''Isle of Wight Railway Company v Tahourdin'' (1884) LR 25 Ch D 320 is a

UK company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary lega ...

case on removing directors under the old

Companies Clauses Act 1845 A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared go ...

. In the modern

Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...

, 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 Railway The Isle of Wight Railway was a railway company on the Isle of Wight, United Kingdom; it operated of railway line between Ryde and Ventnor. It opened the first section of line from Ryde to Sandown in 1864, later extending to Ventnor in 1866. ...

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.

Judgment

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

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 vires ('beyond the powers') is a Latin phrase used in law to describe an act which requires legal authority but is done without it. Its opposite, an act done under proper authority, is ('within the powers'). Acts that are may equivalently be termed ...

''.

Cotton LJ Sir Henry Cotton (20 May 1821 – 22 February 1892) was a British judge. He was a Lord Justice of Appeal from 1877, when he was made a Privy Counsellor, until his retirement in 1890. Early life He was born in Leytonstone. His father Will ...

's opinion, on the issues of when how a meeting should be called and director removal,

Lindley LJ Nathaniel Lindley, Baron Lindley, (29 November 1828 – 9 December 1921) was an English judge. Early life He was the second son of the botanist Dr. John Lindley, born at Acton Green, London. From his mother's side, he was descended from Sir Ed ...

then delivered his judgment, concurring.(1884) LR 25 Ch D 320, 333-334

Fry LJ Sir Edward Fry, (4 November 1827 – 19 October 1918) was an English Lord Justice of Appeal (1883–1892) and an arbitrator on the Permanent Court of Arbitration. Biography Joseph Fry (1795-1879) and Mary Ann Swaine were his parents. He was ...

gave a concurring opinion.

Notes

References