Isle of Wight Railway Company v Tahourdin
Encyclopedia
Isle of Wight Railway Company v Tahourdin (1884) LR 25 Ch D 320 is a UK company law case on removing directors under the old Companies Clauses Act 1845. In the modern Companies Act 2006
, section 168 allows shareholders to remove of directors by a majority vote on reasonable notice, regardless of what the company constitution says. Before 1945, removal of directors depended on the constitution, however this case contains some useful guidance on how to properly construe the provisions of a constitution.
Co instructed the board of directors to call a meeting so they could (1) appoint a meeting to investigate and potentially rearrange the company's management, and also (2) decide whether to remove the present directors and elect new ones. The directors called a meeting “for the purpose of considering and determining upon a demand of the requisitionists for the appointment of a committee to inquire into the working and general management of the company and the means of reducing the working expenses.” But they did not allow the meeting to concern whether they would be dismissed. Disgruntled shareholders, including Mr Graham Tahourdin, boycotted the meeting, and issued their own notice to call a meeting to remove the directors under the Companies Clauses Act 1845, section 70. The directors brought the action to restrain the meeting.
.
Cotton LJ's opinion, on the issues of when how a meeting should be called and director removal,
Lindley LJ then delivered his judgment, concurring.
Fry LJ gave a concurring opinion.
Companies Act 2006
The Companies Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules but it has since...
, section 168 allows shareholders to remove of directors by a majority vote on reasonable notice, regardless of what the company constitution says. Before 1945, removal of directors depended on the constitution, however this case contains some useful guidance on how to properly construe the provisions of a constitution.
Facts
The shareholders of the Isle of Wight RailwayIsle of Wight Railway
The Isle of Wight Railway was a railway company on the Isle of Wight, United Kingdom. The company owned 14 miles of railway line and its headquarters were at Sandown...
Co instructed the board of directors to call a meeting so they could (1) appoint a meeting to investigate and potentially rearrange the company's management, and also (2) decide whether to remove the present directors and elect new ones. The directors called a meeting “for the purpose of considering and determining upon a demand of the requisitionists for the appointment of a committee to inquire into the working and general management of the company and the means of reducing the working expenses.” But they did not allow the meeting to concern whether they would be dismissed. Disgruntled shareholders, including Mr Graham Tahourdin, boycotted the meeting, and issued their own notice to call a meeting to remove the directors under the Companies Clauses Act 1845, section 70. The directors brought the action to restrain the meeting.
High Court
Kay J held that the first part of the original meeting request was illegal where it went beyond merely appointing a committee, because that could result in transferring power away from the directors that was properly fixed under the constitution. The second part was too vague, did not "fully express the object of the meeting" and the directors had no power to call such a meeting, and so the shareholders' power under CCA 1845 s 70 had not arisen. Therefore, he granted the injunction. Mr Tahourdin appealed.Court of Appeal
The Court of Appeal unanimously overturned Kay J's decision and held that the meeting could be called because the notice about voting on removal of "any of the directors" was clear enough, and the Companies Clauses Act 1845 section 91 gave the general meeting power to remove directors. The general meeting can always fill up board vacancies if all directors are removed and the directors do not exercise their power under section 89, and so the directors were bound to send out the notice of the shareholders' proposal. Moreover, the first part of the shareholders' proposal was not illegal, because activities beyond merely appointing a committee could be done in a way that was not ultra viresUltra vires
Ultra vires is a Latin phrase meaning literally "beyond the powers", although its standard legal translation and substitute is "beyond power". If an act requires legal authority and it is done with such authority, it is...
.
Cotton LJ's opinion, on the issues of when how a meeting should be called and director removal,
Lindley LJ then delivered his judgment, concurring.
Fry LJ gave a concurring opinion.
See also
- UK company law
- AG of Belize v Belize Telecom Ltd
- Imperial Hydropathic Hotel Co, Blackpool v HampsonImperial Hydropathic Hotel Co, Blackpool v HampsonImperial Hydropathic Hotel Co, Blackpool v Hampson 23 Ch D 1 is a UK company law case, concerning the interpretation of a company's articles of association...
(1882) 23 Ch D 1 - Andrews v Gas Meter CompanyAndrews v Gas Meter CompanyAndrews v Gas Meter Company LR 25 Ch D 320 is a UK company law case concerning the right of a company to amend its constitution to enable the issuing of preferential shares.-Facts:...
(1884) LR 25 Ch D 320