FOSS V HARBOTTLE

1) FACTS OF FOSS V HARBOTTLE

In this case, some shareholder of the company attempted to sue the directors and certain
shareholders. It was brought by two shareholders against the alleged fraudulent and illegal
transactions by the directors and to make up for the resultant loss to the company. The issues of this
case arise when the claimants alleged that property of the company had been misapplied and
wasted and various mortgage s were given improperly over the company’s property. They seek for
remedy for a receiver be appointed and the guilty parties to be held accountable to the company.It
was held that the director in it company has a locus standie to sue when a company is wronged.
since the loss is to the company, only the company can bring an action and not the minority
shareholders.

2) THE RATIO DECIDENDI

The court dismiss the two shareholders' claims and held that a breach of duty by the directors of the
company was a wrong done to the company for which it alone could sue. The proper plaintiff in that
case was the company and not the two individual shareholders.

3) PRINCIPLE OF PROPER PLAINTIFF RULE

The proper plaintiff for a wrong done to the company is the company itself because the company is
capable of suing

4) EXCEPTIONS TO THE PROPER PLAINTIFF RULE PRINCIPLES

The exceptions to the proper plaintiff rule principle are:

 an act of the company which are ultra vires

for example: the minority members may sue to restrain the company from performing ultra
vires or illegal activities

 Infringement of member’s personel rights

 acts requiring special majority
 fraud on minority