Objection to a variation of class rights:

The company proposed to reduce its share capital by repayment of the 5% 1 pound Cumulative Preference Shares (which were entitled to repayment of capital in priority to ordinary shares)  and to effect repayment by the allotment to the holders an equivalent amount of 6% unsecured loan stock, repayable 1985/90.  The trustees of trusts which held 90% of the issued preference shares voted at a class meeting in favour of the scheme because they had been advised that as holders of 52% of the company's ordinary stock and non-voting ordinary shares they would derive overall benefit from the change.

It was held that the resolution passed at the class meeting was invalid since the trustees who provided the majority of votes cast were not concerned with benefit to holders of the preference shares as a class.  They had instead considered what was best in their own interests, based on their large holding of stock and ordinary shares.  Although this case came to the court for approval of the reduction of share capital and not as an objection to variation of class rights, it is in fact the leading case on the principles which the court will apply in dealing with the objection to a variation of class rights approved by a majority of the class.