MINORITY RIGHTS AND REMEDIES

Personal Actions

Pender v Lushington [1877]

Chairman of a meeting of shareholders wrongfully refused to recognise votes of nominee

shareholders. Held:

1. This refusal infringed the personal rights of nominee shareholders.

2. Thus could bring personal action.

Macdougall v Gardiner [1875]

Chairman of a meeting of shareholders wrongfully (i.e. in breach of articles) refused to call a

poll when one was requested by a shareholder (C). Shareholder sued. Held:

1. Refusal did not infringe personal right of C.

2. Therefore C was not entitled to bring personal action
1. Rather the proper claimant was company.

Cinematic Finance v Ryder [2010]

1. Reforms in CA 2006 have not abolished proper claimant principle from Foss v
Harbottle.
2. Thus individual claims by shareholders still possible

Re a Company [1987]

Hoffmann J
1. Where director allots shares solely for purpose of destroying a majority, the main
basis of action is the wrong to shareholders
1. And not the wrong to company
2. This because members individual rights under articles have been infringed.
3. Thus members have personal right of action.

Johnson v Gore Wood [2001] (HL)

Lord Millett
1. Shareholders cannot recover for loss in value of shares which is reflective loss
(see notes)
2. This rule exists for policy reasons
1. Is principally for benefit of companys creditors
2. i.e. Ensures loss is recovered by company and not shareholders
 Giles v Rhind [2003] (CA)

D, a director, diverted companys most lucrative contract away from company in breach of
duty. As result of loss of this contract, company went into receivership and did not have
enough money to launch proceedings against D. C, fellow shareholder in company, was in
shareholders agreement with D; thus brought action against director for breach of duty. Held:

1. Shareholders agreement was designed to protect Cs investment and remuneration

1. And Ds breach of duty harmed both of these
2. Therefore C has right of action.
2. Reflective loss principle does not prevent shareholder recovering damages where
directors breach of duty has made it impossible for company to pursue its own
cause of action against him
1. Even where loss suffered by shareholder reflects that of shareholder.
3. Thus C could recover his losses.

Heron International Ltd v Lord Grade [1983] (CA)

Were two takeover bids for a company; board of directors accepted lower bid and was able to
take action to enforce this choice on shareholders. Shareholders sued for loss in value of
shares. Held:

1. Companys loss was distinct from that of shareholders:

i) Companys assets were harmed as it was unclear that the relevant regulator would allow
lower bidder to operate in that industry
ii) Shareholders assets were harmed as they were unable to accept a higher offer for their shares
2. Thus no reflective loss principle does not apply.

Perry v Day [2005]

Derivative Actions

Iesini v Westrip Holdings [2009]

1. Under s.263(2), court can only refuse leave for derivative action where satisfied that
no director would seek to pursue the claim themselves.
2. Thus if some directors would seek to continue action, court cannot automatically
refuse leave.

Franbar Holdings [2008]

1. Relevant test under s. 263(3)(b) is that of a hypothetical director.