¹ Just how misleading can be judged from the comments in Gower's Principles of Modern Company Law, 4th ed., (1979) at pp. 9–11.

² Frank Evans, “What is a Company?” (1910) 26 L.Q.R. 259 at p. 263. The reason for his hesitation can be seen both in the enormity of his question, and from the full text of his conclusion which is as follows, “A company is an association of two or more individuals united for one or more common objects, which, whether incorporated or unincorporated, is (a) in the Act or charter by or under which it is constituted, called a ‘company’ or (b), if it is not so constituted and called, is not an ordinary partnership, or a municipal or non-trading corporation, or a society constituted by or under a statute, but an association whose members may transfer their interests and liabilities in or in respect of the concern without the consent of all the other members.”.

³ The wording of s. 14 reproduces with very minor modifications that of s.20 Companies Act 1948, with reference to which most of the learned articles cited in this work were written.

⁴ See for example Droit Commercial—G. Ripert, par R. Roblot, 8th ed. (1974) at pp. 422–425.456 et seq., 622–626 and the works there cited.

⁵ See Roblot, op. cit. at pp. 423–425; R. R. Drury, “Legal Structures of Small Businesses in France and England Compared” (1978) 27 I.C.L.Q. 510 at pp. 517–520. See also F. Derrida. “De la nature juridique des sociétés par intéréts depuis la loi du 24 juillet 1966”, in Mélanges Audinet (1968) at p. 43: Derrida. Mélanges Cabrillac, at p. 125: Hamel et Lagarde. Traité de Droil Commercial No. 385: Cour d’appel de Paris. 26 mai 1966. R.T.D. Com. 1966. 349. obs. Houin. Indeed, some French thinking has gone further still and developed a wider “théorie de l’entreprise.”.

⁶ Not pure discrete transactions in an economist's sense, but at least transactions regarded as being of a “one-off” nature. See pp. 856–859 of the work next cited.

⁷ Macneil, I. A.. “Contracts: Adjustment of Long-Term Economic Relations Under Classical. Neo-Classical. and Relational Contract Law.” (1978) 72 North Western University Law Review 854 at p. 891.Google Scholar

⁸ Prof. A. Chayes. “The Role of the Judge in Public Law Litigation.” (1976) Harv.L.Rev. 1281 at p. 1282.

⁹ Op. cit.at p. 891.

¹⁰ Macaulay, S.. “Non-Contractual Relations in Business: a Preliminary Study.” (1963) 28 American Sociological Review 55.Google Scholar

¹¹ Beale, and Dugdale, , “Contracts between Businessmen: Planning and the Use of Contractual Remedies,” (1975) 2 British Journal of Law and Society 45.Google Scholar

¹² Hugh Beale. Remedies for Breach of Contract (1980). at p. 5.

¹³ Ibid., at p. 213.

¹⁴ (1843) 2 Hare 461; see infra.

¹⁵ Such as ss.517(l)(g) and 459–461. Companies Act 1985.

¹⁶ (1902)86 T.L.R. 381.

¹⁷ [1940] Ch. 794.

¹⁸ See Roshier and Teff, Law and Society in England (1980). at p. 169. where they say that, “in some contexts, more particularly where parties have a continuing relationship, all-or-nothing determination, far from effectively resolving a dispute, may serve to exacerbate it. To achieve a true ‘settlement,’ or at least an acceptable compromise, techniques of conciliation and mediation can sometimes be more suitable.”.

¹⁹ K. W. Wedderburn, ‘shareholders’ Rights and the Rule in Foss v. Harbottle” [1957] C.L.J. 194 at pp. 212 and 214 respectively. The article is concluded at [1958] C.L.J. 93.

²⁰ (1875) 1 Ch.D. 13 at p. 22, where he said, “Any one of the shareholders might have filed his bill in the name of the company, and then if the directors had said, ‘You are not the company: the majority do not act with you, but with us’—the court would, as it has done in other cases, have taken the means of ascertaining which party it is, the Plaintiff’s or Defendant's, which really represents the majority of the company.”

²¹ [1951] Ch. 680, where on a similar point Jenkins L.J. said, at p. 687, “It is common practice in such cases to adjourn any motion brought to strike out the company's name, with a view to a meeting being called to see whether the company desires the action to be brought or not.”.

²² [1967] Ch. 254, esp. at p. 272.

²³ [1909] 1 Ch. 311, affd. sub nom. Quin & Axtens Lid. v. Salmon [ 1909] AC. 442, H.L.

²⁴ (1875) 1 Ex.D. 20, affd. (1876) 1 Ex.D. 88.

²⁵ [1915] 1 Ch. 881.

²⁶ Ibid., at p. 897.

²⁷ Ibid., at p. 898.

²⁸ Ibid., at p. 900.

²⁹ [1957]C.L.J. 194 at p. 212. and subsequently in a number of case notes [1958]C.L.J. 148.[1959] C.L.J. 137 and (1965) 28 M.L.R. 347.

³⁰ However, see the explanation of Eley's Case given by Roger Gregory, “The Section 20 Contract” (1981)44 M.L.R. 526 at pp. 528–531.

³¹ G.D.Goldberg, “The Enforcement of Outsider-Rights under Section 20(1) of the Companies Act 1948,” (1972) 35 M.L.R. 362.

³² Ibid., at p. 363.

³³ G. D. Goldberg, “The Controversy on the Section 20 Contract Revisited,” (1985) 48 M.L.R. 158, esp. at p. 161.

³⁴ (1864) 2 De G.J. & S. 142.

³⁵ 2nd ed., (London, 1980) at p. 100.

³⁶ (1889) 42 Ch.D. 636.

³⁷ Graham N. Prentice, “The Enforcement of ‘Outsider’ Rights.” (1980) 1 Co. Lawyer 179.

³⁸ This appears to be a land law analogy, presumably to the powers of a mortgagee. This point again seems contrary to the effect of Wood v. Odessa Waterworks Co. (supra), where the company undoubtedly had power to function, but was restrained from exercising that power in an improper manner.

³⁹ I.e., if he gets through the procedural stage and can show either that he enjoys the support of the majority, or that the matter is one which is inappropriate to refer to an ordinary majority. This aspect is dealt with more fully in the next section of this work.

⁴⁰ [1900] 1 Ch. 656 at pp. 671–673.

⁴¹ Note 24, supra.

⁴² Roger Gregory. (1981) 44 M.L.R. 526 at pp. 528–531.

⁴³ (1972)35 M.L.R.362 at p. 366. See the judgment of Amphlett B. in Eley's Case (1875) 1 Ex.D. 20 at p. 25.

⁴⁴ Ibid., at p. 28.

⁴⁵ Ibid., at p. 27.

⁴⁶ Note 23, supra.

⁴⁷ “The board may exercise all the powers of the company, subject, nevertheless, to the provisions of any Acts of Parliament or of these articles, and to such regulations (being not inconsistent with any such provisions of these articles) as may be prescribed by the company in general meeting.”.

⁴⁸ (1887)37 Ch.D. 1.

⁴⁹ That he was a shareholder is clear from the judgment of Lindley L.J. where he said at p. 14. “it happens that this gentleman has had shares allotted to him, and is therefore a member of the company.” This point appears to have been missed by Pennington, who in the fifth edition of his Company Law (1985), at p. 65 cites the case as relating to a director who was not a member being unable to prevent the company from dismissing him during his term of office.

⁵⁰ Notwithstanding several dicta in support of Eley's Case.

⁵¹ [1915] 1 Ch. 881.

⁵² Ibid., at p. 889.

⁵³ Sec Robert L. Bonn. “Arbitration: An Alternative System for Handling Contract Related Disputes” (1972) Administrative Sciences Quarterly 254 at p. 262. where he argues that arbitration is more conducive to future business relationships than litigation. However, his survey of 78 cases in textile arbitration in 1967 showed that in only 14 (or 18%) of the cases were business relationships renewed. This is hardly an eloquent argument in favour of arbitration on this ground, and only works at all if one assumes, as may indeed be the case, that the percentage would be much lower if the cases had gone to litigation proper.

⁵⁴ [1915] 1 Ch. 881 at p. 902.

⁵⁵ See. e.g. Gower. op. cit., note 1 supra, at p. 317.

⁵⁶ [1938] 3 All E.R. 214.

⁵⁷ Ibid., at pp. 218–219.

⁵⁸ These cases would include Pulbrook v. Richmond Consolidated Mining Co. (1878) 9 Ch.D. 610, upholding the right of a shareholder director not to be wrongfully excluded from acting as a director, per Jesscl M.R.: “He has a right by the constitution of the company to take a part in its management. It may affect his individual interest as a shareholder as well as his liability as a director,” Cf. Hayes v. Bristol Plant Hire [1957] 1 All E.R. 685, on a similar point, where WynnParry J. said that Jesscl M.R.'s reasoning on the right of a director to participate in management “must equally apply where the articles do not require that a director should hold a [share] qualification, but as a matter of fact he is, as well as being a director, a shareholder, because if he is a shareholder then he must as such be entitled to the degree of protection which is mentioned by the Master of the Rolls” (author's emphasis); Catesby v. Burnett [1916] 2 Ch. 325, where shareholders were enabled to enforce election of new directors and the retirement of the old in accordance with the articles; and Wood v. Odessa Waterworks Co. (note 36. supra), where a shareholder was able to enforce the payment of dividends in accordance with the articles.

⁵⁹ (1843) 2 Hare 461, 67 E.R. 189.

⁶⁰ See Mozley v. Alston (1847) 1 Ph. 790; MacDougall v. Gardiner (1875) 1 Ch.D. 13; Burland v. Earle [1902] AC. 83; Cotter v. National Union of Seamen [1929] 2 Ch. 58.

⁶¹ Pender v. Lushington (1877) 6 Ch.D. 70.

⁶² Wood v. Odessa Waterworks Co. (note 36, supra).

⁶³ Edwards v. Halliwell [1950] 2 All E.R. 1064 and Salmon v. Quin & Axtens Ltd. (note 23.supra).

⁶⁴ Kaye v. Croydon Tramways [1898] 1 Ch. 358.

⁶⁵ Usually but not always: R. J. Smith in his article “Minority Shareholders and Corporate Irregularities” (1978) 41 M.L.R. 147 asserts, at p. 160. that “Foss v. Harbottle has no application to the personal shareholder action, although the courts will not lean in favour of a minority where to do so would unreasonably embarrass the majority. The cases to the contrary can be explained as being based upon misconceptions as to the nature of the personal action and of ratifiability.”.

⁶⁶ Pennington. op. cit., (note 49. supra) at p. 727.

⁶⁷ (1877)6 Ch.D. 70 at p. 81 where he said that a member has “a right to say. whether 1 vote in the majority or minority, you shall record my vote, as that is a right of property belonging to my interest in this company, and if you refuse to record my vote I will institute legal proceedings against you to compel you.”

⁶⁸ See Gower. op. cit., (note 1. supra) at p. 642 where, after describing the extension of the rule in Foss v. Harbottle to internal irregularities, he says. “Though the courts often describe these actions as wrongs done to the company, it is far from clear why they should not instead be regarded as breaches of the rights of each shareholder under the contract established by the memorandum and articles.”.

⁶⁹ If the wishes of the majority are not known then the court may take steps to ascertain them. See the quotations from the judgment of James L.J. in MacDougall v. Gardiner in note 20. supra, and Danish Mercantile Co. Ltd. v. Beaumont [1951] Ch. 680; and. in another context. Hogg v. Cramphorn Ltd. [1967] Ch. 254.

⁷⁰ Certain acknowledged exceptions to the rule in Foss v. Harbottle, such as fraud on the minority and ultra vires or illegal actions, would fall within this category, as would attempts to achieve by ordinary resolutions objectives which would properly require a special resolution.

⁷¹ Witness Lord Eldon's famous dictum in Carlen v. Drury (1812) 1 V. & B. 154 at p. 158. where he protested that “This Court is not to be required on every Occasion to take the Management of every Playhouse and Brewhousc in the Kingdom”. See too Foss v. Harbottle (note 59. supra).Burland v. Earle (note 60,supra) and not least the dicta of Mellish L.J. in MacDougall v. Gardiner (note 20, supra).

⁷² See again the judgments of Mellish L.J. in MacDougall v. Gardiner (ibid.), Lindley L.J. in Browne v. La Trinidad (1887) 37 Ch.D. 1 at p. 17 and Plowman J. in Bentley-Slevens v. Jones [1974] 2 All E.R. 653 at p. 655, where he said that “the irregularities can all be cured by going through the proper processes and the ultimate result would inevitably be the same.”.

⁷³ This viewpoint seems to be shared by Baxter, “The Role of the Judge in Enforcing Shareholder Rights” [ 1983] C.L.J. 96: sec n.75 on p. 112.

⁷⁴ Nigel A. Bastin. “The Enforcement of a Member's Rights” [1977] J.B.L. 17 at pp. 23–24. However, he is forced to add an exception to his analysis to cover cases where there has been a ratifiable breach of procedure. but nevertheless the plaintiff can establish that the application of the Rule would result in injustice because it would deprive the majority of an opportunity of carrying out their will.

⁷⁵ In Esimanco (Kilner House) Ltd. v.G.L.C. [1982] 1 All E.R. 437 at p. 444. Other judges usually cited in this context include Mellish L.J. in MacDougall v. Gardiner. Lindlcy L.J. in Browne v. La Trinidad and Plowman J. in Bemley-Stevens v. Jones (all cited in note 72. supra).

⁷⁶ R. J. Smith, (1978) 41 M.L.R. 147 at p. 154.

⁷⁷ [1957]C.L.J. 194 at p. 214.

⁷⁸ Ibid, at p. 215.

⁷⁹ [1983] C.L.J. 96.

⁸⁰ Ibid., at p. 98.

⁸¹ [1950] 2 All E.R. 1064.

⁸² (1877) 6 Ch.D. 70.

⁸³ See. e.g. Clause 4 of Table A. Companies Act 1948 and s. 125 Companies Act 1985: Brown v. British Abrasive Wheel Co. [1919] 1 Ch. 290: Dafen Tinplaie Co. Ltd. v. Llanellv Steel Co. [1920] 2 Ch. 124 and Sidebottom v. Kershaw Leese & Co. Ltd. [1920] 1 Ch. 154 CA.

⁸⁴ (1889)42 Ch.D. 636.

⁸⁵ [1950] 2 All E.R. 1064.

⁸⁶ Ibid., at p. 1067, citing the observations of Romer J. in Cotter v. National Union of Seamen [1929] 2 Ch. 58.

⁸⁷ [1909] 1 Ch. 311.

⁸⁸ Ibid., at p. 319.

⁸⁹ [1972] 1 All E.R. 15.

⁹⁰ Ibid., at p. 24.

⁹¹ The German Aktiengesetz of 1965, in paragraph 147, permits a minority holding not less than one-tenth of the stated capital to assert the claims of the company to damages against the members of its managing board or the supervisory board. Under paragraphs 241–245, even an individual dissenting shareholder may petition to set aside a shareholders’ resolution for breach of the law or of the company's articles of association (para. 243), although this may in appropriate cases be barred by a subsequent resolution of the company properly ratifying an earlier voidable resolution (para. 244). French law is even more sweeping, and gives to an affected shareholder, or to any shareholder, (according to the circumstances) the right to challenge internal irregularities in the procedure of the general meeting. See Droit Commercial, by G. Ripcrt and R. Roblot. 8th ed. (1974) pp. 720–721. The right to bring an action against the directors of a public company alleging breaches of the laws or of the articles of association, or mismanagement, is vested by articles 244 and 245 of the loi of 24 July 1966, either in a shareholder individually, or in a group of shareholders together representing at least one-twentieth of the company's capital, who may then appoint one or some of their number to represent them. See DécretNo. 67–236 of 23 March 1967. arts 200 and 201.