Facts
Mr Phillips had owned a company called Pectel Ltd. It specialised in stripping asbestos from buildings. Mr O'Neill started to work for the company in 1983. In 1985, Phillips was so impressed with O'Neill's work that he made him a director and gave him 25% of the shares. They had an informal chat in May, and Mr Phillips said that one day, he hoped Mr O'Neill could take over the whole management, and would then be allowed to draw 50% of the company's profits. This happened, Phillips retired and O'Neill took over management. There were further talks about increasing O'Neill's actual sharedholding to 50%, but this was not to happen. After five year the construction industry went into decline, and so did the company. Phillips came back in and took business control. He demoted O'Neill to be a branch manager of the German operations and withdrew O'Neill's share of the profits. O'Neill was miffed. He started up his own competing company in Germany in 1990 and then he filed a petition for unfairly prejudicial conduct against Phillips, firstly, for the termination of equal profit-sharing and, secondly, for repudiating the alleged agreement for the allotment of more shares.
The judge rejected the petition on both grounds. There had been no firm agreement for an increase in shareholding, and it was not unfair for Phillips to keep a majority of company shares. Also, it was held that O'Neill suffered nothing in his capacity as a member of the company. His shares were unaffected. It was merely a dispute about his status as an employee. He had been well rewarded. But in the Court of Appeal, Nourse LJ (with whom Potter and Mummery LLJ agreed) O'Neill won his appeal. Nourse LJ said that in fact Phillips had created a legitimate expectation for the shares in future. Moreover a global view of the relationship should be taken, and so O'Neill did suffer as a member. On further appeal to the House of Lords, the Court of Appeal was overturned, and Phillips won.
Read more about this topic: O'Neill V Phillips
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