Edwards v Halliwell
The rule in Foss v Harbottle does not prevent a member from suing where the act complained of is illegal, requires a special majority, infringes his personal rights, or is a fraud on the minority.
Facts
The rules of a trade union, the National Union of Vehicle Builders, provided that members' contributions could only be increased by a two thirds majority in a ballot of the members. A delegate meeting increased the contributions without holding a ballot. Two members sued for a declaration that the increase was invalid.
Legal principle
The Court of Appeal held that the members could sue. Jenkins LJ said that the rule in Foss v Harbottle did not apply where the act complained of was ultra vires or illegal, where the matter could only be validly done by a special majority, where the personal and individual rights of the member had been infringed, or where what had been done amounted to a fraud on the minority and the wrongdoers were themselves in control of the company. The increase in contributions required a special majority, and it also infringed the members' personal rights, so the claim could proceed.
Related cases on derivative claims and reflective loss
- Daniels v Daniels [1978] Ch 406
- Foss v Harbottle (1843) 2 Hare 461
- Franbar Holdings Ltd v Patel [2008] EWHC 1534 (Ch), [2009] 1 BCLC 1
- Iesini v Westrip Holdings Ltd [2009] EWHC 2526 (Ch), [2011] 1 BCLC 498
- Johnson v Gore Wood & Co [2002] 2 AC 1
- Kiani v Cooper [2010] EWHC 577 (Ch), [2010] 2 BCLC 427
- Mission Capital plc v Sinclair [2008] EWHC 1339 (Ch), [2010] 1 BCLC 304
- Pavlides v Jensen [1956] Ch 565
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