Drawing boundaries between derivative claims and unfairly prejudicial petitions

Abstract

Abstract: Purpose - To consider whether the courts, in addressing petitions under section 994 of the Companies Act, the unfairly prejudicial remedy, have undermined the rule in the case of Foss versus Harbottle.

Design/methodology/approach - The case of Foss versus Harbottle focused on the prohibition on the recovery of reflective loss, and the standing requirements with respect to derivative claims by allowing a combination of corporate and personal claims. Discusses the implications for the case of Gamlestaden Fastigheter AB versus Baltic Partners Ltd, that a cause of action vested in a company could be prosecuted to judgment on an unfairly prejudicial petition and that the court could order that damages be paid by wrongdoing directors to the company.

Findings - The case of Gamlestaden Fastigheter AB versus Baltic Partners Ltd indicated that the courts are quite restrictive in their approach and that this should continue to be the position, especially in the light of the statutory derivative claim now provided for by Companies Act 2006, Part 11.

Originality/value - Clarifies some of the confusion that might have arisen in this implementation of the Companies Act.

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Identifiers

ORCID for Brenda Hannigan: orcid.org/0000-0003-1155-3287

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