Sir John's Tuto Q

1. 1) Explain how the rule in Foss v Harbottle stop the
minority shareholders from bringing an action against the
company.
• The minority shareholder have problems to enforce the
directors duties because they need approval of general
meeting in order to take action against the directors.
This is because the wrong done is to the company and
only the company has the capacity to take action.
• Right to take action is always given to the board of
directors and they will definitely decide not to take
action against themselves
• In this case, some shareholders of the company
attempted to sue the directors and certain other
shareholders for mismanaging and misapplied the
company’s property
• The Proper Plaintiff Rule – The proper plaintiff for a
wrong done to the company is the company itself
because the company is capable of suing.
• The Majority Rule – If the majority decides that the
company should not take any action for the wrong
done to it, than there can be no use in having litigation
about it.
Exceptions :
• Acts of the company which are ultra vires;
- The minority members may sue to restrain the
company from performing ultra vires or illegal
activities.
- In Simpson v Westminster Palace Hotel Co, a
minority argued that a decision to lease a major
portion of the hotel as offices was not within the
objects of the hotel company and therefore was ultra

2. vires. The court held that a single member can
maintain a suit for declaration.
- Section 20 = preserve the validity of ultra vires act.
- Company’s incapacity may only be raised in
proceeding against the company to restrain an ultra
vires transaction; Section 20(2)(a) but the power to
restrain is lost if the transaction is wholly executed;
Section 20(2)(b)
• Infringement of member’s personal rights;
• Acts requiring special majority;
• Fraud on minority;
2) Explain the difference between the representative and
derivative action.
Derivative Action
-A derivative action is a civil action brought by a minority
shareholder in their own names seeking a remedy for the
company in respect of a wrong done to the company.
-A derivative action will only be permitted when a serious
wrong to the company is involved, and the majority
refuse to sanction an action in the company’s name.
-The company cannot sue because the controller of the
company will not allow it to sue.
- Company is a party to the proceeding and an order can be
given in its favour.
-All shareholders are bound by the decision as the P sues on
behalf of himself and all the members except the
wrongdoers.

3. -No specific relief is asked against the company, what
is recovered cannot be paid to the plaintiff but it
goes to the company instead.
- Requirement for derivative action: (Kalau
representative die kene exception under Foss v
Harbottle)
a. Act complained of must amount to fraud on minority;
b. The wrongdoers must be shown to be in control and
refuse to lend the company’s name to an action to
remedy the wrong;
c. Company must be made a defendant in the action;
d. Action must be brought on behalf of the other minority
shareholder except the wrongdoers;
The action is a product of equity and therefore is
subjected to equitable considerations
Representative Actions
-Representative action is a type of lawsuit where one of the
parties is a group of people who are represented collectively by
a member of that group.
-Minority sues the company for the wrong doing of the
company.
-Where the minority is the injured party, they have a personal
right of action against the company and the majority.
-An injunction is sought to restrain a breach of the articles or
declare that the act of the company is invalid. Damages
cannot be claim for breach of Sec 33(1)
-The action must come within the exceptions in the rule of
Foss v Harbottle.
3) Explain whether minority shareholder can bring an
action against the company for an alteration to the MOA,
forcing them to sell their own shares to majority.
-This falls under fraud (as stated above)

4.  It may be fraud on the minority for the majority
shareholders to use their voting power so as to deprive
a members of his shares in the company. This is usually
achieved by altering the AOA and may only be done if
adequate compensation is paid and it can be shown to
be bona fide for the interest of the company as a whole.
 In Brown v British Abrasive Wheel Co, a company
required further capital. The majority shareholders
held 98% of the issued capital but would only provide
further capital if they could buy up the remaining
issued shares. The minority shareholders refused to
sell, so the general meeting passed a special resolution
to alter the AOA, so as to require minority shareholders
to sell their shares if requested by 9/10 of the
shareholders.
 It was held that the alteration was a fraud on the
minority because the majority were trying to achieve
by compulsion which they had failed to achieved by
negotiation. The minority shareholder was allowed to
maintain the action.
# HOWEVER, IF
Where such resolution is pass to acquire shares of any
member who are competing with the company, no minority
action can be made as it was bona fide in the interest of the
company as a whole. This has been illustrated in the case of
Sidebottom v Kershaw Leese & Co Ltd.  SR  75%
and FRAUD  KONPOM OPPRESSION IN USUAL CASES
SEBAB IT UNFAIRLY DISCRIMINATE AND IS HIGHLY
PREJUDICIAL UPON THE MINORITIES. UNLESS INSTANCES
OF THE CASE SIDEBOTTOM.
Oppression under Sec181

5.  Oppression means conduct which is burdensome or
harsh or wrongful or unfair dealing - Scottish
Cooperative Co v Meyer
# Section 181(1)(b) allows the court to provide remedy to a
member where the court finds that:
 Some act of the company has been done or is
threatened; or
 Some resolution or proposed resolution of members,
debenture holders or class of members has been
passed or is proposed
which
 unfairly discriminates; or
 prejudicial
to one or more of the members or debenture holders