Complainants' Remedies

• Author: Suzanne Ffolkes Goldson
• Profession: Attorney-at-Law and Senior Lecturer in the Faculty of Law at The University of the West Indies, Mona
• Pages: 77-87

4. Complainants’ Remedies

For far too long, protection for minority shareholders was limited at common

law, and practically non-existent for other stakeholders, in the wake of corporate

misdeeds that aected their interests. e case law is replete with instances where

the infringement of minority shareholders’ rights, or where the duties owed to the

company by directors and ocers were breached, went unpunished, due to limitations

on the ability for actions to be brought.

e main oender was the Rule in Foss v Harbottle,1 which limited the ability of

a minority shareholder to bring an action on behalf of the company for wrongs done

to the company.

e Rule is two-fold and states:

1. the company is the proper plainti where a wrong is done against the

company; and

2. the courts will not ordinarily interfere in the internal matters of a company

where the company is competent to settle it itself, or in the case of an

irregularity, to ratify.

e purpose of the rule was to prevent shareholders from bringing actions which

are frivolous or vexatious against directors or ocers or other persons in control of the

company and to ensure that the actions are brought on behalf of the company and not

its shareholders.

e only recourse was where a shareholder could t into an exception to bring a

derivative action. Jenkins LJ in Edwards v Halliwell 2 stated that:

e cases falling within the general ambit of the rule are subject to certain

exceptions… in cases where the act complained of is wholly ultra vires the

company or association the rule has no application because there is no question of

the transaction being conrmed by any majority… [W]here what has been done

amounts to what is generally called in these cases a fraud on the minority and the

wrongdoers are themselves in control of the company, the rule is relaxed in favour

of the aggrieved minority who are allowed to bring what is known as a Minority

Shareholders’ action on behalf of themselves and all others… [T]he rule did not

prevent an individual member from suing if the matter in respect of which he was

suing was one which could validly be done or sanctioned, not by a simple majority

of the members of the company or association, but only by some special majority,

as, for instance, in the case of a limited company under the Companies Act, a

special resolution duly passed as such.

1. (1943) 67 ER 189.

2. [1950] 2 All ER 1064, 1065–67.