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.

Citation
[1950] 2 All ER 1064
Court
Court of Appeal (Civil Division)
Year
1950
Subject
Company Law
Topic
Derivative claims and reflective loss

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.

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