there is unfair prejudice as a result of corporate act/omission, he will be able to succeed under s.724 2. It can also apply to listed companies Shows that the court adopt a broad view of unfair prejudice 1. Reflection question: should court adopt a broad or narrow view? Re Saul D. Harrison & Sons plc .: when court lay down guidelines determining what constitute unfairness, the court affirm the sanctity of the articles of association to statutory contracts Court said since keeping promises and honouring agreement is the most important element of commercial fairness, the starting point of any case concerning unfair prejudice will be to ask whether the conduct in which the shareholder complains was in accordance with the article Put it simply First step, whether there has been a breach of contract (articles of association and shareholders' agreement) If there is no breach of contract --> second step: any equitable consideration which, although technically not enforceable (not contained in any of the contracts), would nevertheless allow the court to enforce its understanding --> see Ebrahimi for guidelines
O’Neill v Phillips [1999] 1 WLR 1092 ** See above - important case: showing that court taken a narrow view on what constitute unfair prejudice o But some commentators said the court ought to take a broader view --> which approach should be preferred? (reflection question) Fact: The respondent (P) held all of the shares and was its sole director. Subsequently, the petitioner (O), was employed by the company. P was impressed by O's ability and promoted O. Later on, O received 25% of the company's shares and O was made a director. O was informed by P that O would take over the management of the company's business and O would also receive 15% of the profits. Subsequently, P retired from the board, O became the sole director, and company's managing director. For a while, the company was profitable; subsequently, the company becomes unprofitable, so obviously P was very unhappy with O's management. P used his majority voting right to appoint himself as the MD and P took over the management of the company. O was informed that he would no longer receive 15% of the profits; his entitlement would limit to his salary and dividends from his 25% shareholding O commenced a petition alleging unfairly prejudicial conduct on the part of P. House of Lord held: P's conduct would have been unfair if he had used his majority voting power to exclude O from the business But P had not done so He had simply revised the terms of O's remuneration P refusal to allot additional shares, as part of the proposed incentive scheme, was not unfair because the negotiation between them was not completed; and there were no contractual undertaking And the court also held that P's decision to revise O's profit sharing arrangement did not amount unfair prejudice because O's entitlement to the 15% of company's profit was never formalised and it was additional upon O's running of the business. Since the condition was no longer fulfilled because P had to

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