Company alone may sue for legal wrong against it.
A bill was lodged by two of the proprietors of shares in a company incorporated by Act of Parliament, on their own and the other shareholders’ behalf. They claimed against three bankrupt directors, a proprietor, solicitor and architect charging them with fraudulent transactions misapplying the company’s assets, that there had ceased to be a sufficient number of qualified directors to make up a board, and the company had no clerk or office, that in such circumstance the proprietors had no power to take the property out of the hands of the defendant directors.
Held: If a company suffers a legal wrong it is the company itself which must sue in respect of damage resulting from it. The company has its own separate legal identity which must be respected. Observations were made on the point at which a relationship of trust arises between company promoters and the company. The possibility of avoiding a transaction does not necessarily create a void transaction. A corporation may later choose to adopt the transaction, and hold the directors bound by them. They can be confirmed if a transaction is a mortgage not authorised by powers given by the Act, this is an act beyond the powers of the corporation and can not be confirmed whilst there is any one dissenting voice raised against it.
Jenkins LJ said: ‘The proper plaintiff in an action in respect of a wrong alleged to be done to a corporation is, prima facie, the corporation.’
Wigram VC, Jenkins LJ
[1843] 67 ER 189, [1843] EngR 478, (1843) 2 Hare 461
Commonlii
England and Wales
Cited by:
Cited – Johnson v Gore Wood and Co (a Firm) CA 12-Nov-1998
The claimant had previously issued a claim against the defendant solicitors through his company. He now sought to pursue a claim in his own name. It was resisted as an abuse of process, and on the basis that no personal duty of care was owed to the . .
Cited – Heyting v Dupont CA 1964
The plaintiff owned shares in a company registered in Jersey and created to make the most of an invention. The articles contained a deadlock provision.
Held: This was ‘essentially a dispute between two discordant partners’ There was a general . .
Explained – Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) CA 1982
A plaintiff shareholder cannot recover damages merely because the company in which he has an interest has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in . .
Cited – Cabvision Ltd v Feetum and others CA 20-Dec-2005
The company challenged the appointment of administrative receivers, saying there had been no insolvency.
Held: No question arises of a derivative action arose here. The claimant had standing to apply for declaratory relief since they were . .
Cited – Stuart v Goldberg and Linde (a firm) CA 17-Jan-2008
The claimant appealed against orders preventing him from suing his former solicitors in respect of heads of claim which the court said should have been included in earlier proceedings.
Held: When deciding whether a claim was an abuse of . .
Cited – Webster v Sandersons Solicitors (A Firm) CA 31-Jul-2009
The claimant apealed against refusal of permission to amend his claim for negligence against his former solicitors by adding claims from 1993 and 1994 . .
Cited – Wallersteiner v Moir (No 2) CA 1975
The court was asked whether Moir would be entitled to legal aid to bring a derivative action on behalf of a company against its majority shareholder.
Held: A minority shareholder bringing a derivative action on behalf of a company could obtain . .
Cited – Iesini and Others v Westrip Holdings Ltd and Others ChD 16-Oct-2009
The claimants were shareholders in Westrip, accusing the Defendant directors of deliberately engaging in a course of conduct which has led to Westrip losing ownership and control of a very valuable mining licence and which, but for their . .
Cited – Smith v Croft (No 3) ChD 1987
Knox J said: ‘Ultimately the question which has to be answered in order to determine whether the rule in Foss v. Harbottle applies to prevent a minority shareholder seeking relief as plaintiff for the benefit of the company is, ‘Is the plaintiff . .
Cited – Bracken Partners Ltd v Gutteridge and Others ChD 31-Mar-2003
The claimant sought to claim against former directors of a company in which it held shares under the rule in Foss v Harbottle. . .
Cited – Smith v Croft (No 2) 1987
A registered shareholder who is absolute beneficial owner can vote as he pleases, subject only to rather imprecise constraints imposed by company law.
It is essential to the exception to the rule in Foss v Harbottle that the alleged wrongdoing . .
Lists of cited by and citing cases may be incomplete.
Company, Damages
Leading Case
Updated: 02 November 2021; Ref: scu.180903