Foss v Harbottle
Where a wrong is done to a company, the proper claimant is the company itself, and an individual shareholder cannot normally sue in respect of it.
Facts
Two shareholders of the Victoria Park Company, Mr Foss and Mr Turton, brought proceedings against the directors, alleging that they had sold land to the company at an inflated price and misapplied the company's property in other ways. They sued on behalf of themselves and all the other shareholders except the defendants.
Legal principle
Wigram V-C held that the claim could not proceed. He said that the injury was done to the company, which was a corporate body, and that the proper claimant in respect of a wrong done to the company was the company itself. The company could act through a majority of its members in general meeting, and it was open to the majority to ratify the directors' acts or to decide to sue. This is known as the rule in Foss v Harbottle, which comprises the proper claimant principle and the majority rule principle. The derivative claim is now governed by Part 11 of the Companies Act 2006.
Related cases on derivative claims and reflective loss
- Daniels v Daniels [1978] Ch 406
- Edwards v Halliwell [1950] 2 All ER 1064
- 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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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
