Foss V Harbottle Essay Flashcards
(21 cards)
What is the rule in Foss v Harbottle (1843)?
Only the company itself can sue for wrongs done to it; individual shareholders cannot sue for harm to the company.
What two principles underpin the rule in Foss v Harbottle?
Separate legal personality
Majority rule in company decisions
What are the two limbs of the rule in Foss v Harbottle?
The proper plaintiff is the company itself.
If the act can be ratified by the majority, a minority cannot sue.
Name the four traditional common law exceptions to the rule in Foss v Harbottle.
Ultra vires or illegal acts
Actions requiring a special majority
Infringement of personal shareholder rights
Fraud on the minority + wrongdoer control
What is the fifth, more controversial exception to the rule in Foss v Harbottle?
Where the justice of the case requires it (rarely applied).
What case allows suit for illegal or ultra vires acts?
Cockburn v Newbridge Laundry Co Ltd (1915)
What case confirmed minority protection when a special majority is bypassed?
Edwards v Halliwell (1950)
What case protects personal rights of shareholders?
Pender v Lushington (1877)
What case is the leading authority on fraud on the minority?
Cook v Deeks (1916)
What is a derivative action?
A lawsuit brought by a shareholder on behalf of the company, usually where wrongdoers control the company.
What must be shown to bring a derivative action?
That the claim falls within an exception to Foss v Harbottle
A good cause of action
Wrongdoer control
What is the main limitation of derivative actions?
Remedies are limited (e.g., setting aside transactions), and reflective loss is generally not recoverable.
What does Section 212 CA 2014 provide?
A remedy for oppressive conduct or disregard of members’ interests by majority shareholders.
What remedies are available under Section 212?
Share buyouts
Compensation
Constitutional changes
Winding up of the company
What case expanded the use of s.212 to unfair share alteration?
Re Williams Group Tullamore Ltd (1986)
What section of CA 2014 enshrines majority rule?
Section 158 CA 2014
Can the majority misuse their power to benefit themselves?
No – this would amount to fraud on the minority (Cook v Deeks).
What is “reflective loss”?
A loss in share value resulting from harm to the company – generally not recoverable by shareholders personally (O’Neill v Ryan).
What is the ultimate remedy where relationships break down completely?
Winding up the company on just and equitable grounds (s.569(f) CA 2014).
What case supports winding up in quasi-partnership breakdowns?
Ebrahimi v Westbourne Galleries (1973)
When is winding up appropriate under s.569(f)?
When mutual trust and confidence has irretrievably broken down, especially in small or family companies (Re Murph’s Restaurant Ltd).
