Wallersteiner v Moir (No 2)
A minority shareholder who properly brings a derivative action on behalf of the company may be indemnified by the company for his costs.
Facts
Mr Moir, a minority shareholder in a company controlled by Dr Wallersteiner, alleged that Dr Wallersteiner had defrauded the company, and brought a derivative action on behalf of the company. Mr Moir had spent all his own money on the litigation and could not afford to continue. He asked the court to order the company to pay his costs.
Legal principle
The Court of Appeal held that the company could be ordered to indemnify Mr Moir for his costs. Lord Denning MR said that a minority shareholder who brings a derivative action is acting on behalf of the company, as its agent, and so is entitled to be indemnified by the company for his costs, if it was reasonable and prudent for him to bring the action in the interests of the company. The court can make an order for indemnity at an early stage of the proceedings. The power is now in the Civil Procedure Rules, rule 19.9E.
Related cases on derivative claims and reflective loss
- Daniels v Daniels [1978] Ch 406
- Edwards v Halliwell [1950] 2 All ER 1064
- 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
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