The Rule in Foss v Harbottle
Full Case Name: Foss v Harbottle
Citation: (1843) 2 Hare 461 (2 parties which add up to 11 divided the
Kiruga way of 1843)
Decided: March 25, 1843.
Judges: THE VICE-CHANCELLOR [Sir James Wigram]
Keywords: proper plaintiff of a company is the company- exceptions arise in
derivative action- Land mishandled on behalf of company directors—illicit
enrichment by company directors—articles of association fundamental
Laid down: In any action in which a wrong is alleged to have been done to a
company, the proper plaintiff is the company itself. This is known as
"the proper plaintiff rule", and the several important exceptions that have
been developed are often described as "exceptions to the rule in Foss v
Harbottle".Amongst these is the "derivative action", which allows a
minority shareholder to bring a claim on behalf of the company. This
applies in situations of "wrongdoer control" and is, in reality, the only true
exception to the rule. The rule in Foss v Harbottle is best seen as the
starting point for minority shareholder remedies.
Facts
Minority shareholders brought this action against the five directors who
were also majority shareholders in the company. (three of whom had
become bankrupt), and against an owner who was not a director, and the
solicitor and architect of the company) and they charged them of carrying
out several various “fraudulent and illegal” transactions. The claimants
alleged that property of the company had been misapplied and wasted
and various mortgages were given improperly over the company's
property. They asked that the guilty parties be held accountable to the
company and that a receiver be appointed. (They were as if reporting on
behalf of the company and yet they were minority shareholders with no
simple resolution in the least)
Issues
Full Case Name: Foss v Harbottle
Citation: (1843) 2 Hare 461 (2 parties which add up to 11 divided the
Kiruga way of 1843)
Decided: March 25, 1843.
Judges: THE VICE-CHANCELLOR [Sir James Wigram]
Keywords: proper plaintiff of a company is the company- exceptions arise in
derivative action- Land mishandled on behalf of company directors—illicit
enrichment by company directors—articles of association fundamental
Laid down: In any action in which a wrong is alleged to have been done to a
company, the proper plaintiff is the company itself. This is known as
"the proper plaintiff rule", and the several important exceptions that have
been developed are often described as "exceptions to the rule in Foss v
Harbottle".Amongst these is the "derivative action", which allows a
minority shareholder to bring a claim on behalf of the company. This
applies in situations of "wrongdoer control" and is, in reality, the only true
exception to the rule. The rule in Foss v Harbottle is best seen as the
starting point for minority shareholder remedies.
Facts
Minority shareholders brought this action against the five directors who
were also majority shareholders in the company. (three of whom had
become bankrupt), and against an owner who was not a director, and the
solicitor and architect of the company) and they charged them of carrying
out several various “fraudulent and illegal” transactions. The claimants
alleged that property of the company had been misapplied and wasted
and various mortgages were given improperly over the company's
property. They asked that the guilty parties be held accountable to the
company and that a receiver be appointed. (They were as if reporting on
behalf of the company and yet they were minority shareholders with no
simple resolution in the least)
Issues
