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 being improperly prevented from bringing these proceedings on behalf of the company?’ If it is an expression of the corporate will of the company by an appropriate independent organ that is preventing the plaintiff from prosecuting the action he is not improperly but properly prevented and so the answer to the question is, ‘No’. The appropriate independent organ will vary according to the constitution of the company concerned and the identity of the defendants who will in most cases be disqualified from participating by voting in expressing the corporate will.
Finally on this aspect of the matter I remain unconvinced that a just result is achieved by a single minority shareholder having the right to involve a company in an action for recovery of compensation for the company if all the other minority shareholders are for disinterested reasons satisfied that the proceedings will be productive of more harm than good. If Mr. Potts’ argument is well founded once control by the defendants is established the views of the rest of the minority as to the advisability of the prosecution of the suit are necessarily irrelevant. I find that hard to square with the concept of a form of pleading originally introduced on the ground of necessity alone in order to prevent a wrong going without redress.’
Knox J
[1987] BCLC 355
England and Wales
CitedFoss v Harbottle 25-Mar-1843
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 . .
See AlsoSmith v Croft ChD 1986
Walton J was concerned with two appeals from the Master. The first appeal was from an order made ex parte ordering the company to indemnify the claimant against costs. The appeal against that order was allowed, and Walton J decided that there was so . .

Cited by:
CitedIesini 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 . .

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Updated: 11 May 2021; Ref: scu.551064