Having regard to the contentions advanced on behalf of Kevin and Murph I think it appropriate to quote the following passage from the report of the speech of Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd [ 1973] AC 360:
For some 50 years, following a pronouncement by Lord Cottenham LC [ Spackman, ex parte (1849) 1 Mac and G 170, 174] in 1849, the words 'just and equitable' were interpreted so as only to 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 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 to 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 s. 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 s. 222 (f) of the Act of 1948 and the principles of equity developed in relation to partnerships (at p. 374).
Before proceeding further with consideration of the speech of Lord Wilberforce it would be helpful to refer at this stage to what was said by Lord Cross of Chelsea:
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 (at p. 383).
He then cites two examples and then goes on to say:
Having explained why he takes that view he goes on to say:
People do not become partners unless they have confidence 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 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 [the names of parties in the case under his then consideration] 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.
Turning again to the speech of Lord Wilberforce I draw attention to the nature of the submissions made to the court in that case as summarised in the speech of Lord Wilberforce and the manner in which he expressed his opinion on these matters following examination of a number of cases dealing with the partnership features of companies. He then says:
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 sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more then 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 (at p. 379).
Lord Wilberforce then gives examples of circumstances in which relations of a special personal character may be essential to the members of a company with particular reference to mutual confidence. He goes on to say:
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. S. 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 Wondoflex Textiles Pty. Ltd, In re [1951] VLR 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. and 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) (at p. 380).
I make one final quotation from this speech which concludes as follows:
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 (at p. 381).
I accept the statements of principles given in the Lords' speeches in that case as the correct guidance for my consideration of the questions before me on this petition.
Reverting now to the facts: there is only one answer to the question: Was Brian lawfully removed from the office of director of this company? Was this not a business in which all three engaged on the basis that all should participate in its direction and management? Was it an abuse of wrongfully or mistakenly arrogated power and a breach of the good faith which these three partners owed to each other to exclude him from all participation in the business of the company? To these questions there can be only an affirmative answer. Even if the intended resolution for his removal had been proposed in a regular manner, and even if the resolution had been considered at a regularly convened meeting what justification could have been offered to support it? The only matters of complaint of their nature were such that they probably could have been resolved by a temporary spell of personal attention by one of the other directors more experienced in that area of work; But the facts belie the complaints. The business at the Cork branch was exceeding expectations and seemed likely to outstrip the business of the best branch in Dublin and provided support for private investment for the partners making the complaints. The action of Kevin and Murph on 3 February 1979 was wholly unjustified as well as being irregular. But by that action, and in their evidence relating to it, they made it clear that they did not regard Brian as a partner but simply as an employee. Their refusal to recognise any status of equality amounted to a repudiation of their relationship on which the existence of the company was founded. By ceasing to be a director Brian would lose not director's fees for there were none, nor dividends on his shares for there were none, but his very livelihood consisting of an equal share of all capital and profits and active participation in direction and management of the company.
I am satisfied that the petitioner has made out a case for a winding up order, and has shown that proceedings under s. 205 would not be appropriate. A liquidator will be appointed and notice of the presentation of the petition and the making of the winding up order will be advertised. The petitioner will have his costs of the hearing to be borne by Kevin and Murph and the company will bear such of its own costs as are not related to those of Kevin and Murph.