Members of the defendant company had approved in general meeting, of an acquisition of the assets of another company in which its directors were substantially interested. The shareholders’ approval was given on the basis of a circular. The action was commenced against the directors by the Prudential as a minority shareholders’ action alleging that the circular was tricky and misleading. It sought damages for conspiracy.
Held: Vinelott J said: ‘These cases, in my judgment, establish two propositions. First, no order will be made in favour of a representative plaintiff if the order might in any circumstances have the effect of conferring on a member of the class represented a right which he could not have claimed in a separate action or of barring a defence which the defendant could have raised in such proceedings. Secondly, no order will be made in favour of a representative plaintiff unless there is some element common to the claims of all members of the class which he purports to represent.’
He also said:’The second condition is that there must be an ‘interest’ shared by all members of the class. In relation to a representative action in which it is claimed that every member of the class has a separate cause of action in tort, this condition requires, as I see it, that there must be a common ingredient in the cause of action of each member of the class. In the present case that requirement is clearly satisfied.’ and
‘As drafted the order which the plaintiff seeks in its representative capacity is for a declaration that the plaintiff in its personal capacity as a shareholder in Newman Industries and on behalf of itself and all other shareholders in Newman Industries who like the plaintiff have suffered damage is entitled to damages against the defendants, Bartlett and Laughton, for conspiracy. The practical effect of such a declaration would, it seems to me, be no greater and no less than the effect of declarations, first, that the circular was tricky and misleading; secondly, that the individual defendants conspired to procure its circulation in order to procure the passing of the relevant resolution; and thirdly, that in so doing they conspired either to injure the plaintiff and the other shareholders at that date or to commit an unlawful act, or to induce a breach by the first defendant company of its contractual duty to the shareholders. It would, I think, be better that those declarations, which constitute the common element of any claim by any member of the class for damages for conspiracy, should be so spelt out. Further, I can see no reason for defining the class of shareholders of the first defendant company at July 29, 1975, as being those ‘who like the plaintiff have suffered damage and are entitled to damages.’ The words I have cited appear to me to be unnecessary and undesirable. The members of the class who share a common interest in obtaining the declarations I have outlined are shareholders other than the second and fourth defendants as at July 29. A person coming within that class will be entitled to rely on the declarations as res judicata, but will still have to establish damage in a separate action.’
Judges:
Vinelott J
Citations:
[1979] 3 All ER 838, [1981] Ch 29
Jurisdiction:
England and Wales
Cited by:
Distinguished – EMI Records v Riley ChD 1981
The defendant to an action for an injunction by the plaintiff on behalf of the British Phonographic Industry Copyright Society, said that the company did not properly represent the members of the Society.
Held: It could be inferred that all . .
See Also – 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 – Emerald Supplies Ltd and Another v British Airways Plc ChD 8-Apr-2009
The claim was for damages after alleged price fixing by the defendants. The claimants sought to recover for themselves and as representatives of others who had similarly suffered. The defendants sought that the representative element of the claim be . .
Lists of cited by and citing cases may be incomplete.
Litigation Practice
Updated: 18 July 2022; Ref: scu.195020
