ABSTRACT
Historically, the ‘proper plaintiff’ rule in Foss v Harbottle (1843) has been of the utmost significance in governing when shareholders can take action on behalf of the company in which they hold shares. The facts of the case were as follows:
Certain burghers in Manchester had got together to purchase park land to dedicate to the then heiress to the throne, Princess Victoria. The park opened to great acclamation but difficulties soon followed. It was alleged by some of the company’s members that some directors had misapplied company property. The case was heard by Wigwram VC. He held that the action could not proceed as the individual shareholders were not the proper plaintiffs. If a wrong had been committed, the wrong had been committed against the company and the company was therefore the proper plaintiff. The rule in Foss v Harbottle has acted like a deadhand on minority protection in British company law. The rule is to some extent justifiable. It has sometimes been justified as preventing a multiplicity of actions and sometimes by the argument that the company can ratify what directors have done and that therefore litigation might well be pointless.
