Howard Johnson

 Howard Cruz Essay

ICLR: Charm Cases/1974/HOWARD JOHNSON LTD. APPELLANT AND AMPOL PETROLEUM LTD. AND OTHERS RESPONDENTS [ON APPEAL IN THE SUPREME COURT OF NEW SOUTHERN WALES] - [1974] A. C. 821

[1974] A. C. 821

[PRIVY COUNCIL]

HOWARD SMITH LTD. APPELLANT AND AMPOL PETROLEUM LTD. AND OTH-ERS RESPONDENTS [ON APPEAL IN THE SUPREME THE COURTROOM OF NEW SOUTH WALES]

1973 Nov. 26, twenty-seven, 28, 30; Dec. 3;

Lord Wilberforce, Lord Diplock,

1974 Feb. 14

Master Simon of Glaisdale, God Cross of Chelsea and Lord Kilbrandon

Company -- Director -- Fiduciary responsibility - End of stocks and shares - Australian company requiring capital - Primary thing of owners to alter majority share keeping of issued shares -- No personal advantage to directors -- Whether power to allot stocks and shares validly practiced by administrators

Two firms, A and B, held 55 %. of the granted shares of company M, which required more capital. A made an offer for all the given shares of M, and another organization, H, released an objective to make a bigger offer for the people shares. M's directors regarded A's present too low and decided to advise that the give be rejected. A and B in that case stated that they can intended to action jointly down the road operations of M and would reject any provide for their stocks. H then simply applied to Meters for a great allotment of 4ВЅ million ordinary stocks; M's administrators decided with a majority to make the allotment and immediately granted the stocks and shares. The effect of this issue was that M experienced much needed capital; A and B's talk about holding was reduced to 36. 6th per cent. of the issued shares and L was in a situation to make a powerful takeover provide. A challenged the quality of the issue of the shares to They would and desired an buy in the Great Court for the rectification of the talk about register by the removal of They would as a member of M in respect of the allotted shares. M's directors contended that the major reason for the issue of the stocks to H was to attain more capital.

Street M. found that M's administrators had not been enthusiastic by any purpose of personal gain or advantage or perhaps by a aspire to [1974] A. C. 821 Page 822

retain all their position around the board, that M required capital, but that the major purpose of the allotment was going to reduce the proportionate share holding of A and B to ensure that H can proceed using its takeover give. The evaluate held that in these circumstances the directors had improperly practiced their power and this individual ordered which the allotment of shares become set aside and the share register rectified.

On appeal by H for the Judicial Committee: -

Placed, dismissing the appeal, that, although the administrators had served honestly and had power to associated with al-lotment, to change a majority share holding was to interfere with that element of you can actually constitution which was separate by and set up against the directors' power and, accordingly, it was unconstitutional for the directors to use their fiduciary powers above the shares in the company with regards to destroying a preexisting majority or perhaps creating a fresh majority; and that, since the directors' primary target for the allotment of shares was going to alter the bulk share holding, the directors had improperly exercised their particular powers as well as the allotment was invalid (post, pp. 837F - 838C).

Mills sixth is v. Mills (1938) 60 C. L. R. 150 deemed.

Per curiam. A matter including the raising of finance is usually one of supervision, within the responsibility of the company directors. It would be wrong for a the courtroom to query the correctness of the management's decision if perhaps bona fide attained. But , when a dispute arises whether the administrators of a business made a specific decision for starters purpose or perhaps for another, or whether delete word more than one purpose, one or another purpose was your substantial or primary goal, the court is entitled to look at the scenario objectively in order to estimate how critical or perhaps pressing or substantial a great alleged necessity may have been. Whether it finds a particular requirement, though true, was not important or...

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