ICAS TC Business Law Module 14 Flashcards
Foss v Harbottle 1843
Facts: A shareholder sued the directors of the company alleging that the directors
had defrauded the company by selling land to it at an inflated price. The company
was by this time in a state of disorganisation and efforts to call the directors to account
at a general meeting failed.
Held: The action was dismissed because the company, as a separate person from
its members, was the only proper claimant in an action to protect its rights or property
and the company in general meeting must decide whether to bring such legal
proceedings.
Kleanthous v Paphitis 2011
Facts: P was a majority shareholder and a director in Ryman Group Ltd (‘Ryman’).
In 1998 when La Senza lingerie chain was looking for a buyer, Ryman were
approached but decided not to invest in La Senza. P decided he wanted to buy La
Senza in his personal capacity. He bought La Senza though a newly-acquired shelf
company. However, he needed funding to buy La Senza which he obtained from
Ryman who agreed to lend P’s new company £1.8m to buy La Senza. K, the
claimant, sought leave under the CA 2006 derivative claim provisions, to bring an
action against the directors of Ryman for breach of duty, claiming that the directors
had conflicts of interest in relation to the La Senza acquisition (as Ryman also had a
subsidiary in the lingerie business).
Held: K was not granted permission to bring a derivative claim because the directors
of Ryman had approved the loan and there was no evidence that the decision had
not been taken on proper grounds.
Wishart v Castlecroft Securities Ltd 2009
Facts: The claimant alleged that the directors of a company, C, had entered into
certain property transactions secretly from which they had profited. The directors of company C denied the claims and argued that the claimant was acting in bad faith in
seeking to raise proceedings.
Held: The court considered the allegations of bad faith and concluded, on the
evidence available, that the petitioner was entitled to start a derivative claim. This
decision was upheld on appeal. Furthermore, the claimant sought and was granted,
for the first time in Scotland, an indemnity in relation to expenses.
Tay Bok Choon v Tachansan Sdn Bhd 1987
Facts: A shareholder who had put up a significant amount of capital was
subsequently excluded from a management role in the company.
Held: He was entitled to have the company wound up.
Re German Date Coffee Co 1882
Facts: The company had been formed with the sole object of obtaining a German
patent to manufacture coffee from dates. The request for a patent was refused by
the German government so the company manufactured coffee under a Swedish
patent for sale in Germany.
Held: Since the point of setting up this company was the German patent, the member
who petitioned for the company’s winding up was successful.
Re Yenidje Tobacco Co Ltd 1916
Facts: The company had two directors with an equal number of shares. They could
not agree how the company should be managed.
Held: Since there was no provision for breaking the deadlock, a petition to wind up
the company on the just and equitable ground was granted.
Re Lundie Bros Ltd 1965
Held: A petition to wind up was granted where it was established that the directors
ran the company as if it were their own business without any account being taken of
the interests of the shareholders.
Hyndman v RC Hyndman Ltd 2004
Facts: A shareholder was able to show that her efforts, over a number of years, to
obtain information about the company’s affairs, had been frustrated. Further, the
company’s accounts were not being kept properly and the director’s lifestyles did not
accord with the fortunes of the company and what it could afford to pay them.
Held: A compulsory winding up order was granted on the just and equitable ground.
The court’s view was that if the company was allowed to wind up voluntarily it was
likely that the petitioner’s interests would be further prejudiced as it appeared that the
directors had acted fraudulently.
