## Facts

- Saul D. Harrison & Sons plc was a family company whose share structure separated control from economic rights.
- “A” shares carried voting rights but no dividend rights; “B” and “C” shares carried dividend rights but no voting rights.
- The petitioner, a founder’s granddaughter, held non-voting “C” shares with rights to dividends when available and to participate in surplus assets on a winding up.
- Directors who controlled the company through voting “A” shares held executive roles and received salaries.
- The company’s trading had been poor and loss-making for a period.
- In 1990, the company sold its main factory for about £2.75 million and used the proceeds to purchase a replacement factory, continuing operations rather than realizing capital for distribution.
- The petitioner alleged the business was no longer commercially viable and that directors kept it trading to preserve their salaries, contending a reasonable board would have ceased trading and distributed assets.

## Issues

1. Whether continuing to trade, reinvesting sale proceeds in a replacement factory, and paying directors’ salaries amounted to conduct “unfairly prejudicial” to the petitioner’s interests as a member.
2. Whether the petitioner had an enforceable “legitimate expectation” (beyond the articles and share rights) that the company would be run to generate distributions for non-voting dividend shareholders or to realize assets by winding up.
3. How far the unfair-prejudice jurisdiction permits courts to intervene in contested management decisions absent bad faith, breach of duty, or violation of members’ rights.

## Decision

- The Court of Appeal dismissed the appeal and affirmed the dismissal of the petition.
- The challenged decisions were treated as matters within directors’ managerial discretion when taken in good faith and within power.
- The petitioner failed to show any breach of her legal rights under the articles or any equitable basis for a further expectation limiting the directors’ choice to continue trading.
- Allegations that directors acted merely to protect salaries were not established to a degree warranting relief.

## Legal Principles

- Relief for unfair prejudice requires conduct that is both prejudicial and unfair in light of the parties’ commercial relationship.
- The articles of association and related agreements ordinarily define the benchmark for fairness; conduct consistent with that framework will usually not be unfair.
- The unfair-prejudice remedy is not a general mechanism for reviewing the commercial merits of board decisions (e.g., whether to reinvest, continue trading, or liquidate).
- “Legitimate expectations” may supplement strict legal rights only where equitable considerations arising from the parties’ relationship justify them (commonly in quasi-partnership settings); they do not arise merely from disappointment with business outcomes.
- Absent bad faith, breach of duty, or a serious departure from standards of fair dealing within the established shareholder bargain, the court will not grant unfair-prejudice relief.

## Conclusion

The court rejected an unfair-prejudice challenge based on disagreement with directors’ strategy to continue operating and reinvest assets, holding that compliance with the share structure and articles, without proven bad faith or a violated equitable expectation, does not amount to unfair prejudice.


In re Saul D. Harrison & Sons plc, [1995] 1 B.C.L.C. 14 (C.A. 1995)