(1959) A.C. 324

324
HOUSE OF LORDS [1959]
H. L. (B.) established or conducted for profit, and t h a t its main objects do

n
1958 ° t ^ a ^ within the proper construction of section 8 (1) (a) of the
E a t i n g and Valuation (Miscellaneous Provisions) Act, 1955.
NATIONAL
DEPOSIT
FEIENDLX Appeal dismissed.
SOCIETY
TBUSTEES
v. Solicitors: Woolley, Tyler & Bury; Wrentmore & Son.
SKEGNESS
URBAN
DISTRICT F. C.
COUNCIL.
[HOUSE OF LORDS.]
H.L.(Sc)* SCOTTISH CO-OPEEATIVE WHOLESALE

1958 SOCIETY LTD APPELLANT;
June 9,10, AND
M E Y E R AND
X7* 18* l l ' ANOTHER EESPONDENTS.
23, 24; '
V Company—Oppression—Subsidiary company—Minority of independent
shareholders—Majority of nominees—Controlling powers used to
destroy subsidiary company—Remedy alternative to winding up—
Companies Act, 1948 (11 & 12 Geo. 6, c. 38), s. 210.
By section 210 of the Companies Act, 1948: " ( 1 ) Any member
"of a company who complains that the affairs of the company are
"being conducted in a manner oppressive to some part of the
" members (including himself) . . . may make application to the
"court by petition for an order under this section. (2) If on any
" such petition the court is of opinion—(a) that the company's
" affairs are being conducted as aforesaid; and (6) that to wind up
" the company would unfairly prejudice that part of the members,
" but otherwise the facts would justify the making of a winding-up
" order on the ground that it was just and equitable that the
" company should be wound up, the court may, with a view to
" bringing to an end the matters complained of, make such order
" a s it thinks fit, whether for regulating the conduct of the com-
" pany's affairs in future, or for the purchase of the shares of any
"members of the company by other members of the company,
" or by the company, and, in the case of a purchase by the
* Present: VISCOUNT SIMONDS, LORD MORTON OF HENRTTON, LORD

KEITH OF AVONHOLM and LORD DENNING.
325
A.C. AND PRIVY COUNCIL.
"company, for the reduction accordingly of the company's capital, H. L. (Sc.)

" or otherwise." iq.fi
In 1946 a co-operative wholesale society formed a subsidiary
company to enable it to participate in the manufacture and sale SCOTTISH
of rayon materials and get licences to manufacture rayon cloth, CO-OPEEATIVB
the production of which was then controlled and remained con- WHOLESALE
. . . SOCIETY XJTD
trolled until 1952. The two respondents were appointed joint v
managing directors of the company, which, so long as cotton control MEYER.
lasted, was dependent on their skill, knowledge and experience and
on their connections with the trade, and, because of these, licences
were granted. The company's capital consisted of 25,000 shares
of £1 each, 7,900 of which were issued. The respondents acquired
3,450 and 450 respectively, and the society acquired 4,000, appoint
ing as directors three nominees who were also members of its own
board. The company traded successfully for several years and
earned substantial profits. In 1951 the society sought to purchase
from the respondents their shares at less than their true value but
the suggestion was rejected. The society dropped the attempt but
adopted a policy of transferring the company's business to a new
department within its own organisation, thereby forcing down the
value of the company's shares. The nominee directors, though
aware of this policy, did not inform the respondents but pro
moted the society's plans. In consequence, the company's business
came virtually to a standstill and the value of its shares was
greatly reduced. In 1953 the respondents presented a petition
under section 210 for an order on the society to purchase the
whole of their shares at a price based on their previous value or
such other price as the court might think fit. I t was common
ground that at the date of the petition it was just and equitable
that the company should be wound u p : —
Held, that the society had acted towards the minority share
holders of the company in an oppressive manner, and that this
conduct through the nominee directors of the company, who were
also directors of the society, amounted to conduct of the affairs of
the company, since the transactions of the two could not be
separated. The inaction of the nominee directors amounted to a
breach of their duties.
Per Viscount Simonds. When a subsidiary company is formed
with an independent minority of shareholders, the parent company
is under an obligation so to conduct its own affairs as to deal fairly
with its subsidiary.
Held, further, that the respondents were entitled to the relief
sought, since the purchase of the shares by the society would bring
to an end the matters complained of, namely, the oppression. The
making of a winding-up order would unfairly prejudice the minority
shareholders.
Decision of the First Division of the Court of Session, sub nom.
Meyer v. Scottish Textile and Manufacturing Go. Ltd., 1957 S.C.
110; 1957 S.L.T. 250 affirmed.
APPEAL from the First Division of the Court of Session.

326
HOUSE OP LORDS [1959]
H. L. (Sc.) This appeal from a unanimous decision of the First Division

1958 of the Court of Session (Lord President Clyde, Lord Carmont,
Lord Eussell and Lord Sorn) concerned the application and
SCOTTISH
CO-OPERATIVE scope of section 210 of the Companies Act, 1948, which dealt
WHOLESALE with. '' alternative remedy to winding u p in cases of oppression.
„. ' The interlocutor appealed from, dated March 20, 1957, was pro-
MEYEB. nounced in a petition presented by Dr. George Meyer and Eonald
Joseph Lucas, who were the respondents in the present appeal,
under section 210, praying for an order on the appellants, Scottish
Co-operative Wholesale Society Ltd., for the purchase of the
respondents' shares in Scottish Textiles & Manufacturing Co. L t d .
B y t h a t interlocutor the appellants were ordained to purchase
the whole of the respondents' shareholdings in the company at
the price of £ 3 15s. a share. The total purchase price payable
thereby was £14,625. The interlocutor was based on a certain
construction of section 210 and on findings t h a t the respondents
had satisfied the provisions of the section by proving t h a t the
appellants' nominee directors on the board of the company were
conducting the affairs of the company in a manner oppressive of
the respondents, and t h a t the respondents were accordingly
entitled to the order sought. The appellants submitted t h a t the
interlocutor was unfounded both in fact and in law.
The facts are stated in their Lordships' opinions.
I. Robertson Q.C. (of the Scottish Bar), Benjamin Bathurst

Q.C. (of the English Bar) and A. Johnston Q.C. (of the Scottish
Bar) for the appellant society. This is the first case in which an
order has been made under section 210 of the Companies Act,
1948. The following are the propositions on behalf of the appel
lant society: (1) On the facts the appellants did not pursue such
a policy as was held by the court below of systematically diverting
business from the company with the deliberate intention of injur
ing it. There is no evidence to justify such a finding and no
evidence from which it can be inferred.
(2) E v e n taking the court's findings in fact as justified on
the evidence, section 210 does not apply, because the actings
complained of are actings in the affairs of another body, the
appellants' own affairs.
(3) The remedy given by the court is not a remedy justified
under section 210, because t h a t section gives an alternative
remedy to winding up under the " just and equitable " provisions
of section 225. I t is only when the company is to be kept going
327
and is fit to be kept going t h a t the remedy here given is appli- H. L. (Sc.)
cable. The remedy here given is the equivalent of an award of 1959
damages for p a s t misconduct, which is not the remedy envisaged 7
by section 210. CO-OPERATIVB
(4)
v
I n anv event the valuation p u t on the shares was uniusti- WHOLESALE
' ^ SOCIETY L T D .
fied by the evidence. o.
YEB
If the appellants are right on the first point, the question of "
fact, t h a t is the end of the case. Chronologically there are five
chapters in the story of the company: (a) the period of success,
1947-51; (b) the period when the realignment of the shares was
the m a i n question, August, 1951, to February, 1952; (c) the period
of decline, September, 1951, to January, 1953; (d) the period when
the parties were at a r m s ' length, through the t h r e a t of litigation;
(e) the period after the presentation of the petition on J u l y 14,
1953. I t is not disputed t h a t everything went well until 1951.
On the findings of fact it is submitted for the appellants:
Till August, 1951, the company's position was precarious because
it had no factory and no p e r m a n e n t contract with Falkland Mill
for the obtaining of material. The proposals and negotiations for
the realignment of shares at the end of 1951 were not pursued
and had no bearing on the company's prosperity. I n these
negotiations it was not the appellants' policy to acquire all the
respondents' shares, and the appellants accepted the principle of
realignment on a valuation basis. From the end of 1951 the
appellants had no scheme deliberately to deprive the company of
material from Falkland Mill, so as to run down its business and
depreciate the value of its shares. After the summer of 1951
the company got into trading difficulties for reasons unconnected
with any policy of the appellants. The abolition of rayon control
in J u n e , 1952, had no effect on the company's progress. After
August, 1951, the company gave no orders to Falkland Mill,
which by September, 1952, had no looms working for the com
pany, instead of 52 a year before. After this Meyer, on behalf
of the company, did not give orders to Falkland Mill but got his
cloth elsewhere. B y the end of 1952 Falkland Mill was in
desperate straits for work and the company's business was almost
at a standstill. At this time Falkland Mill even offered to sell
material to the company at a loss, but this was not accepted.
The price offered was genuinely lower t h a n the cost price. Falk
land Mill was a small mixed mill of low efficiency which could
not produce rayon cloth at a price competitive with the large
mass-producing mills. B y the end of 1952 relations in the com
p a n y ' s board were strained because of m a t t e r s unconnected with
328 HOUSE OP LORDS [1959]
H. L. (Sc.) Falkland Mill. B y January, 1953, the respondents had decided

1958 ^ na * * n e y could not carry on and were determined to litigate if
the appellants would not take over their shares at their own price.
SCOTTISH ne
CO-OPERATIVB ^ appellants at this time considered that the best thing for
WHOLESALE the company would be that it should be wound up in view of its
SOCIETY L T D
p# " trading position and the losses it was incurring. The appellants
MEYEE. had no desire or intention to continue the company if the respon-
dents gave up, as the reason for its existence would then be gone.
The merchant converting department was set up in June, 1951,
and began to do business with Falkland Mill in December, 1952,
as a consequence of the mill's idleness. The initiative in this
association came from the mill's manager, Schofield. Thereafter
the department did comparatively little work in rayon and did
not compete for business with the company. The change-over
to commission weaving was a consequence of disputes between
the company and Falkland Mill and was a reasonable step for the
appellants to take. Falkland Mill was under control of an inde
pendent manager, whose duty was to do his job efficiently in the
appellants' interests. He at no time took orders from anyone as
to how he should do his business and in particular as to his prices.
These were genuine prices. The dismissal of the managing
directors was necessary in the interests of the company's share
holders in view of its financial position. The nominee directors
on the company's board never interfered with the respondents'
conduct of the company's business and only twice was there a
divided vote. The nominee directors never interfered with the
working of the appellants' mill and had no right to do so. The
board of the company after the change-over to commission weav
ing did what they could to get a lower price from Falkland Mill,
without success.
Elder v. Elder and Watson x suggests the correct approach to
section 210, and Lord President Cooper names the necessities for
its application, (a) There must be oppressive conduct towards
some part of the members, including the petitioner, (b) Winding
up would unfairly prejudice that part of the members, (c) Other
wise the facts would justify winding up under the " just and
" equitable " clause. The oppressive conduct must be in the
affairs of the company and it must oppress the shareholder qua
shareholder. The remedy contemplated under section 210 must
bring the oppression to an end and the company must be fit to
proceed as a going concern once the oppression is removed. That
i 1952 S.C. 49, 54-55.

32
A.C. AND PRIVY COUNCIL. 9
decision was referred to a t an earlier stage of the present case by H. L. (Sc.)

Lord President Cooper. 2 1958
A proper case for the application of section 210 would be one SCOTTISH
of oppression when a company was prosperous and no one would CO-OPERATIVB
have an interest in winding it u p ; the remedy might then be SOCIETY LTD.
an order for the purchase of the shares of the majority by the «•
minority, if the minority asked for it. '
Section 210 provides an alternative to winding u p . The legis
lature contemplated a continuing business with a continuing life
ahead of it, whereas here the company's business was virtually
a t an end when the petition was lodged and there was no point
in keeping it alive. H e r e an order under section 210 was not
justified. I t is not for the appellants to suggest what would have
been the right remedy. The only relief under the section m u s t
aim at " b r i n g i n g to an end the m a t t e r s complained of," and
this order for t h e purchase of the shares does not satisfy t h a t
requirement. F u r t h e r , the value p u t on the shares was excessive
at the time of the order. I n the fixing of this value the court
did not properly exercise its discretion. The order for the pur
chase of these shares amounts to an award of damages for past
misconduct, a m a t t e r not within section 210.
The m a i n point is t h a t there m u s t be oppressive conduct to
bring the case within section 210, and here no oppressive conduct
in t h e affairs of the company was proved b y the respondents, on
whom the onus lies. The section contemplates a lack of probity,
b u t t h a t is not established. W h e n the nominee directors of the
company were sitting in the board room of the appellant society
they were bound not to take any action contrary to the appellant
society's interests. W h a t the appellant society did a t their own
board meetings could not be oppressive of the company in the
affairs of the company. On the evidence here, looking at the
actions of the nominee directors in the conduct of the company's
business, there was no oppression by t h e m in 1953. At most
they were inactive, doing nothing to protect the company, b u t
what could they have done? If they had protested at the appel
l a n t s ' actions, what good would t h a t have done? The respon
d e n t s ' complaints all relate to t h e actions of the society and do
not touch the real issue, which is concerned with the conduct of
the company's affairs. The company's position was precarious
from the beginning because it had no factory and there was no
» 1954 S.C. 381, 387.

330
H. L. (Sc.) long-term agreement as to the looms. I t should have ensured

1958 its supply of rayon cloth from the mill by a contract.
gc0TTISH Benjamin Bathurst Q.C. following. There are only two
CO-OPEBATIVE questions: (1) The main question is: Have the affairs of the
com an
SOOTBTY LTD. P y been conducted in a way oppressive of the respondents
v. as shareholders? (2) If so, was the court entitled to adopt a
' remedy which (a) did not ensure the continuance of the com
pany's business, and (b) amounted in effect to a judgment for
damages, whereas the remedy contemplated by section 210 in
general assumes continuance of the company's business?
The main, if not the only, ground on which the First Division
held that section 210 applied was that (as found by the court,
but denied by the appellants) from 1952 onwards the appellants
used their own mill to manufacture cloth for sale by themselves
rather than to the company. On this point, contrast the views
of Lord President Clyde and Lord Carmont. 3 On the facts as
found by the court, 4 neither Mr. Taylor, who was chairman of
the appellant society at the material time, nor the nominee
directors could control the society.
To bring section 210 into play a petitioner must satisfy the
court of the three matters stated by Lord Cooper in Elder v.
Elder and Watson.5 Here the third is admitted (that it would
be just and equitable to wind up the company). The second
(that winding up would unfairly prejudice the members com
plaining) largely depends on the first.
As to whether the company's affairs had been conducted in a
manner oppressive to some of the members, the conduct must
be in the company's own affairs and not in those of some other
body: see per Lord President Cooper and Lord Eussell. 6 The
fact found that the appellants decided to use their own mill to
supply their own commercial requirements in preference to those
of the company has no connection with the fact that the appel
lants happened to hold a majority of the company's shares. The
policy would in any event have been detrimental to the company,
and the fewer shares the appellants held, the greater would
have been the advantage to them. No case of oppression under
section 210 can be made on the appellants' use of their own mill.
That was an action in the course of their own trading business.
If the company's business depended on a continuance of a certain
supply from the mill, it would have been a matter of ordinary
3
1957 S.C. 110, 122, 134. s 1952 S.C. 49, 55.
* Ibid. 122, 134, 148. <s 1954 S.C. 381, 387, 394.
331
commercial prudence to enter into a contract with the appellants H. L. (Sc.)

for that supply, but this was never attempted: see -per Lord 1953
7
President Clyde. This lies at the root of the whole matter. ~
SPOTTTSTT
The respondents are now trying to invoke section 210 to provide CO-OPEBATIVE
a remedy for a failure to take the normal business course of WHOLESALE
, , . . SOCIETY LTD.
obtaining a contract. v.
The higher prices charged by the appellants to the company MEYER.
did not amount to oppression. The respondents were never
prevented from buying in the market. The fact was that supplies
were unobtainable and so the expression " market prices " is
meaningless. It is a fallacy to talk of the mill selling its products
to the appellant society; it was part and parcel of the appellant
society who could not sell to themselves. Though, as a matter
of internal book-keeping, the mill may have invoiced its products
to the merchant converting department, there was never a sale
and purchase in the true sense. Lord Carmont 8 considered that
this matter afforded no ground for complaint, and he was right.
As to the appellants' attitude on their proposal to buy the
respondents' shares in the company, they were not bound to buy
at the price fixed by the auditors: see per Lord President Clyde
and Lord Carmont.9 These negotiations should be ignored.
The inaction of the nominee directors was wrongly treated as
oppression in the court below. They never interfered with the
company's management in the day-to-day control of it, which was
in the hands of the respondents as managing directors. There
was nothing to prevent the respondents from getting supplies
elsewhere. Further, the nominee directors had no control over
the appellant society. They were powerless to alter the course
of events and their resignation could not have affected the situa
tion. The position would have been the same if no representatives
of the appellant society had ever voted at a meeting of the
company or its board.
Further, Schofield's actions as manager of the mill cannot be
held to be oppression by a majority of the company's shareholders,
since the actions of a mill manager independent of the company
cannot be " conduct of the company's affairs " within section 210.
Lord President Cooper's statement 10 as to the position of a
subsidiary company is too wide. The parent company's duty
must be to conduct its own business in the best interests of its
own shareholders. The minority shareholders in the subsidiary
I 1957 S.C. 110, 122. » Ibid. 121, 131.

« Ibid. 134-135. 10 1954 S.C. 381, 391.
332
H. L. (So.) cannot expect to control the business of the parent company,

1958 which must be left in the hands of the directors and shareholders
~ of the parent company. If as a matter of business the directors
CO-OPERATIVE of the parent company consider that the interests of its share-
WHOLESALB holders are best secured by itself selling the products it manu-
SOCIETY LTD. , °
c. factures, their duty (in the absence of any contractual duty to the
MEYEB
- subsidiary) must be to do so. The Lord President's view would
involve the proposition that when a company holds just over
50 per cent, of another company's shares, its trading activities
would be restricted owing to its " obligation " to its subsidiary,
whereas if it owned just under 50 per cent, of the shares, no such
obligation would exist. But in truth in the nature of things the
minority shareholders in fact put themselves in the hands of the
majority. That is the commercial risk they take.
As to the dismissal of the respondents, this took place after
the presentation of their petition on July 13, 1953, and was done
on counsel's advice. Events subsequent to proceedings should
not be taken into account. Section 210 was not intended to
meet the case of a director losing his office: see Elder v. Elder
and Watson.11 Liquidation was the only practical and sensible
course at this date to preserve such assets as the company
possessed. As a corollary, it was necessary to terminate the
employment of the managing directors.
As to the remedy, section 210 provides an alternative to
winding up. Section 210 (2) (b) clearly contemplates that the
company will continue to operate. The court might make an
order regulating the conduct of the company's affairs in future,
possibly by altering the memorandum or the voting powers or
by granting an injunction. The proper remedy here would be
either to order the majority to sell their shares to the minority
or to make an order " regulating the conduct of the company's
" affairs in future " which would effectively prevent the majority
oppressing the minority. The order appealed against would
probably lead to a winding up because the appellants would have
no reason to keep alive a wholly owned subsidiary. It amounted
to '' the solvent of a monetary award '' which was not the remedy
contemplated by section 210.
The relevant authorities are Bell v. Lever Brothers Ltd.12;
Irwin & Johnson Ltd. v. Oelofse Fisheries Ltd.13; In re Hannetta
u 1952 S.C. 49, 57, 58, 60, 61. " (1954) (1) S.A. 281.
is [1932] A.C. 161; 48 T.L.E. 133.
333
Ltd.1* and Buckley on the Companies Acts, 13th ed., p. 868 (as H - L - (So-)
to improper use of powers). 1958
B. Johnston Q.G. and F. O'Brien (both of the Scottish Bar) ~~~
for the respondents. The decision of the Inner House was CO-OPEBAWVB
unanimous with no expressions
r of doubt or indecision. Thomas WHOLBSALB
SOCIETY LTD.
(or Watt) v. Thomas 15 indicates that this House will be slow t>.
to reverse conclusions so arrived at. METER.
The view of the facts relied on by the respondents is as
follows: The appellants were forced to create the company in
order to enter the rayon trade and took advantage of the respon
dents' skill, knowledge and experience in that trade. The
appellants had to maintain the company in existence up to the
end of cotton control to stay in the rayon trade. From Novem
ber, 1951, when realignment of shareholdings was in issue, the
appellants, as majority shareholders, were determined to secure
realignment at par and refused to consider realignment on a fair
valuation basis. The reason for the company's decline was the
general recession, and efforts to " bridge " the depression were
unsuccessful. After the end of cotton control the appellants
decided to divert the potential rayon production at the mill from
the company in order to benefit one of their own departments,
in the knowledge, shared by the nominee directors, that this
would prejudice the company's trade and progressively depress
the value of its shares. The recession in the rayon trade ended
in September/October, 1952, after which time weavers were very
busy and the conditions of trade, which prevailed before the
recession, returned. At this time the looms at the mill were
available for the resumption of production, having been idle
because of the recession. The company had stocks in hand for
converting to meet the then increased demand. Before the
company required new stocks of cloth the appellants' drapery
committee initiated the beginning of business between the mill
and the merchant converting department and it was at once
apparent that there was a prospect of increasingly profitable
business being done between these two. This beginning was
known to the nominee directors of the company, who were at the
time members of the drapery committee. When the company
applied to the mill for resumption of production of rayon and, in
particular, standard quality 1009, Schofield was reluctant to do
business. He quoted a price to the company which he knew was
' 4 (1953) Nov. 2 (unreported); see « [1947] A.C.484; 1947 S.C.(H.L.)
216 L.T.J. 639. 45; 63 T.L.R. 314; [1947] 1 All E.R.
582.
A.C. 1959. 22
334
H. L. (So.) unacceptable because it was too high, being above the m e r c h a n t s '
1958 price of I s . 6|d., which included wholesalers' profit. Meyer did
~ not understand the quotation: he did not know of the negotiations
SnflTTTRTT
CO-OPEEATIVE between the mill and the merchant converting department and
WHOLESALE n o o n e told him. I n good faith he thought the mill's prices were
0. ' the result of either faulty costing or inefficient manufacture or
MBYHB
- both and suggested in good faith ways and m e a n s of improving
it. All his requests and suggestions were ignored. Because of
m a r k e t conditions the company could not get elsewhere supplies
of cloth of the quality required in sufficient quantity and in time
to take advantage of the returned boom. Consequently its trade
did not recover. The appellants and the nominee directors were
aware of this position and were aware t h a t the result was to
lower the value of the company's shares. Although deliveries
of rayon from the mill to the m e r c h a n t converting d e p a r t m e n t
were small at the beginning, there were prospects of increasing
business between them. So far as the evidence goes, business
increased on a substantial scale up to the end of J a n u a r y , 1955.
Alternatively, if business between the merchant converting de
p a r t m e n t and the mill began soon after the company asked for
a quotation, the appellants and the nominee directors knew t h a t
the mill had been previously allocated for production for the
company and they also knew t h a t the company had applied for
supply and had been quoted a price which the company considered
excessive.
The evidence clearly discloses a policy by the appellants to
destroy the company.
I n construing section 210 one m u s t have regard to what the
law was previously, to the mischief at which it was aimed and
to the remedy provided. The terms of section 210 are very wide
and there is no warrant for limiting by implication the scope of
the circumstances to which it in terms applies. The meaning
of section 210 cannot -be affected by the nature of the remedy
sought. W h e n oppression has been established, together with
the other facts required by the Act, there is no limit to the
nature of the order which the court m a y pronounce; it m a y have
an element of an award of damages. Section 210 is not designed
to redress past wrongs, but the court's order m a y in effect be an
award of damages for a continuing wrong.
E a c h nominee director was aware of and responsible for the
policy of the appellants as a whole, and through t h e m the
appellants " conducted " the company's affairs " i n a manner
" oppressive " of the respondents. The nominee directors cannot
A.C. AND PRIVY COUNCIL. ^35
shelter behind a wall of ignorance of the appellants' policy, H. L. (Sc.)

especially as they were appointed to look after the appellants' 1958
interests. ~
SfOTTISH
The appellants say t h a t section 210 does not apply because CO-OPERATIVE
the actings complained of were actings in the affairs, not of the WHOLESALE
company b u t of another body, the appellant society. B u t when „.
a subsidiary company is formed with an independent minority of MBIEB.
shareholders, the parent company m u s t conduct its own affairs
so as to deal fairly with its subsidiary, and if their affairs are so
closely interrelated t h a t it is impossible to say t h a t the affairs of
the one are not the affairs of the other, then anything the parent
company does is conduct in t h e affairs of the subsidiary company.
I n any event, in this case the evidence discloses t h a t the
appellants, as majority shareholders, conducted the company's
affairs oppressively in participating in the campaign to destroy
its business. Conduct includes both active and passive conduct.
W h e n there is a duty to act, failure to act is as m u c h conduct
as any action. So any conduct, whether active or passive, is
within the section. One would be conducting the affairs of a
boat if one knew t h a t it was heading for the rocks and neither
interfered nor informed the crew. I t is a fallacy to suggest t h a t
oppression can only take an active form. Inaction can be just
as much conduct as action.
The nominee directors, knowing t h a t the appellants' policy
was to destroy the company, should have disclosed t h a t policy
to the respondents or resigned. Any director who acts for the
destruction of his own company is not acting in its interests.
Oppression is not a commercial risk, although in the past a
minority had to run it; t h a t is the very thing which section 210
was designed to deal with.
I t is a question of fact what are a company's affairs. Section
210 can cover the whole of its activities. I n any view, its trading
activities are covered. On the facts of this particular case, the
obtaining of supplies of rayon cloth from the mill was a vital
affair of this company, and when the appellants interfered with
those supplies they were interfering in its affairs.
As to the contention t h a t the appellants were only acting in
their own affairs and not in those of the company, see what was
said in the court below. 16
The directors of a company are in a fiduciary position and
m u s t show the utmost good faith in dealing with it. Where a
« 1954 S.C. 381, 390-391; 1957 S.C. 110, 144, 154.

336
H. L. (Sc.) conflict of interest arises between their duty as directors of one

1958 company and their duty as directors of another company or their
~ interests as individuals, they must act with good faith. The least
SCOTTISH • J O
CO-OPERATIVE the nominee directors could have done was to tell the respondents
WHOLESALE o f t h e situation.
SOCIETY LTD.
v. Oppression does not cease to be oppression merely because
MEYBR
- it is done on the advice of counsel. One would wish to know
what.was the case which was put before counsel. Also counsel's
opinion may have been given on a wrong view of section 210.
As to the remedy, there is no express indication that it is
essential under section 210 that the company must be capable
of going on and that this limits its application, but, in any event,
this company was capable of going on if the oppression was
removed. Any order which the court judges will bring the
oppression to an end is within the competence of section 210. If
the appellants were right, there would be a remedy for slight
oppression, but not for grave destructive oppression: per Lord
President Cooper.17
Even though the order now pronounced may have an element
of damages, that does not make it improper. On the facts this
was not a company which inevitably had to be wound up. I t was
fit to be kept alive either when the petition was first presented
or when the complaints of diversion of the mill's production were
first made. The company could have issued fresh capital and
built its own factory. It had large resources and, on the evidence,
it is not proper to suppose that it was moribund.
7. Robertson Q.G. in reply. At the material time the com
pany was no longer able to trade, not because of any deliberate
policy of the appellants, but because of the conditions prevailing.
But, even assuming oppression in fact, the respondents cannot
recover at law. In view of the terms of section 210, what was
done within the appellant society could not be oppression within
the section. There must be a difference between the conduct of
the affairs of the company and the conduct of the affairs of the
society. The nominee directors were not bound to disclose to
the respondents information received in the appellants' board
room. Their failure to resign was not oppression; it cannot be
said to have affected the consequences of the alleged oppression.
They were not in breach of their duty.
Their Lordships took time for consideration.
" 1954 S.C. 381, 391-392.

337
July 24. VISCOUNT SIMONDS. My Lords, in this appeal from H. L. (Sc.)

an interlocutor of the First Division of the Court of Session I am igg g
in such full agreement with their Lordships both in their findings
of fact and in their conclusions of law that I do not think it CO-OPEBATIVB
necessary to trouble the House at such length as I otherwise WHOLESALE
might. But, inasmuch as your Lordships have for the first time „
to consider a new and important section of the Companies Act, MEYER.
1948, it is right that I should state my views upon it.
On May 7, 1946, there was incorporated as a private limited
company the Scottish Textile and Manufacturing Co. Ltd., which
I will call " the company." I t had an authorised share capital
of £25,000 divided into 25,000 shares of £1 each. Its substantial
object was the manufacture and merchanting of rayon fabrics.
The respondents, formerly of German but now of British
nationality, who had left Germany when the Nazis obtained
power in that country, had a large experience and extensive
connections in the continent of Europe in the rayon trade, and
one of them, Dr. Meyer, had already in 1945 been appointed
textile adviser to the appellant society. Into this trade the
society wished to enter and, though they would have preferred
to carry it on as a branch of their own business, this was for
more than one reason not practicable. The respondents were
unwilling to act merely as employees of the society and, since at
that time licences had to be obtained for the manufacture of
rayon, and were granted only to persons who could satisfy the
cotton control authorities that they commanded the necessary
skill and experience, it was mutually advantageous to the society
and the respondents that a subsidiary company should be formed
in which they should both be interested. The company was
accordingly formed and 7,900 shares were issued, 4,000 to the
society, 3,450 to Meyer, 450 to Lucas. Thus the society had
such control as a majority shareholding could give. Moreover, of
the five directors of the company three were at all material times
nominees of the society, the other two being the respondents,
who were the managing directors. Nor was there lacking control
by the society of a practical sort. For from the outset it was
contemplated that, at any rate until a factory could be built or
acquired for it, the company should be substantially dependent
for its supplies upon the society's mill at Falkland which in 1946
was partially idle. Accordingly, under arrangements with cotton
control, the production of a number of looms at Falkland was
allocated to the company and the looms were licensed for rayon
production. Dr. Meyer made arrangements for the supply of
338
H. L. (So.) rayon yarn to be used in t h e manufacture of t h e finished cloth,

1958 t h e yarn being purchased by t h e society a n d invoiced to t h e m a t
~~~ Falkland Mill. There it was woven a n d t h e woven cloth sold to
ne
CO-OPEEATIVB * company ready for dyeing a n d finishing. This was t h e plan,
WHOLESALE a n ( j from t h e beginning it flourished greatly.
v. ' But, my Lords, it was a plan which demanded the utmost
MEYEB
- good faith on both sides, and, as your Lordships will see, it was
viscount the lack of it on the part of the society which led to this
' discreditable tale.
I must hark back for a moment to the year 1947. It seems
that in March of that year an agreement between the parties was
made for what was curiously called a realignment of their share
holding, so that, instead of approximately equal holdings, the
society should hold 70 per cent, and the respondents 30 per cent.
of the issued capital. That was in March 1947, but nothing was
done to carry the agreement into effect until the year 1951. In
November of that year, the company being then apparently very
prosperous, the nominee directors, as I will call them, under the
instructions of the board of the society raised the question:
numerous proposals were put forward, some of which involved
the purchase by the society of some of the respondents' shares.
I t is unnecessary to go into the details of this episode, for in the
end nothing was done. The significance of it lay in the fact that
the society's representatives adopted the view that they were
entitled to acquire at par any shares they might get under the
so-called realignment and, upon a refusal of this unjust demand,
threatened that the society would liquidate the company if it was
not met. This and other threats led to legal advice being sought.
The solicitor to the society and the company advised that the
shares should be valued and bought at a valuation: they were
valued by the company's auditors at no less than £6 0s. l i d .
a share and thereafter the society proceeded no further in the
matter. It is impossible after reading the voluminous evidence
in this case not to see that the society, thus foiled in their attempt
to obtain a grossly unfair advantage of the respondents, deter
mined to seize any opportunity of procuring for themselves the
benefit of the trade which had been largely built up by their
efforts.
I t is at this stage convenient to refer to the section of the
Act under which the respondents petitioned the court for relief
and obtained the order, against which this appeal is brought, that
the society should buy their shares in the company at £3 15s. Od.
per share. I t is, so far as relevant, as follows:
339
[His Lordship read section 210 (1) and (2) and continued:] H. L. (So.)
It is common ground that at the date of presentation of the ig5 8
petition on July 13, 1953, it was just and equitable that the
company should be wound up. I t could hardly be denied that to CO-OPERATIVB
wind up the company would unfairly prejudice the respondents. WHOLESALE
The only question is whether its affairs were being conducted in a 0.
manner oppressive to the respondents and, if so, whether the MEYEB.
court ordained the appropriate remedy. viscount
My Lords, as I have already said, I do not propose to rehearse '
the facts at length. The four learned judges of the First Division,
including Lord Garmont who was deputed to take the proof, were
unanimously of opinion that the society had conducted the affairs
of the company in a manner oppressive to the respondents. Each
of them gave a judgment which, I may perhaps be permitted to
say, was a careful and exhaustive appraisal of the evidence, and,
even if I did not myself come, as I do come, upon an independent
reading of it to the same conclusion, I should be reluctant to
disturb their findings, particularly as Lord Carmont had the
peculiar advantage of seeing the witnesses. I t cannot be ignored
that, wherever there was any dispute of fact, the testimony of
the respondents was preferred to that of the witnesses of the
society. Having myself only read the written word, I must say
that I was by no means favourably impressed by the evidence of
more than one of the latter witnesses.
It is, however, necessary, if section 210 is to be successfully
invoked, to show, not only that there has been oppression of the
minority shareholders of a company but also that it has been the
affairs of the company which have been conducted in an oppressive
manner, and it was to this point that a large part of the appel
lants' argument was directed. I must therefore state in broad
outline the course of events which led to the presentation of the
petition.
The last event that I mentioned was the failure of the society
to acquire at par shares that were worth a far greater sum. This
was at a time of the company's great prosperity which, subject
to the ups and downs of the textile trade, might be expected to
continue. It was, however, followed by a recession in the rayon
trade, of which the dates of beginning and ending were a matter
of dispute. Such dates cannot be precisely determined and are
of no consequence. It is, however, to be noted that it was in the
course of it that rayon control came to an end, so that neither the
society nor the company any longer depended on the personality
340
HOUSE OF LOEDS [1959]
H. L. (So.) of the respondents to get supplies of yarn. It was also in the

igs8 course of it that the respondent Meyer was anxious to visit
•—~ Germany with a view to increasing the company's trade in that
CO-OPERATIVB country but was prevented by his co-directors from doing so.
WHOLESALE This was undoubtedly J the cause of much ill-feeling and was itself
SOCIETY LTD. °
„. a matter of complaint in the original petition, but, as the aver-
MEYER- ment in regard to it was struck out, I say no more about it.
viscount During the same period other incidents occurred which aggravated
' the hostile relations between Meyer and Schofield, the manager
of the society's Falkland Mill.
An important consequence of the removal of cotton control was
this. In or about June, 1951, a new department of the society
had been formed called the merchant converting department. I t
was under the control of a Mr. Wand, the manager of the drapery
department, and its function was to convert loom state cloth by
dyeing, printing and finishing into material for manufacture into
garments. I t therefore became possible upon the removal of
cotton control and upon a revival of the rayon trade for the
society to divert to their own converting department the product
of their Falkland Mill. I t was the fact, as they were well aware,
that the company which had throughout been practically tied to
them for the greater part of its supplies, would have great diffi
culty upon a revival of trade in getting them elsewhere.
Deliberately they supplied the necessary material to the con
verting department but, in spite of Meyer's protests, declined to
supply the company except at higher and non-competitive prices.
An attempt to justify this discrimination was rightly regarded by
their Lordships of the First Division as unsatisfactory. I have no
doubt that at any rate by the end of 1952 it was the policy of the
society by one means or another to destroy the company it had
created, knowing that the minority shareholders alone would suffer
in that process. But it is, in truth, unnecessary to seek to draw
inferences from ambiguous facts. For in January, 1953, a Mr.
Kobert Taylor, a director of the society and then chairman of the
company, had an interview with Meyer and Lucas. He cannot be
absolved from a share in the lethal policy of the society but is
entitled to what credit may be due for the attempt to make the
death as merciful as possible. He told them frankly that the
society was out to destroy the company, that they had no chance
against such a powerful organisation, and that they should make
their peace with the society by offering to sell their shares, and he
offered to draft, and, two days later, drafted, a letter for them
to send to the society. I t is not surprising that Meyer wrote,.
though not in terms suggested by Taylor, offering on behalf of H- L. (Sc.)

Lucas and himself to sell their shares at a negotiated price. This 1955
letter having been referred to a joint meeting of the society's
finance sub-committee and the furnishing sub-committee, those CO-OPEBATIVE
sub-committees met and agreed that the company had served its WHOLESALE
SOCIETY L T D
purpose and should be liquidated, if possible. At about the same o.
time the finance sub-committee interviewed the respondents, who MEYEB.
intimated that in their opinion a fair price for the shares was 96s. viscount
per share and also that they were prepared after selling their '
shares to stay on in the service of the company. The same sub
committee recommended that Dr. Meyer should be informed that
the society did not wish to accept the offer to sell '' at the present
" time." These recommendations were approved by the board of
the society on February 9, 1953, and a letter was duly sent to
Meyer informing him of the decision not to accept the offer to
sell " at the present time." He was not told and did not learn,
until in these proceedings the minute was produced, that the
society had decided that " the company had served its purpose "
and should be liquidated if possible.
At this time the three nominee directors of the company were
aware (Taylor by his own confession) of the policy of the society.
I t is undeniable that persons so placed may find themselves in a
difficulty. But in all the evidence I have not been able to find
the least trace that they regarded themselves as owing any duty
to the company of which they were directors. They were the
nominees of the society and, if the society doomed the company
to destruction, it was not for them to put out a saving hand.
Eather, they were to join in that work, and, when a frank and
prompt statement to their co-directors might have enabled them
to retrieve its fortunes, they played their part by maintaining
silence. That is how they conducted the affairs of the company,
and it is impossible to suppose that that was not part of the
deliberate policy of the society. As I have said, nominees of a
parent company upon the board of a subsidiary company may be
placed in a difficult and delicate position. I t is, then, the more
incumbent on the parent company to behave with scrupulous
fairness to the minority shareholders and to avoid imposing upon
their nominees the alternative of disregarding their instructions
or betraying the interests of the minority. In the present case
the society pursued a different course. It was ruthless and
unscrupulous in design and it was effective in operation, and, as
I have said, it was promoted by the action or inaction of the
nominee directors. The company, which might have recovered
342 HOUSE OF LORDS [1959]
H. L. (Sc.) its former prosperity, had " served its p u r p o s e . " I t could con-
jgijg veniently be liquidated. I have omitted m u c h which reflects no
- credit on the society and its officers, for I do not want to repeat
SCOTTISH
CO-OPERATIVE what has already been said, or to anticipate what will fall from
WHOLESALE some of your Lordships. I will only mention the final fact t h a t
S O P T P T Y T ITT*>
„. ' on August 24, 1953 (that is, after the presentation of the petition
MEYER. under section 210) Meyer and Lucas were given three m o n t h s '
viscount notice of termination of their appointments as managing directors,
' and Mr. Wand, the manager of the society's drapery department,
was appointed manager of the company.
My Lords, upon the facts, as I have outlined t h e m and as
they appear in greater detail in the judgments of their Lordships
of the First Division, it appears to m e incontrovertible t h a t the
society have behaved to the minority shareholders of the com
pany in a manner which can justly be described as " oppressive."
They had the majority power and they exercised their authority
in a manner " burdensome, harsh and wrongful " — I take the
dictionary meaning of the word. B u t , it is said, let it be assumed
t h a t the society acted in an oppressive m a n n e r : yet they did not
conduct the affairs of the company in an oppressive manner. My
Lords, it m a y be t h a t the acts of the society of which complaint
is m a d e could not be regarded as conduct of the affairs of the
company if the society and the company were bodies wholly
independent of each other, competitors in the rayon market, and
using against each other such methods of trade warfare as custom
permitted. B u t this is to pursue a false analogy. I t is not
possible to separate the transactions of the society from those of
the company. Every step taken by the latter was determined
by the policy of the former. I will give an example of this. I
observed t h a t , in the course of the argument before the House, it
was suggested t h a t the company had only itself to blame if,
through its neglect to get a contract with the society, it failed in
a crisis to obtain from the Falkland Mill the supply of cloth t h a t
it needed. The short answer is t h a t it was the policy of the
society t h a t the affairs of the company should be so conducted
and the minority shareholders were content t h a t it should be so.
They relied—how unwisely the event proved—upon the good faith
of the society, and, in any case, they were impotent to impose their
own views. I t is just because the society could not only use the
ordinary and legitimate weapons of commercial warfare but could
also control from within the operations of the company t h a t it is
illegitimate to regard the conduct of the company's affairs as a
m a t t e r for which they had no responsibility. After much
343
consideration of this question, I do not think t h a t m y own views H. L. (Sc.)

could be stated better t h a n in t h e late Lord President Cooper's 1953
words on t h e first hearing of this case. " I n m y v i e w , " he said, 1
SCOTTISH
" t h e section warrants t h e court in looking a t t h e business CO-OPERATIVE
" realities of a situation and does not confine t h e m to a narrow WHOLESALE
SOCIETY LTD
" legalistic view. The t r u t h is that, whenever a subsidiary is „.
" formed as in this case with an independent minority of share- MEYER.
" holders, t h e parent company must, if it is engaged in t h e same viscount
" class of business, accept as a result of having formed such a '
" subsidiary an obligation so to conduct what are in a sense its
" o w n affairs as to deal fairly with its subsidiary." At t h e
opposite pole to this standard m a y be p u t t h e conduct of a parent
company which s a y s : " Our subsidiary company h a s served its
" p u r p o s e , which is our purpose. Therefore let it d i e , " and,
having t h u s pronounced sentence, is able to enforce it and does
enforce it not only by attack from without b u t also by support
from within. If this section is inept to cover such a case, it will
be a dead letter indeed. I have expressed myself strongly in
this case because, on t h e contrary, it appears to m e to be a
glaring example of precisely t h e evil which Parliament intended
to remedy.
Some criticism was made of t h e relief given by t h e order of
the court. I t was said t h a t only t h a t relief could be given which
had as its object and presumably its effect t h e " bringing to an
" end of t h e m a t t e r s complained of " and t h a t an order upon
the society to purchase t h e respondents' shares in t h e company
did not satisfy t h a t condition. This argument is without sub
stance. The m a t t e r complained of was t h e oppression of t h e
minority shareholders by t h e society. They will no longer be
oppressed and will cease to complain if t h e society purchase
their shares.
Finally, it was said t h a t t h e court had n o t properly exercised
its discretion in fixing a price of £ 3 15s. Od. per share. I see no
ground for interfering with this decision. Necessarily a price
cannot be scientifically assessed, b u t I heard no argument, nor
had any evidence called to m y attention, which suggested t h a t
their Lordships had acted on any wrong principle or adopted a
measure too generous to t h e respondents.
The appeal should accordingly, in m y opinion, be dismissed
with costs.
LORD MORTON OF HBNRYTON. My Lords, I shall refer to t h e
1 1954 S.C. 381, 391.

H. L. (Sc.) appellant society as '' the society,'' and to Scottish Textile and
2958 Manufacturing Co. Ltd. as " the company."
—
~ I would accept the finding of fact by the First Division of the
2
CO-OPERATIVE Court of Session which the Lord President expressed as follows :
e m eir
SOMETV LTD " ^°^ ^ *^ attempt to secure the realignment of the share-
v. " holdings by the purchase of shares from the petitioners at or
MBVEB
' " about par, the society as a matter of policy thereafter proceeded,
Lord Morton " as the subsequent events demonstrated only too clearly, to
J J
of Henry ton. (( ^ '
endeavour to force down the value of the company s shares,
" and in the process in effect to transfer the goodwill of the
" company's business to the society itself."
The conduct thus described was, no doubt, oppressive to
the company and to the respondents, minority shareholders in
the company. I t is necessary, however, to consider what was the
nature of the steps taken by the society in furtherance of the
policy thus described, in order to see whether they bring the case
within section 210 of the Companies Act, 1948. The respondents,
as members of the company, can only succeed if they prove that
" the affairs of the company "—and I emphasise the words " of
" the company "—were " being conducted in a manner oppres
s i v e to some part of the members," i.e., to themselves.
1 cannot improve upon the learned Lord President's summary
of the steps taken by the society and I gratefully adopt it. After
referring to the fact that cotton control, and its attendant licensing
system, came to an end in June, 1952, the learned Lord President
continued 3 :
" The door was then open for the department " (that is, the
society's own merchant converting department) " to utilise
" Falkland Mill " (which belonged to the society) " for the manu-
" facture of rayon and to merchant it themselves—thereby
" by-passing the company altogether. The trade and the con-
" nections built up by the company could then be transferred to
" the society itself, and the goodwill of the company emptied
" of almost any. content. No contractual arrangement had been
" made between the company and Falkland Mill whereby the
" latter undertook to do the weaving for the former. All the
" members of the company's board knew that the facilities at
" Falkland Mill were essential to the company, and no breach of
" any formal contract (as distinct from any question of fair
" dealing) was therefore involved in Falkland Mill abandoning
" the customer who had employed it for so many years and
2 1957 S.C. 110, 121. a Ibid. 122.
345
" substituting the m e r c h a n t converting d e p a r t m e n t of the society H. L. (Sc.)

" as its customer. B u t this is what was in fact done. 1958
B y the a u t u m n of 1952 a temporary trade recession in rayon ~
" had passed; manufacturers were getting busy, and the m a r k e t CO-OPERATIVE
" was short of goods. I t would not have been easy for the WHOLESALE
" company in these conditions to secure its manufacturing require- e,
" m e n t s in some other quarters. Now t h a t the barrier created MEYER.
" by the existence of cotton control was removed, this was the Lord Morton
m o m e n t selected for the gradual transfer of the society's ° e n r y on '
" interest in the merchanting of rayon from the company to the
" m e r c h a n t converting d e p a r t m e n t . "
The Lord President then went on to state t h a t the prices
which Falkland Mill quoted for deliveries to the company, and
refused to lower, were quite uneconomic for the company and
were throughout consistently above m a r k e t prices. H e referred
to efforts made by the respondent, Dr. Meyer, to induce Falkland
Mill to do business with the company, and continued *:
" Nothing came of these approaches, as the mill's prices
" remained far too high. Dr. Meyer reported the difficulties to
" the board of the company, all the members of which m u s t have
" realised how serious an effect these high quotations were having
" on the operations of the company. B u t none of the members
" of the board appear to have given him any assistance or
" explanation, nor taken any steps to try to remedy the situation
" by raising his difficulties at any committee or board meeting of
" the society.
" The reason is not far to seek. At the very time when Dr.
'' Meyer was finding the mill consistently quoting these high
" prices to him, the society decided t h a t the m e r c h a n t converting
" d e p a r t m e n t should obtain deliveries of rayon goods from the
" Falkland Mill. This was not a mere departmental m a t t e r
" arranged between managers, b u t was raised to a policy level by
'' a direct approach to the m e r c h a n t converting d e p a r t m e n t by the
" manager of Falkland Mill. This is clear on the evidence both
" of Mr. Schofield and Mr. W a n d s . The board of the society
" and the society's nominee directors on the board of the company
" were, therefore, fully advised of the decision.
" Moreover, the arrangement made was t h a t the mill would
" supply woven rayon cloth to the merchant converting depart-
" m e n t and t h a t the mill would ' accept the prices which the
" ' department was prepared to pay, and see the manager of the
* 1957 S.C. 110, 123.

346
H. L. (Sc.) " ' department about it later if the prices were not economical
1958 " ' o n e s . ' To start with, experimental orders only were given
" and accepted. B u t the manager of the department said in
SCOTTISH
CO-OPEKATIVB " evidence that he gave Falkland Mill in 1952 enough orders to
WHOLESALE " keep the looms going for six months. In 1953 and 1954 all the
SOCIETY L T D .
„ " rayon looms at Falkland were operating for the merchant con-
MEYEE. " verting department. This department was buying from the
Lord Morton " mill at prices throughout substantially lower than those quoted
enry
°"" " by the mill to the company. Moreover, on the costing figures
" produced by the respondents, the prices at which the mer-
" chant converting department were buying were completely
" uneconomic.
" It was contended that there was nothing wrong in the mill
" changing over from one customer to another, particularly if
" the mill could not arrange a mutually satisfactory price with
" the company. This would no doubt be so if both customers
" were treated alike, or if it could be maintained that the com-
" pany was holding out for an unduly low price. But this was
" not the situation. The policy adopted involved starving the
" company of deliveries and diverting the production to the
" merchant converting department at substantially lower prices
" with the understanding that the department would see about
" it later if the prices turned out too small. I t involved a clear
" violation of the elementary principles of fair dealing which
"normal commercial standards require."
My Lords, it is, I think, manifest that the oppressive opera
tions so clearly described were all operations in the conduct of
the society's affairs, not in the conduct of the company's affairs.
The society so conducted its affairs as to oppress the company
by shutting it off from its previous source of supply. By so
doing the society did, I think, oppress the minority shareholders
in the company; but, as I have already pointed out, the respon
dents can only bring themselves within section 210 of the Act
of 1948 if they prove that the affairs of the company whereof
they are members are being conducted in a manner oppressive
to themselves as minority shareholders. They cannot succeed,
in my opinion, merely by proving that the affairs of another
company are being so conducted, even if that other company
holds the majority of the shares in the company whereof the
petitioners are members, and nominates the majority of its
directors. I t may be unfortunate that this form of oppression
is not covered by the section; but this is, to my mind, the inevit
able result of the words " the affairs of the company are being
347
" conducted." For this reason, m y Lords, I should have held H. L. (Sc.)
the appellant society entitled to succeed if the only evidence of iggs
oppression had been evidence t h a t the society deliberately so ~
conducted its own affairs as to cause hardship to the company CO-OPERATIVE
and to force down the value of its shares, however regrettable WHOLESALE
such conduct m a y be, and whether or not it may be actionable. „.
I t u r n now to consider whether there is any other ground '
upon which the present case comes within section 210. Counsel o°2e5J.°to°nn
for the respondents contend t h a t certain directors of the com-
pany, nominated by the society and constituting a majority of
the company's directors, or the society acting by these directors,
" conducted " the affairs of the company " i n a m a n n e r oppres-
" sive " to the respondents. As these directors of the company
were also directors of the society, they m u s t , no doubt, be treated
as parties to the oppression by the society in the conduct of its
own affairs; but I have had great difficulty in arriving at a con
clusion upon the question just posed, which is directed only to
the affairs of the company. The inaction of these directors at
a critical time was pointed out by the Lord President in a
passage which I have already quoted from his judgment, and
their conduct throughout the relevant period is open to severe
criticism. My difficulty is t h a t the conduct of which complaint
is made consists rather of sins of omission t h a n of sins of com
mission, and the day to day affairs of the company appear to
have been " conducted " by Dr. Meyer and Mr. Lucas without
any active interference by the other directors, except, possibly,
on two occasions, which the First Division excluded from proof
on the ground of irrelevancy, and except t h a t notice of dismissal,
on the ground of saving expense, was given to the respondents
after they had presented the present petition. I shall not detain
your Lordships by referring in detail to the evidence. Suffice it
to say t h a t in the end I have reached the conclusion t h a t there
is evidence to justify the view t h a t the affairs of the company
were " conducted in a manner oppressive " to the respondents.
I a m not disposed to give a narrow meaning to these words,
having regard to the manifest object of section 210. I am
naturally assisted to my conclusion by the fact t h a t the decision
of t h e four learned judges of t h a t Division (including Lord
Carmont, who had the advantage of seeing and hearing the
witnesses) was unanimous, and by the fact t h a t your Lordships
are all of the same opinion.
I agree t h a t this appeal m u s t be dismissed.

348
H. L. (So.) LORD K E I T H OF AVONHOLM. My Lords, this appeal arises out

1958 of a petition presented by t h e respondents (whom it, will be con-
~~~ venient to refer to as " t h e petitioners " ) against, inter alios, the
CO-OPEEATIVE appellants (whom J will call " the society ") under section 210
WHOLESALE 0 f the Companies Act, 1948. Under t h e procedure of t h e Court
SOCIETY L T D
„. ' of Session such a petition must be presented to the Inner House
MEYEB. a n ( j | unless it is remitted to the Outer House, is dealt with and
disposed of by the Inner House. Where in the Inner House
inquiry into the facts through the mouths of witnesses is thought
necessary, evidence is taken in the presence of one of the judges
of the Division of the Inner House before whom the petition
comes and the hearing on the evidence thereafter takes place
before the full Division, including the judge who saw and heard
the witnesses. This judge gives no opinion until, after the
hearing, he takes part in the judgment of the court. This was
the procedure followed in the present case.
This petition was presented as far back as July 14, 1953, and
after a hearing on relevancy the court, on June 1, 1954, gave a
judgment allowing parties a proof before answer of their respec
tive averments, excluding certain averments of the petitioners
from probation, and appointed the proof to proceed before Lord
Carmont, one of their number. The proof, which commenced on
March 25, 1955, was lengthy and voluminous and extended, with
many interruptions, for a period of over a year, though the actual
number of days occupied was only 12. After a hearing lasting
13 days, the First Division gave judgment on March 20, 1957,
ordaining the society to purchase the shares of the petitioners in
the Scottish Textile and Manufacturing Co. Ltd. (hereinafter
called " the company ") at a price of £3 15s. per share.
I t is difficult to compress the salient features of the case even
in broad outline. The petitioners, who were originally of German
nationality and are now naturalised British subjects, came to this
country in 1939. Through an advertisement Dr. Meyer (one of
the petitioners) got into touch with the society in 1945 and got
employment from them as textile adviser. He had considerable
knowledge of rayon trade and production and conceived the idea
that one of the society's weaving mills at Falkland could be
profitably employed in the weaving of rayon goods, which would
be for it a new line of manufacture. He had great experience
of the processes involved and had formulae of his own. He also
had trade connections abroad and he succeeded in establishing
relations with the cotton control board who controlled the supply
of yarn and manufacture of the cloth. Ultimately it was agreed
34
A.C. AND PEIVY COUNCIL. 9
between the society, Dr. Meyer and the other petitioner Mr. H. L. (Sc.)
Lucas, who had been associated with Dr. Meyer in the textile ^ggs
business in Germany before the war, that a company should be ~
formed on certain terms for the purpose of manufacturing and CO-OPEBATIVB
dealing in textile fabrics of all descriptions. The company called WHOLBSALH
the Scottish Textile and Manufacturing Co. Ltd. was incorporated „.
on May 7, 1946, with an authorised capital of £25,000 in one MEYEB.
pound shares. Thereafter in March, 1947, a second agreement Lord Keith or
was entered into between the parties which gave effect largely to 1
what had been agreed before the incorporation of the company.
...The terms of this agreement are important in the light of what
follows. I recite the greater part of this agreement:
" FIRST. The share capital of said company is £25,000
" divided into 25,000 shares of £1 each and subject to the provi-
" sions of clause 10 hereof the [society] shall subscribe and hold
" i n their own right up to 17,500 of said shares, [Dr. Meyer]
" shall subscribe and hold in his own right up to 5,250 of said
" shares and [Mr. Lucas] shall subscribe and hold in his own
" right up to 2,250 of said shares the said shares to be allotted
" and issued from time to time as the directors of the Scottish
" Textile and Manufacturing Co. Ltd. may decide.
" SECOND. The [society] shall purchase as they do hereby
" purchase from [Dr. Meyer] all his formulae for the manufac-
" ture of textile fabrics for the price of £3,000 which formulae
" [Dr. Meyer] has now delivered to the [society] and as to pay-
" ment of said price [Dr. Meyer] hereby requests and authorises
" the [society] to pay the same to the said Scottish Textile and
" Manufacturing Co. Ltd. to be held for his account and applied
" towards settlement of the amount due by [Dr. Meyer] to said
" company for shares allotted to him.
" THIRD. The [society] in addition to being otherwise en-
" titled to use said formulae shall place the same at the disposal
" of said Scottish Textile and Manufacturing Co. Ltd. which
" shall have full liberty and licence to use the same without
" restriction.
" FOUKTH. The [society] are entitled and shall continue
" t o be entitled to nominate three persons to act as directors of
" the said Scottish Textile and Manufacturing Co. Ltd. along
" with [Dr. Meyer] and [Mr. Lucas] who already have been
" elected directors of the company and appointed managing
" directors thereof.
A.C. 1959. 23 (1)

H. L. (Sc.) " SEVENTH. [Dr. Meyer's and Mr. Lucas's] appointments

1958 " 8 S joint managing directors shall subsist for a period of three
" years as from May 7, 1946, notwithstanding the date hereof,
SCOTTISH an
CO-OPBRATIVB " ^ o n * n e expiry of said period unless terminated as herein-
WHOLESALB " after provided, or unless renewed for a further period, shall
ti " thereafter continue from year to year. [Dr. Meyer's and Mr.
MEYEB. " Lucas's] appointments as managing directors or one or other
Lord Keith " of them may be terminated by the company on three months'
o vonj>m. " p r e v j o u s notice in writing being given to that effect, but said
" notice shall not prejudice their status to act as ordinary
" directors of the company if so elected.
" EIGHTH. [Dr. Meyer and Mr. Lucas] in the perform-
" ance of their duties as joint managing directors shall promote
" and safeguard the company's interests faithfully and with due
'' diligence and they shall devote their whole time to the manage-
" ment and supervision of the company and in particular they
" shall apply without reservation in any respect their specialised
" knowledge and experience in the textile trade to the advantage
" and benefit of the company. [Dr. Meyer and Mr. Lucas]
" shall also use every endeavour to renew or to re-establish all
" former trade connections held by them with customers and
" agents both in Great Britain and abroad with the purpose of
" enhancing and developing the company's interests to the best
" extent.
" NINTH. [Dr. Meyer and Mr. Lucas] shall make full dis-
" closure for the use benefit and advantage of the company of all
" formulae, processes and inventions which they may discover
'' during the tenure of their appointments. They shall also place
" at the disposal and use of the company all patent rights (but
" excluding trade names previously held by them) of which they
" are the present owners or of which they may come to be
" possessed during the period of their respective appointments
" and that all free of charge. Further [Dr. Meyer and Mr.
" Lucas] or either of them bind and oblige themselves not
" to transfer or make known to any other person or company
" any formulae (including the formulae sold to the [society] by
" [Dr. Meyer]) processes, patent rights or inventions held or to
" be held by them or to become known to them respectively
" without the written consent of the company. Neither shall
" they grant licences to any other person or company to use
" such formulae, processes, patent rights or inventions without
'' the written consent of the [society].
351
" T E N T H . I n the event of this agreement coming to an end H\ L. (So.)

" or in the event of [Dr. Meyer's and Mr. L u c a s ' s ] appointments 195$
" with said company being terminated from any cause whatever ~
" [Dr. Meyer and Mr. L u c a s ] shall have the option to sell their CO-OPERATIVE
" shares in said company to the [society] who shall be bound to WHOLESALE
" purchase said shares and t h a t at a price to be fixed by the „_
" auditors of the company, said auditors' decision as to price MEYER.
" being final and binding; . . . " Lord Keith
Of the authorised share capital of the company only 7,900
shares were actually issued, of which 4,000 were held by the
society, 3,450 by Dr. Meyer, and 450 by Mr. Lucas, all fully
paid. This was not according to the proportions contemplated
by the agreement, which were in the ratio of 70 to 21 to 9, and
although this disproportion was accepted and apparently desired
by the society at the beginning, it carried with it later, as will
be seen, the seeds of dissension between the society and the
petitioners.
To commence operations it was necessary for the company to
secure three things—sources of supply of rayon yarn, a licence
from cotton control to obtain and weave the yarn, and a place
at which to weave it. Dr. Meyer was the chief, if not the sole
instrument, in obtaining the first two of these things and he was
largely responsible for securing the third. I t was contemplated
apparently t h a t the company might obtain a factory of its own.
On December 29, 1945, before the company was incorporated,
the society minuted approval of a recommendation by its furnish
ing sub-committee " t h a t steps should be taken without delay to
r e n t a suitable factory. W h e n we are successful in obtaining
" premises, sub-committee would consider transferring to t h e m
" [the company] several looms (say 24) from the linen works at
" Falkland. Until such time as a factory becomes available,
" p r o d u c t i o n would be carried on at Falkland and elsewhere."
At a meeting of the company's board on J a n u a r y 14, 1947, Dr.
Meyer reported disappointment t h a t the 24 looms promised at
the outset had not been altogether made available and t h a t not
more t h a n 10 looms were running on the company's behalf at
Falkland. H e stressed the fact t h a t " sales total was entirely
" dependent on the supply of cloth received from Falkland and
" t h a t the rapid progress of the company was only possible by
" m e a n s of increased production." The board, which included
the society's nominee directors, resolved t h a t the report be
accepted and the society be approached to ascertain a date when
the company might expect the 24 looms to be in operation on its
A.C. 1959. 23 (2)
H. L. (So.) behalf. Dr. Meyer had in fact by this time obtained a licence
1958 from cotton control for these looms, and in March, 1948, he
received a revised licence to operate 40 looms at Falkland Mill
w n
CO-OPBRATIVH i * effect from March 1, 1948. I t is only necessary to add that
WHOLESALE rayon production at the mill increased from some 23,000 yards
SOCIETY LTD. i n 1 9 4 6 _ 4 ? t o Q v e r 4 7 5 0 0 0 y a r d s i n 1949.50, showing to the mill,
MEYER. in money, an increase from £3,087 to £39,532. The relationship
Lord Keith of observed between the company and the mill was that Dr. Meyer
Avonhoim. p r o c u r e ( j the rayon yarn, which was invoiced to the mill and paid
for by the society, and the company paid the mill for the cloth
produced for it. The cloth was then dyed, dressed, or otherwise
treated and sold by the company to its customers. The idea of
setting up an independent factory by the company faded into the
background and after a short initial period, when the mill was
being equipped and its workers trained for rayon production, the
mill, on the rayon side, became the company's chief supplier
and the mill wove rayon exclusively for the company.
The rest of the story is an unfortunate one. The company
prospered for some five years and more, made considerable
profits, paid large dividends and accumulated substantial reserves.
The rayon looms at Falkland Mill were, during the same period,
fully employed. About September, 1951, however, trade began
to slacken. To Dr. Meyer it appeared that a recession was
approaching, not unconnected with rumours about changes in
purchase tax. He wished to hold back supplies ordered from
Falkland Mill until he saw how things were going to develop and
what customers wanted. This did not please Mr. Schofield, the
manager of the mill, who wished to keep his workers engaged on
the looms. He had large quantities of yarn in stock obtained
through the efforts of Dr. Meyer. I have little doubt that Dr.
Meyer's policy was sound, looking to the close relations between
the mill and the company. If there was no market for cloth,
there was no point in the mill making cloth to be accumulated
by the company with no orders in sight and with no money
coming in to pay for it. The last bulk order for cloth given by the
company to the mill in 1951 was on August 22, 1951, and a dis
pute arose about the mill continuing to weave to this order, which
was not settled till April, 1952. There are indications in the evi
dence that even before this Mr. Schofield was not particularly well
disposed to Dr. Meyer and I think that from this time onwards his
attitude unjustifiably hardened against him.
Another event took place about this time which is crucial in
this case. The society, stimulated presumably by the prosperity
A.C. AND PEIVY COUNCIL. 353
of the company and desiring to have a share interest in the com- H. L. (Sc.)
pany corresponding to what they were entitled to under the 1958
original agreement, decided to seek what was described as a proper ~
alignment of the shareholding. The matter came before the CO-OPBKATIYB
society first on August 20, 1951, and their representatives on the WHOLESALE
company's board were thereafter asked to raise the matter with „
the company. At a board meeting of the company on November MEYBK.
5, 1951, proposals were continued for further consideration at a Lord Keith of
om
meeting to be held on November 22. In the meantime, on Novem- '
ber 15 an informal meeting took place between Messrs. Nicholson,
Patterson and Dow, the society's nominees on the company's
board, and Dr. Meyer and Mr. Lucas, at which Mr. Douglas, the
company's secretary, was also present. No minute was taken
of this meeting and what transpired can be got only from the
evidence given in this case. The judges of the First Division,
including Lord Carmont, who saw and heard the witnesses, have
accepted the account given by Dr. Meyer and Mr. Lucas, and I
find it impossible to take a different view. At the meeting dis
cussion took place on certain proposals for rearrangement of the
share capital. The society's representatives insisted that they
should acquire the shares at par. Dr. Meyer and Mr. Lucas
objected. Discussion got heated and the petitioners say threats
were made that if they did not agree the society would liquidate
the company. When Dr. Meyer pointed out that this was im
possible as the society did not have a three-quarter majority of
shareholding, another threat was made that " we will increase
" the capital to £25,000 and that will put you in a pickle." The
shares of the company were at this date of considerable value.
But Mr. Nicholson, one of the society's representatives, who was
present at the meeting, agrees that the society was determined
to realign the shares at par value.
Following this meeting Dr. Meyer put forward certain pro
posals in writing to the society, one of which was that 5,100 new
shares should be allotted to the society at a value to be ascer
tained by the auditors of the company. The society resolved to
ascertain the decision of the auditors before coming to a decision.
The auditors fixed a value of £6 0s. lid., and on February 18,
1952, the society's board resolved that this be noted and com
municated this decision to the company. No further action was
ever taken in the matter of realignment of shares by the society.
From this date till the end of the tale it is, I think, clear that
there existed in the company an atmosphere of hostility on the
part of the society's nominees on the board to the petitioners,
354
H. L. (Sc.) except in the case of Mr. Taylor, who was not at all times on
ig58 the board. Even Mr. Schofield seems to have been aware of
~ the fact, and Mr. Taylor recognised it, as will be seen in the
SCOTTISH
CO-OPERATIVE events of a year later. I t is to be remembered t h a t the directors
WHOLESALE 0 f the company were personally or as representatives of the
„, ' society the whole shareholders and t h a t the company was a
MEYER. private company. No appeal to a shareholders' meeting would
Lord Keith of alter the situation because the composition of board and share-
' holders' meeting would be the same.
The recession deepened through the major p a r t of 1952 and
manufacture by the mill for the company was non-existent. I t
would seem likely t h a t the recession was felt by other mills of
the society than Falkland Mill, b u t a veil is drawn over much
of the society's and the petitioners' activities in 1952 by the
exclusion from probation by the Court of Session of inquiry into
certain happenings of which complaint was made by the peti
tioners in their pleadings.
I n J u n e , 1952, cotton control was abolished. This has a
material effect on what followed for it left the society free to
procure rayon yarn and weave rayon cloth without any licences.
No orders had passed from the company to Falkland Mill since
1951. B u t trade began to pick up in the a u t u m n of 1952 and it
is clear t h a t Dr. Meyer was anxious for the mill to resume
weaving for the company. The mill itself was at a low ebb.
There were no looms working on rayon cloth. I t was impossible,
however, for Mr. Schofield and Dr. Meyer to come to terms on
prices. On November 15, 1952, Dr. Meyer writes to the mill:
" W e feel most unhappy to place our order somewhere else
" while not all of your looms are working. Please do recalculate
" y o u r prices a g a i n . " On November 20, he writes: " W e are
" very reluctant to place an order with some other firms while
" y o u r looms are standing i d l e , " and suggests a small order of
some 16,000/17,000 yards " so t h a t we can start business again
" and then we can review the position from time to time and
" see if we can carry on or not. This would at least, even if we
" b o t h worked without any profit at all, mark the beginning."
Mr. Schofield quoted prices of I s . 7d. a yard and I s . 9£d. a yard
for two qualities of cloth, which Dr. Meyer was unable to accept,
and on December 4 Dr. Meyer is writing again: " I feel very
" sorry indeed t h a t you are unable to accept an order from us
" after so many years of co-operation." On the same date Mr.
Schofield was writing to the convener of the drapery and
furnishing committee of the society, following on an interview
355
H
with t h e m two days' earlier, in which he presents the mill's - L - (Sc-)
point of view and concludes: '' W e are in desperate need of iggs
" work for these rayon looms at the present time, and in view ~
• • • SCOTTISH
of the foregoing circumstances, we consider t h a t we are CO-OPERATIVE
" receiving unfair t r e a t m e n t from the Scottish Textile and Manu- WHOLESALE
SOPIFTY Ti'rr)
" facturing Co. L t d . " This letter was never disclosed to the „.
petitioners, though it m a y well have been known to the com- MEYER.
p a n y ' s society nominees, and it is, I think, significant t h a t it Lord Keith of
should have been written at a time when other plans were
maturing. Shortly before this date the drapery d e p a r t m e n t of
the society had put Mr. Schofield in touch with a department of
the society, formed about a year before, known as the merchant
converting department. This was a department which carried
on a business similar to t h a t of the company. I n other words, it
included the business of buying materials and dyeing, finishing
or otherwise processing t h e m for sale to customers. The proposal
was t h a t the mill should supply the m e r c h a n t converting depart
m e n t with a variety of woven goods for converting, including
rayon cloth. This idea came to fruition and the first experi
mental order for rayon cloth was placed on December 11, 1952,
and the first bulk order in April, 1953. For the year 1953 £2,167
worth of rayon cloth was supplied by the mill and for the year
1954 £11,776 worth. F r o m transfer invoices produced for these
years it is shown t h a t a line of rayon cloth known as 1009 was
throughout debited by the mill to the m e r c h a n t converting
department at I s . 6Jd. a yard. The lowest price quoted by Mr.
Schofield to the company for this quality on November 24, 1952,
was I s . 7d. a yard, and Dr. Meyer was never able to secure a
better quotation. Indeed, much later, in July, 1953, when the
society was not prepared to provide cloth for the company except
on a weaving commission basis, Mr. Schofield was quoting prices
which, on a manufacturing basis, worked out as high as I s . 9 | d .
a yard. I n December, 1952, when Dr. Meyer was endeavouring
to resume business with the mill he was able to buy this quality
cloth from other sources at about Is. 5fd. and from a m e r c h a n t
converter a t I s . 6Jd. I n these circumstances, the judges of the
First Division all took the view t h a t there was a policy on the
p a r t of the society to starve the company of cloth, and I do not
find it possible, in the circumstances proved, to differ from this
view. I t is said t h a t during 1953 and 1954 the society made a
contribution to the mill to make up for the alleged uneconomic
price charged by the mill against the merchant converting depart
m e n t . B u t , like Lord Sorn, I find the evidence on this very
356
H. L. (Sc.) unsatisfactory and unconvincing. The allowance, for which no

1958 specific figures can be shown in the books of the society, would
~ seem to have been given, if at all, in respect of the conversion a t
SCOTTISH ne m u
CO-OPBBATIVB * l °f looms that had nothing a t all to do with the weaving
WHOLESALES of rayon. Likewise, I discard the costing evidence given to
SOCIETY LTD
„. ' support the prices quoted by Mr. Schofield to the company. I t
MEYER. falls with the other evidence and it seems that, in any case, it is
Lord Keith of based on reduced production at the mill, whereas Dr. Meyer was
vo om
" " anxious to get the mill back to a state of full production. I find
it difficult to appreciate how, if Dr. Meyer was unable to compete
on the mill's quotations in a competitive market, the society
would be able to compete, unless it be that the society enjoyed
a quasi monopoly in the retail co-operative world.
The next chapter in this unfortunate history opens with the
month of January, 1953. In that month Dr. Meyer and Mr.
Lucas had a meeting with Mr. Taylor, one of the society's repre
sentatives and fellow director, with whom Dr. Meyer was on
friendly personal and social relations. Dr. Meyer says Mr.
Taylor told him: '' They want to get you out and to destroy the
" company and you have no chance at all," and Mr. Lucas gave
evidence to the same effect. Though Mr. Taylor denies using
this language, Lord Carmont accepts it as true, and it certainly
fits in with the surrounding facts and circumstances at the time.
About the same time Mr. Taylor drafted a letter which he sug
gested the petitioners should send to the society. It was not
sent, as will be seen, but it shows Mr. Taylor's recognition of the
existing situation. It opens: " I explained to you [the society's
" secretary] on Friday afternoon how unhappy Mr. Lucas and I
" have been recently because of the strained relations in our
" b o a r d . " After a reference to the impossibility of re-estab
lishing harmony and offering their shares to the society it
proceeds: " You will understand how reluctant we are to take
" this step as we have been together associated with Scottish
" Textiles since it was formed and we feel we are making it a
" success as the records will show. However, it is quite
" impossible to carry on in the present atmosphere and this
" decision is forced upon u s . " The letter, dated January 27,
1953, that was sent by Dr. Meyer was couched in somewhat
different language and in particular refers to a price to be
negotiated for the petitioners' shares. I t runs:
" Dear Mr. Stirling,
" In our conversation last Friday we covered all events from
" the negotiations regarding the ratio of shareholding up to today.
357
" I explained to you how the very harmonious and friendly H. L - (So.)
" relations which were the guiding principle in all our dealings ^58
" started to deteriorate rapidly, and certain actions taken during ~ ;
" the last fifteen months did serious harm to our prosperity and CO-OPEBATIVB
" goodwill. WHOLESALE
SOCIETY L T D .
" Mr. Lucas and myself regret this turn of events most v.
" deeply as it affects not only our livelihood which we built up MEYER.
" w i t h so much pain and labour, but also our sentiment and Lord Keith of
" affection which we gave wholeheartedly to the co-operative idea
" in spirit and actions.
" In spite of all these happenings we still feel that a friendly
" settlement is very much desired at least from our side and
" we have therefore decided to offer to you our shareholding of
" 3900 shares at a price to be negotiated between us.
" As we have to take certain important decisions very soon
" we would be grateful if you could let us have your views as
" soon as possible.
" Yours truly,
" (Sgd.) GEORGE MEYER."
Following on this letter Dr. Meyer and Mr. Lucas had a
meeting with the society's finance sub-committee, when it was
indicated to them that as they wished to give up their interest
in the company it might be voluntarily liquidated. Dr. Meyer
stated that in that case the goodwill would be lost, that they
had had no desire to bring about the present position and they
were not going to give up their shares at a liquidation value and,
in their opinion., they should be paid 96s. a share. They were
prepared to stay on after selling their shares to the society. At a
meeting of the society's board on February 9, 1953, it was
minuted that the finance sub-committee and the furnishing com
mittee had met and agreed that the company " had served its
" purpose " and should, if possible, be put into voluntary liquida
tion. The interview with Dr. Meyer and Mr. Lucas was then
referred to and a recommendation of the finance sub-committee
approved that a reply be sent to Dr. Meyer indicating that the
society did not wish to accept his offer to sell the shareholding
of Mr. Lucas and himself " at the present time." The purpose
which the company had served was plain. It was introducing
rayon production to the society, as Mr. Nicholson, one of the
society's directors, himself said in evidence.
The petitioners knew nothing of the terms of this minute or
of the decision by the two sub-committees that the company had
358 HOUSE OF LORDS [1959]
H. L. (Sc.) served its purpose. B u t they did receive a letter dated February
ig58 9, 1953, stating t h a t the society did not wish " at the present
" time " to accept the offer to sell to t h e m the petitioners' shares.
SCOTTISH
CO-OPERATIVE After that, according to Dr. Meyer, the petitioners were refused
WHOLESALE access to the company's books. There followed a letter from the
SOCIETY LTD
„_ ' petitioners' solicitors to the society, dated February 19, threat-
MEYBE. ening proceedings under section 210 if the petitioners' shares
Lord Keith of were not taken over at £ 6 0s. 11 d. a share. The petitioners
om
' continued to carry on in the company while a t t e m p t s were made
to resolve the differences between the parties. These, however,
came to nothing and the present proceedings were commenced
on July 14, 1953. The petitioners still remained with the com
pany. Business, however, was a t a low ebb, and on August 24,
1953, the board passed a resolution t h a t their employment as
managing directors should terminate on November 30, 1953.
They were, I think, still anxious to do what they could to pro
mote the trade of the company and conserve its goodwill and
did in fact do some business through other sources t h a n the mill.
Under their agreement, they were in any case bound to do so and
had been told to do so at a board meeting on August 24, 1953.
B u t excessively high commission weaving rates quoted by Mr.
Schofield prevented business on any scale being done with t h e
mill and disputes arose also with regard to a special order where
the price charged was of no consequence. The evidence suggests
to me the continuance of a policy of hostility to and discourage
m e n t of the petitioners by the society. This period produces an
instance of support of the petitioners by their fellow directors.
Following a meeting of the company's board on October 5, 1953,
at which Dr. Meyer complained of the rates quoted by the mill,
the company's secretary, on the board's authority, wrote to the
society's secretary t h a t " my board would like to inquire if there
" is any possibility of the quoted commission weaving charges
" from the linen works, Falkland, being r e d u c e d , " an inquiry
which produced a reply in the negative. B u t this, it seems to
me, was but an idle gesture. Litigation was in progress, the
company's conduct was under the scrutiny of the court, and t h e
mill, to the knowledge of the society's representatives, was now
in active production for the merchant converting department.
My Lords, all the judges of the First Division take the view
t h a t it was the deliberate policy of the society in the later years
of its history to depress the value of the company's shares by
starving it of supplies and some of t h e m would date the genesis
of this policy from the events at the end of 1951 and beginning
of 1952, when the society found itself unable to obtain an adjust- H. L. (Sc.)
m e n t of its holding a t par. There is, I think, no positive conduct ^953
proved to support t h a t view before J u n e , 1952, when cotton
control was abolished, but from t h a t date there was an oppor- CO-OPEEATIVE
tunity afforded to the society to pursue such a policy, if they had WHOLESALE
^SOCIFTY L T D
already entertained it, and I think, as events showed, they did in „.
fact t h e n adopt such a policy. The crucial evidence is t h a t MEYER.
bearing on the trading relations between the mill and the Lord Keith o(
von o m
merchant converting department, on the one hand, and the mill "
and the company, on the other. I have already narrated the facts
and, in m y opinion, there was started in the a u t u m n of 1952 a
policy which took effect in 1953 of utilising the rayon looms in
the mill for the production of cloth for the merchant converting
d e p a r t m e n t and shutting off the company from its ordinary source
of supply. This was done, not by refusing orders from the
company, but by quoting to the company prices at which it could
not hope to compete in the selling market. While the society
were at pains to show t h a t because of the costs of production
they could not quote lower prices, the fact remains t h a t through
out the whole of 1952 and 1953 cloth was being passed from the
mill to the m e r c h a n t converting department at prices which, for
a t least bookkeeping purposes, were being noted at a figure per
yard materially lower t h a n t h a t quoted to the company. I t is in
evidence t h a t the various trading departments of the society were
regarded as separate entities expected to show results on a com
mercial basis. If t h a t m e a n t t h a t the society was content t h a t
the mill should work a t a loss in order t h a t the m e r c h a n t
converting d e p a r t m e n t should work at a profit, that only means
t h a t it allowed the mill to show favour to the m e r c h a n t convert
ing department which it could equally have shown to its old
customer the company. B u t I prefer the view t h a t the mill was
giving the m e r c h a n t converting d e p a r t m e n t rayon cloth at prices
which it was prepared to quote on an ordinary commercial and
competitive basis. I have already dealt with the evidence by
which the society seeks to escape this natural inference. Mr.
Schofield's own evidence was t h a t he was expected to show a
profit at his mill. I t is to be remembered t h a t the company was,
shortly before, giving full employment to the rayon looms and
that, if it had been allowed the opportunity to place orders after
the recession passed, there was every reason to think it would do
so again. According to the evidence trading prospects were good
and the results shown in the production of rayon for the merchant
converting department bear out this evidence. According to a
360
H. L. (Sc.) report of the manager of the drapery department dated August 8,

ig5 g 1953, the cost prices of the mill were based on covering overheads
on reduced production and it was anticipated " that if full
fiffYTTTSTT
CO-OPERATIVE '' productive capacity can be obtained mill cost prices will be
WHOLESALE "lowered."
„. ' From the company's point of view, the position was very
MEYER. serious. It had become dependent on the mill for its supplies of
Lord Keith of cloth. At the height of its prosperity 94 per cent, of its cloth was
™ ° ' obtained from the mill. When trade revived in 1953 other sources
on any scale were not available to the company. Manufacturers
were busy supplying their regular customers. The position was
so minuted by the company as the opinion of the managing
directors on August 24, 1953. Mr. Schofield agrees that it was
difficult for the company to obtain woven cloth in any quantities
outside Falkland and that the company had been tied to Falkland
for its rayon cloth. On the other hand, the society had the
formulae, connections, and technical knowledge introduced to the
mill by the company through Dr. Meyer, and the equipment and
workers to manufacture the cloth free from any controls. For
practical purposes the mill had started as being, on the rayon
weaving side, the company's mill, a substitute for a mill owned by
or leased to the company. The rayon weaving looms had now
been diverted to the purposes of the society which was enjoying
the monopoly which had previously belonged to the company.
In the circumstances prevailing, this spelt death to the company.
A very significant situation arose in August, 1953, when Dr.
Meyer found the commission weaving rates quoted by Mr. Scho
field impossible of acceptance. When the secretary of the
company wrote on August 19: " A s a result of this no produc-
" tion is being undertaken on behalf of this company and its
" activities are brought almost to a standstill," the society, at a
board meeting on August 24, decided to make no reduction in the
commission charge. In their minute there appears this passage:
" Another factor which affects the situation is that increasing
" orders are being received from the merchant converting depart-
" ment of the drapery department, and an increasing number of
" looms are being devoted to that work so that bur manager does
" not feel himself pressed to cut his price to the limit as he was
" towards the end of last year when work was very difficult to
"get."
Lastly, on the facts, it is to be noted that while the society's
directors of the company, who were also directors of the society,
knew all that was happening within the society, Dr. Meyer and
Mr. Lucas knew nothing apart from what they could infer from H. L. (So.)
the communications, verbal and written, which they had received, i$5%
with reference to the alignment of the shareholding and the
taking over of shares from the petitioners, and the general CO-OPBEATIVB
attitude of the society's directors on the company's board. On WHOLESALE
the vital m a t t e r s affecting the company's prosperity known to the „_
nominee directors these directors remained silent, concealed the MEYEB.
facts from the petitioners and took no action and gave no advice Lord Keith of
von 10 m
helpful to the company. As Lord Sorn p u t it, their conduct as "
directors was a negative one to " let the company drift towards
" the r o c k s . "
My Lords, if the society could be regarded as an organisation
independent of the company and in competition with it, no legal
objection could be taken to the actions and policy of the society.
Lord Carmont pointed this out in the Court of Session. B u t
t h a t is not the position. I n law the society and the company
were, it is true, separate legal entities. B u t they were in the
relation of parent and subsidiary companies, the company being
formed to run a business for the society which the society could
not at the outset have done for itself, unless they could have
persuaded Dr. Meyer and Mr. Lucas t o become servants of the
society. This the petitioners were not prepared to do. The
company, t h r o u g h , the knowledge, the experience, the connec
tions, the business ability and the energies of the petitioners, had
built up a valuable goodwill in which the society shared and
which there is no reason to think would not have been maintained,
if not increased, with the co-operation of the society. The
company was in substance, though not in law, a partnership
consisting of the society, Dr. Meyer and Mr. Lucas. Whatever
m a y be the other different legal consequences following on one
or other of these forms of combination one result, in m y opinion,
followed in the present case from the method adopted, which is
common to partnership, t h a t there should be the utmost good
faith between the constituent members. I n partnership the
position is clear. As stated in Lindley on Partnership, 11th ed.,
p. 4 0 1 : " A partner cannot, without the consent of his co-
" partners lawfully carry on for his own benefit, either openly or
" secretly, any business in rivalry with the firm to which h e
" belongs." I t m a y not be possible for the legal remedies t h a t
would follow in the case of a partnership to follow here, b u t the
principle has, I think, valuable application to the circumstances
of this case.
I n these circumstances, I have no doubt the conduct of the
362
H. L. (Sc.) society was oppressive. T h e only question i s : was it oppressive in

1958 the affairs of t h e company? A t a previous stage of this case when
~ relevancy was under consideration t h e late Lord President
SCOTTISH 5
CO-OPERATIVE Cooper said : " T h e truth is that, whenever a subsidiary is
WHOLESALE " formed as in this case with an independent minority of share-
SOCIETY L T D
„, ' " holders, the parent company must, if it is engaged in the same
MEYER. " c i a s s 0f business, accept as a result of having formed such a
Lord Keith of '' subsidiary an obligation so to conduct what are in a sense its
' " own affairs as to deal fairly with its subsidiary." I would adopt
this statement with this expansion, that conducting what are in a
sense its own affairs may amount to misconducting the affairs of
the subsidiary. It is difficult to say that misconduct in the affairs
of the subsidiary is not conduct in the affairs of the subsidiary
and that, I think, is what Lord Cooper had in mind. Misconduct
in the affairs of a company may be passive conduct, neglect of its
interests, concealment from the minority of knowledge that it is
material for the company to know. That, in my opinion, is what
happened here. Nor do I think what I have said is materially
different from the views expressed by all their Lordships in the
Court of Session. The Lord President considered 6 that there was
a policy by the society's nominees on the company's board of
" uniform silence " in face of the progressive deterioration in
the company's activities; of failure to disclose to the petitioners
the explanation of the deterioration; unwillingness to encourage
the company to seek other manufacturers, leading to the conclu
sion that the society was extending to the conduct of the affairs
of the company the same policy that was being operated by the
society itself. Lord Carmont considered that the society's
nominees conducted the affairs of the company oppressively as
from the time when being aware of the society's policy they •
continued to sit on the company's board and to control its affairs.
"They could not," he says, 7 " i n the circumstance of their
" relation to the society be anything other than active, or at best
" passive, supporters of the society's policy when dealing with the
" company's affairs, and even their continuance in office as
" directors of the company put an obstacle in the way of the
" minority taking early and perhaps some timeous action to save
" the company, or at all events to maintain in whole or in part
" the value of the company's shares." Lord Eussell held 8 that
they " acted in the interests of the society and against the
7
s 1954 S.C. 381, 391. Ibid. 136.
8
« 1957 S.C. 110, 136. Ibid. 145.
363
" interests of the company by adopting a policy of masterly H. L. (Sc.)

" inactivity and allowing the company's trading activities to i958
" decline to vanishing p o i n t . " Lord Sorn's view w a s 9 that the
society as majority shareholders controlling the company " made CO-OPERATIVE
" use of its control to ensure t h a t the company remained passive WHOLESALE
" under the attack and did not have an opportunity to struggle „
'" for its existence " ; t h a t they failed in their duty of raising " the MEYEB.
question of looking for another source of supply as an urgent Lord Keith of
von
" question of policy " ; and t h a t , when the policy of liquidation ° m'
had been expressly approved by the society's board, " the
" nominee directors still did nothing and let the company drift
'" towards the r o c k s . "
My Lords, these views indicate t h a t the conduct of the society
o n the company's affairs was negative conduct. That, in a sense,
is true, for it is just the other side of the shield from t h a t which
displayed the society acting positively to destroy the company.
B u t I cannot think t h a t where directors, having power to do
something to save a company, lie back and do nothing, they are
not conducting the affairs of the company, perhaps foolishly,
perhaps negligently, perhaps with some ulterior object in view.
They are certainly conducting the affairs of the company in
breach of their duty as directors. I n the present case I would
go further, for I think t h a t the production of rayon cloth at the
mill was an affair of the company and t h a t the society being
majority shareholder in the company cannot claim t h a t in divert
ing this production to itself and obstructing supplies to the
■company it was acting for itself and not conducting the affairs
of the company in a manner unfair and oppressive to the minority
shareholders. I t was said t h a t the company should have secured
its rayon cloth from the mill by a contract. B u t t h a t is beside
the point, looking to the special relationship between the company
and the society. A partner who starts a business in competition
with the business of the partnership without the knowledge and
consent of his partners is acting contrary to the doctrine of utmost
good faith between partners. H e is also acting in a manner
which, I think, m a y be regarded as oppressive to his partners for
he is doing t h e m an injury in their business. I n the same way
there was here, in m y opinion, oppression by the society of the
minority shareholders and it was, I consider, oppression in the
conduct of the affairs of the company. Oppression under
section 210 m a y take various forms. I t suggests, to m y mind, as
s 1957 S.C. 154-155.

364
H. L. (Sc.) I Said in Elder v. Elder and Watson,10 a lack of probity and fair
1958 dealing in the affairs of a company to the prejudice of some
portion of its members. The section introduces a wide power to
S OOTTIS H
CO-OPERATIVE the court to deal with such a situation in an equitable manner
WHOLESALE which it did not have in the case of a company prior to the
„. ' passing of the Act of 1948. The court has here acted, in my
MEYER. opinion, within the powers conferred upon it.
Lord Keith of It was said that appeal could not be made to section 210
' unless the company had a continuing life ahead of it and here it
was clear that the company would have to be wound up. But
that means that if oppression is carried to the extent of destruc
tion of the business of the company no recourse can be had to
the remedies of the section. This would be to defeat the whole
purpose of the section. The present position is due to the
oppression and but for the oppression it must be assumed that
the company would be an active and presumably nourishing
concern. The section is, in my opinion, very apt to meet the
situation which has arisen.
It was contended that the value of £3 15s. put upon the
shares was excessive. I see no reason for altering this figure.
Lord Sorn has, in my opinion, approached this matter on a
correct principle, by considering what would have been the value
of the shares at the commencement of the proceedings had it not
been for the effect of the oppressive conduct of which complaint
was made. This is clearly not a matter on which a calculation
can be made with mathematical accuracy or by the application
of strict accounting principles and the figure fixed by the court
is well below the figure fixed by the auditors in February, 1952,
and the price suggested by Dr. Meyer in February, 1953.
I would dismiss the appeal.
LOED DENNING. My Lords, I had myself prepared a sum

mary of the material facts in this case but, in view of the com
prehensive statement by my noble and learned friend, Lord Keith
of Avonholm, I will not burden your Lordships with what I had
written. I would only say that I am sorry that the events of
1952 were excluded as irrelevant. Dr. Meyer and Mr. Lucas from
the very beginning put those events in the forefront of their
complaints. They did so in the first letter of their solicitors
dated February 19, 1953, and in the original petition lodged on
July 14, 1953. The burden of their complaints was that, when
« 1952 S.C. 49, 60.

365
there was a recession in 1952 in the rayon trade, they—Dr. H. L. (Sc.)

Meyer and Mr. Lucas—tried, on behalf of the textile company, 1958
to develop trade in other goods: particularly in the export of
woollen materials to Germany (where they had valuable trade CO-OPERATIVE
connections) and in a large export order for £60,000: but that WHOLESALE
they were thwarted in their efforts by the actions of two of the „.
nominee directors, who tried to get the trade for the Scottish MEYER.
Co-operative Wholesale Society itself. Whether these complaints Lord Denning.
be true or not your Lordships cannot know—because these allega-
tions were excluded from probation. But your Lordships have,
I think, sufficient material to decide the case on the other facts
which were proved.
The complaints which were established were, I think, these:
The co-operative society set up a competing business. It estab
lished its own merchant converting department, engaged in the
rayon trade itself, and quoted more favourable terms to its own
department than it did to the textile company. I t is said that
the co-operative society did this with intent to injure the textile
company—to depress the value of its shares so that the co-opera
tive society could get them cheap—but I would not myself go as
far as this. It seems to me that the co-operative society all the
time was seeking to promote its own interests. It was ready in
1946 to enlist the co-operation of Dr. Meyer and Mr. Lucas when
they were useful to it—so as to get an introduction into the rayon
trade—but it was ready to throw them over when they were no
longer useful. By which I mean that it was ready to withdraw
all support from them. That was, I think, the state of mind of
the co-operative society right from the moment in November,
1951, when Dr. Meyer and Mr. Lucas refused to realign the shares
at par. At that time the rayon trade was in a recession and Dr.
Meyer and Mr. Lucas were not of so much use to the society as
they had been. By the time the rayon trade revived, the con
trols were off and the co-operative society was able to engage in
rayon production itself—and it had no further need of Dr. Meyer
and Mr. Lucas or of the textile company. It had its own depart
ment for rayon. So the textile company could go to the wall.
I t had " served its purpose "—or rather the purpose of the co
operative society—and could be let go into liquidation. The
co-operative society had not the voting power to put it into
voluntary liquidation. But liquidation might come about by
sheer inanition. So it came about that, when Dr. Meyer and
Mr. Lucas in January, 1953, offered to sell their shares to the
co-operative society at a price to be negotiated (mentioning 96s.),
366
H. L. (So.) the co-operative society refused " a t the present t i m e . " The
1958 co-operative society thought, perhaps, that, if they waited,
- sooner or later liquidation would come about, or t h a t terms of
SCOTTISH
CO-OPERATIVE purchase would be arranged later more favourable to t h e
WHOLESALE co-operative society
J
t h a n rpaying
J 5
96s. a share.
SOCIETY LTD.
v. Such being " the m a t t e r s complained of " by Dr. Meyer and
MEYEB
- Mr. Lucas, it is said: " T h o s e are all complaints about t h e
Lord Denning. " conduct of the co-operative society. H o w do they touch the
" real issue—the manner in which the affairs of the textile com-
" pany were being conducted? " The answer is, I think, by their
impact on the nominee directors. I t m u s t be remembered t h a t
we are here concerned with the m a n n e r in which the affairs of t h e
textile company were being conducted. That is, with the con
duct of those in control of its affairs. They m a y be some of t h e
directors themselves, or, behind them, a group of shareholders
who nominate those directors or whose interests those directors
serve. If those persons—the nominee directors or the share
holders behind them—conduct the affairs of the company in a
m a n n e r oppressive to t h e other shareholders, t h e court can
intervene to bring an end to the oppression.
W h a t , then, is the position of t h e nominee directors here?
Under the articles of association of the textile company the
co-operative society was entitled to nominate three out of the
five directors, and it did so. I t nominated three of its own
directors and they held office, as the articles said, " as nominees "
of the co-operative society. These three were therefore a t one
and the same time directors of the co-operative society—being
three out of 12 of t h a t company—and also directors of the
textile company—three out of five there. So long as the
interests of all concerned were in harmony, there was no diffi
culty. The nominee directors could do their duty by both com
panies without embarrassment. B u t , so soon as the interests of
the two companies were in conflict, t h e nominee directors were
placed in an impossible position. Thus, when the realignment of
shareholding was under discussion, the duty of the three directors
to the textile company was to get the best possible price for any
new issue of its shares (see per Lord Wright in Lowry v . Consoli-
dated African Selection Trust Ltd.11), whereas their duty to the
co-operative society was to obtain the new shares at the lowest
possible price—at par, if they could. Again, when t h e co-opera
tive society determined to set up its own rayon department,
11
[1940] A.C. 648, 679; 56 T.L.E. 735; [1940] 2 All B.E. 545.
367
A.C. AND PRIVY COUNCIL. I
competing with the business of the textile company, the duty of H. L. (Sc.)
the three directors to the textile company was to do their best ^53
to promote its business and to act with complete good faith
fif OTTIRH
towards it; and in consequence not to disclose their knowledge CO-OPERATIVE
of its affairs to a competitor, and not even to work for a competi- WHOLESALE
SOCIETY LTD
tor, when to do so might operate to the disadvantage of the „
textile company (see Hivac Ltd. v. Park Royal Scientific Instru- MEYER.
ments Ltd.12), whereas they were under the self-same duties to Lord Denning.
the co-operative society. It is plain that, in the circumstances,
these three gentlemen could not do their duty by both com
panies, and they did not do so. They put their duty to the
co-operative society above their duty to the textile company in
this sense, at least, that they did nothing to defend the interests
of the textile company against the conduct of the co-operative
society. They probably thought that " as nominees " of the
co-operative society their first duty was to the co-operative
society. In this they were wrong. By subordinating the
interests of the textile company to those of the co-operative
society, they conducted the affairs of the textile company in a
manner oppressive to the other shareholders.
It is said that these three directors were at most only guilty
of inaction—of doing nothing to protect the textile company.
But the affairs of a company can, in my opinion, be conducted
oppressively by the directors doing nothing to defend its interests
when they ought to do something—just as they can conduct its
affairs oppressively by doing something injurious to its interests
when they ought not to do it.
The question was asked: What could these directors have
done? They could, I suggest, at least on behalf of the textile
company, have protested against the conduct of the co-operative
society. They could have protested against the setting up of a
competing business. But then it was said: What good would
that have done? Any protest by them would be sure to have
been unavailing, seeing that they were in a minority on the board
of the co-operative society. The answer is that no one knows
whether it would have done any good. They never did protest.
And it does not come well from their mouths to say it would
have done no good, when they never put it to the test. See the
decision of this House in Morison, Pollexfen & Blair Ltd. v.
Walton,13 as described by Scrutton L.J. in Goldman v. Hill.14
« [1946] Ch. 169; 62 T.L.E. 231; « [1919] 1 K.B. 443, 457; 35
[1946] 1 All B.E. 350. T.L.E. 146.
is (1909) May 10 (unreported); see
[1915] 1 K.B. 90.
368
H. L. (Sc.) Even if they had protested, it might have been a formal gesture,
ig5g ostensibly correct, but not to be taken seriously.
SCOTTISH Your Lordships were referred to Bell v. Lever Brothers
15
CO-OPERATIVE Ltd., where Lord Blanesburgh said that a director of one com-
S an was a
SoMEry liTD P y * liberty to become a director also of a rival company.
c. That may have been so at that time. But it is at the risk now
MEIEB
- of an application under section 210 if he subordinates the
Lord Denning, interests of the one company to those of the other.
So I would hold that the affairs of the textile company were
being conducted in a manner oppressive to Dr. Meyer and Mr.
Lucas. The crucial date is, I think, the date on which the
petition was lodged—July 14, 1953. If Dr. Meyer and Mr. Lucas
had at that time lodged a petition to wind up the company
compulsorily, the petition would undoubtedly have been granted.
The facts would plainly justify such an order on the ground that
it was " just and equitable " that the company should be wound
up: see In re Yenidje Tobacco Co. Ltd.1' But such an order
would unfairly prejudice Dr. Meyer and Mr. Lucas because they
would only recover the break-up value of their shares. So
instead of petitioning for a winding-up order, they seek to invoke
the new remedy given by section 210 of the Companies Act,
1948. But what is the appropriate remedy? I t was said that
section 210 only applies as an alternative to winding up and that
an order can only be made under section 210 if the company is fit
to be kept alive: whereas in this case the business of the com
pany was virtually at an end when the petition was lodged, and
there was no point in keeping it alive. If the co-operative society
were ordered, in these circumstances, to buy the shares of Dr.
Meyer and Mr. Lucas, this would amount, it was said, to an
award of damages for past misconduct—which is not the remedy
envisaged by section 210.
Now, I quite agree that the words of the section do suggest
that the legislature had in mind some remedy whereby the com
pany, instead of being wound up, might continue to operate.
But it would be wrong to infer therefrom that the remedy under
section 210 is limited to cases where the company is still in active
business. The object of the remedy is to bring " t o an end the
" matters complained of," that is, the oppression, and this can
be done even though the business of the company has been
brought to a standstill. If a remedy is available when the
« [1932] A.C. 161, 195; 48 T.L.E. " [1916] 2 Ch. 426; 32 T.L.K.
133. 709.
369
oppression is so moderate that it only inflicts wounds on the H. L. (So.)

company, whilst leaving it active, so also it should be available 1958
when the oppression is so great as to put the company out of
action altogether. Even though the oppressor by his oppression CO-OPERATIVE
brings down the whole edifice—destroying the value of his own WHOLESALE
SOOIPTY TiTTi
shares with those of everyone else—the injured, shareholders P.
have, I think, a remedy under section 210. MEYER.
One of the most useful orders mentioned in the section— Lord Denning.
which will enable the court to do justice to the injured share-
holders—is to order the oppressor to buy their shares at a fair
price: and a fair price would be, I think, the value which the
shares would have had at the date of the petition, if there had
been no oppression. Once the oppressor has bought the shares,
the company can survive. It can continue to operate. That is
a matter for him. It is, no doubt, true that an order of this kind
gives to the oppressed shareholders what is in effect money
compensation for the injury done to them: but I see no objection
to this. The section gives a large discretion to the court and it
is well exercised in making an oppressor make compensation to
those who have suffered at his hands.
True it is that in this, as in other respects, your Lordships
are giving a liberal interpretation to section 210. But it is a new
section designed to suppress an acknowledged mischief. When
it comes before this House for the first time it is, I believe, in
accordance with long precedent—and particularly with the
resolution of all the judges in Heydon's case 17—that your Lord
ships should give such construction as shall advance the remedy.
And that is what your Lordships do today.
I would dismiss the appeal.
Appeal dismissed.
Solicitors: Martin & Co. for Gray, Muirhead & Carmichael,

W.S., Edinburgh, and Keyden, Strong & Co., Glasgow; Cole &
Matthews for Kinnear & Beatson, W.S., Edinburgh, and Wilson,
Chalmers & Hendry, Glasgow.
F. C.
" (1584) 8 Co.Eep. 7a.
A.C. 1959. 24

(1959) A.C. 324

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

(1959) A.C. 324

Uploaded by

Copyright:

Available Formats

324

HOUSE OF LORDS [1959]

H. L. (B.) established or conducted for profit, and t h a t its main objects do

H.L.(Sc)* SCOTTISH CO-OPEEATIVE WHOLESALE

* Present: VISCOUNT SIMONDS, LORD MORTON OF HENRTTON, LORD

"company, for the reduction accordingly of the company's capital, H. L. (Sc.)

APPEAL from the First Division of the Court of Session.

H. L. (Sc.) This appeal from a unanimous decision of the First Division

I. Robertson Q.C. (of the Scottish Bar), Benjamin Bathurst

H. L. (Sc.) Falkland Mill. B y January, 1953, the respondents had decided

i 1952 S.C. 49, 54-55.

decision was referred to a t an earlier stage of the present case by H. L. (Sc.)

» 1954 S.C. 381, 387.

H. L. (Sc.) long-term agreement as to the looms. I t should have ensured

commercial prudence to enter into a contract with the appellants H. L. (Sc.)

I 1957 S.C. 110, 122. » Ibid. 121, 131.

H. L. (So.) cannot expect to control the business of the parent company,

shelter behind a wall of ignorance of the appellants' policy, H. L. (Sc.)

« 1954 S.C. 381, 390-391; 1957 S.C. 110, 144, 154.

H. L. (Sc.) conflict of interest arises between their duty as directors of one

Their Lordships took time for consideration.

" 1954 S.C. 381, 391-392.

July 24. VISCOUNT SIMONDS. My Lords, in this appeal from H. L. (Sc.)

H. L. (So.) rayon yarn to be used in t h e manufacture of t h e finished cloth,

H. L. (So.) of the respondents to get supplies of yarn. It was also in the

though not in terms suggested by Taylor, offering on behalf of H- L. (Sc.)

consideration of this question, I do not think t h a t m y own views H. L. (Sc.)

LORD MORTON OF HBNRYTON. My Lords, I shall refer to t h e

1 1954 S.C. 381, 391.

" substituting the m e r c h a n t converting d e p a r t m e n t of the society H. L. (Sc.)

* 1957 S.C. 110, 123.

I agree t h a t this appeal m u s t be dismissed.

H. L. (So.) LORD K E I T H OF AVONHOLM. My Lords, this appeal arises out

A.C. 1959. 23 (1)

H. L. (Sc.) " SEVENTH. [Dr. Meyer's and Mr. Lucas's] appointments

" T E N T H . I n the event of this agreement coming to an end H\ L. (So.)

H. L. (Sc.) unsatisfactory and unconvincing. The allowance, for which no

H. L. (Sc.) report of the manager of the drapery department dated August 8,

H. L. (Sc.) society was oppressive. T h e only question i s : was it oppressive in

" interests of the company by adopting a policy of masterly H. L. (Sc.)

s 1957 S.C. 154-155.

LOED DENNING. My Lords, I had myself prepared a sum­

« 1952 S.C. 49, 60.

there was a recession in 1952 in the rayon trade, they—Dr. H. L. (Sc.)

oppression is so moderate that it only inflicts wounds on the H. L. (So.)

Solicitors: Martin & Co. for Gray, Muirhead & Carmichael,

" (1584) 8 Co.Eep. 7a.

You might also like

LOED DENNING. My Lords, I had myself prepared a sum