Re Saul D. Harrison & Sons plc

In 1960, the shares of Saul D. Harrison & Sons plc (company) were reorganized into three classes: A shares, which provided voting rights but no dividend rights, and B and C shares, which provided dividend rights but no voting rights. The A shares were owned by the founder’s surviving sons. Most C shares were owned by or held in trust for the founder’s grandchildren, including a granddaughter (plaintiff). The company’s primary business was the manufacture and sale of industrial cloths. In October 1990, the company sold its factory (its main asset) for £2.75 million. The company used the sale proceeds to buy a replacement factory for the same amount. The granddaughter disagreed with the purchase of the replacement factory, contending that the company’s business prospects were so poor that any reasonable board of directors would have shut the business and distributed the company’s assets to the shareholders and that the directors wished to keep the company alive because they and their wives received substantial salaries. Alleging that the directors acted in bad faith, the granddaughter filed a petition in the chancery court seeking an order pursuant to § 459 of the Companies Act 1985 requiring the company’s other members to buy her shares because the company was being run in a manner that was unfairly prejudicial to the class C shareholders. In the alternative, the granddaughter requested a ruling that it would be just and equitable to wind up the company. The chancery court rejected the granddaughter’s petition. The granddaughter appealed.