British America Nickel Corporation Ltd v O’Brien [1927] AC 369

Court: Privy Council

Facts: A scheme of arrangement proposed altering the rights of mortgage bondholders. The majority of bondholders voted in favor due to promises of additional benefits, which led to a challenge by the minority bondholders who argued that the vote was not conducted in the class’s best interests.

Issue: Can a resolution to vary class rights be challenged on the grounds of not being bona fide in the interests of the class as a whole?

Held: The resolution was challenged successfully by the minority bondholders.

Key Judicial Statement: Viscount Haldane noted, "There is, however, a restriction of such powers, when conferred on a majority of a special class in order to enable that majority to bind a minority; namely, that the power given must be exercised for the purpose of benefiting the class as a whole, and not merely individual members only."

💡 Leveluplaw: Class rights resolutions may be challenged if they are not exercised for the benefit of the class as a whole, particularly if influenced by personal gains for some members.