These five directors claim that The property of the company had been misapplied and various mortgages were given improperly over the company's property
If the corporation is a legal person separate from its members, it follows that for a wrong done to it the corporation itself is the only proper plaintiff."When theshareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company and that he can only exercise his influence over the fortunes of the company by the exercise of his voting rights in general meeting
caditquaestioCaditQuaestio is a Latin term for “the question falls” or “argument collapses.” This means that there is no further argument or discussion. This term is used to refer to a situation where a legal dispute has been settled. The word “cadit” means to fall and “quaestio” means question. Caditquaestio is used to indicate that a dispute or an issue is no longer in question.Rule in Foss v. Harbottle is actually rule of majority supremacy. It means that once a resolution is passed by majority, it is binding on all the members. Also the courts will in such cases not interfere to protect the minority interest. This is based on the rational that on becoming a member, each person impliedly consents to submit to the will of majority. Said in another way it is a corollary to the rule that only the company can sue, which again translates to the wish of the majority.
Foss vs harbottle
BUSINESS LAWFOSS VS HARBOTTLE
Victoria Park Company• The company had been set up in September 1835 .• To establish a residential area to the east of Wilmslow Road, an "estate" of substantial houses in spacious grounds, where prosperous business and professional families could live .
Minority ShareholdersRichard Edward StarkieFoss
Claim The property of the company had been misapplied and various mortgages were given improperly over the companys property
Annual general meeting No action should be taken against them.
Reason 1 : The "proper plaintiff rule" is that a wrong done to the company may be vindicated by the company alone. - Corporation has separate legal entity
Reason 2 :The "majority rule principle“ - states that if the alleged wrong can be confirmed or ratified by a simple majority of members in a general meeting, then the court will not interfere, cadit quaestio.