Foss v Harbottle
- Facts
- Two shareholders (Foss and Turton) of the Victoria Park Company sued five directors alleging they had misapplied company property and caused loss to the company.
- Issue
- Whether individual shareholders can maintain an action for wrongs done to the company when the company itself (controlled by the alleged wrongdoers) refuses to sue.
- Held
- The Court held that the proper plaintiff for wrongs done to the company is the company itself, not individual shareholders. Since the majority (in general meeting) can decide whether to ratify the directors' acts or to sue them, individual members cannot override the majority's will by suing in their personal capacity.
- Principle
- The proper plaintiff for wrongs done to a company is the company itself (acting through its majority); individual members cannot sue for corporate wrongs
Facts
- Two shareholders (Foss and Turton) of the Victoria Park Company sued five directors alleging they had misapplied company property and caused loss to the company.
- They sought to recover the loss on behalf of the company.
Issue
- Whether individual shareholders can maintain an action for wrongs done to the company when the company itself (controlled by the alleged wrongdoers) refuses to sue.
Held
- The Court held that the proper plaintiff for wrongs done to the company is the company itself, not individual shareholders. Since the majority (in general meeting) can decide whether to ratify the directors' acts or to sue them, individual members cannot override the majority's will by suing in their personal capacity.
Ratio decidendi
Two principles emerge: (1) Majority rule: corporate decisions are taken by majority vote in general meeting. (2) Proper plaintiff: only the company (not individual members) can sue for corporate wrongs. Exceptions exist for ultra vires acts, fraud on minority (wrongdoers in control), personal rights violated, special majority not obtained, and illegal acts.
Exam use
How to use it in an answer
The foundational rule of company governance. All minority protection mechanisms (S.241-245, derivative actions, class actions) are exceptions carved from this principle. Understanding Foss is a prerequisite to understanding when and why those exceptions apply.
Cite this
Citation
Foss v Harbottle (1843) 2 Hare 461Reported: (1843) 2 Hare 461. This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.