¹ Derivative actions have been allowed at least since Alwool v. Merryweather (1867) L.R. 5 Eq. 464n, but not until Wallersteiner v. Moir (No. 2) [1975] Q.B. 373 was the term judicially recognised and adopted. The company is joined as a nominal defendant. The plaintiff sues in a representative capacity on his own behalf and on behalf of fellow shareholders. The proceeds of any judgment against the substantive defendants are held for the company: Gower, Modern Company Law, 4th ed. (1979), pp. 649–652. Departure from this form was condoned in Wallersteiner v. Moir (No. 2), where an action appearing on the writ as a direct plaintiffs action was treated as a derivative action (at p. 391). No special provision for derivative actions is made by the Rules of the Supreme Court. As Professor Lord Wedderburn has stated ((1981) 44 M.L.R. 202 at note 6), the Rules should prescribe a special procedure, dispensing with the need for a representative action under R.S.C., Ord. 15 and laying down clear rules on costs, compromises and control of the action.

² (1843) 2 Hare 461.

³ Werner, “Management, Stock Market and Corporate Reform” (1977) 77 Col. L. R. 388, 398; Block and Prussia, “The Business Judgment Rule and Shareholder Derivative Actions” (1981) 37 Bus. Law. 28, 29–30.

⁴ The narrowly conceived exceptions to the rule in Foss v. Harbottle.

⁵ Principally the proscription of contingency fees and the absence of legal aid: see Wallersteiner v. Moir, supra, note 1. There is also the problem for the individual, unaided shareholder of unearthing facts which would turn suspicions into pleadable allegations, well illustrated by Lord Denning's graphic account of the difficulties encountered by Mr. Moir ([1975] Q.B. at p. 389). For earlier observations in a similar vein see Maugham J. in Re Dorman, Long & Co. [1934] Ch. 635, 657–658.

⁶ A recent survey conducted by the economic department of the Stock Exchange found that, at the end of 1981, individuals as opposed to institutions held 28–2 per cent, of quoted shares: The Stock Exchange Survey of Share Ownership (Stock Exchange Fact Service, 1983). “In many quoted companies institutions in the aggregate hold legal or de facto control”: Farrar and Russell, “The Impact of the Institutional Investor on Company Law,” (1984) 5 Co. Law. 107, 107.

⁷ For example, the monitoring and questioning of excessive directors' remuneration by the National Association of Pension Funds: Wheatcroft, “Derailing the Directors' Gravy Train,” The Sunday Times, 11 April 1982.

⁸ Re Associated Communications Corp. plc. (1982) 3 Co.Law. 106 and the Prudential litigation, infra note 10.

⁹ For an argument that a preponderance of institutional shareholders will increase the accountability of management, sec Sir James Ball (1984) 154 Lloyd's Bank Review 1.

¹⁰ [1981] Ch. 229 (Vinelott J.); [1982] Ch. 204 (C.A.)

¹¹ In the dexrivative action the Court of Appeal upheld the plaintiffs, but damages were reduced from £445,000 to £45,000. The appeal against the direct personal claim brought by Prudential was successful. This paper is concerned only with the derivative claim.

¹² [1982] Ch. at p. 235.

¹³ Ibid., at p. 220.

¹⁴ “We were invited to give judicial approval to the public spirit of the plaintiffs who, it was said, are pioneering a method of controlling companies in the public interest without involving regulation by a statutory body. In our view the voluntary regulation of companies is a matter for the City. The compulsory regulation of companies is a matter for Parliament”: [1982] Ch. at p. 224 (per Cumming-Bruce, Templeman and Brightman L.JJ).

¹⁵ The Court of Appeal declined to hear any argument on Vinelott J.'s lengthy analysis of the rule in Foss v. Harbottle, although invited to do so in “the public interest” by counsel for Prudential ([1982] Ch. at p. 220). As Newman Industries had chosen to adopt the order which the plaintiffs had obtained on its behalf, “the rule had ceased to be of the slightest relevance to the case” (ibid.).

¹⁶ Reg. v. Inland Revenue Commissioners, Ex pane National Federation of Self Employed and Small Businesses Ltd. [1982] A. C. 617,644; Reg. v. Her Majesty's Treasury, ex p. Smedley [1985) 2 W.L.R. 576, 583–584.

¹⁷ Contrast the attitude of Brandeis J. in Louis K. Liggett Co. v. Lee, 288 U.S. 517,565 (1933) and Laskin J. in Canadian Aero Service v. O'Malley (1974) 40 D.L.R. (3d) 371, 384.

¹⁸ Concern at the ineffectiveness of the criminal law in combating company and investment fraud has given rise to the appointment of a committee under the chairmanship of Lord Roskill to examine the criminal trial process (Hansard, H.L., 8 November 1983, Vol. 444, col. 790) and the formation of a Fraud Investigation Group which reports to the Director of Public Prosecutions (weekly Hansard, 3 July 1984, Vol. 63, No. 183, col. 89). The deficiencies of the civil law's response to fraud are summarised in Professor Gower's Report on Investor Protection (Cmnd. 9125) at pp. 170–175.

¹⁹ Under this section a court may authorise civil proceedings on behalf of the company (s. 461(2)(c)), but only if the petitioner can establish an act or omission or conduct in the affairs of the company which is “unfairly prejudicial” to members including the applicant. It seems that misfeasance which adversely affects the company but which is not directed at a particular individual or group of shareholders is not “unfair prejudice”: Re Carrington Viyella pic, Financial Times, Commercial Law Reports, 4 February 1983. In Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (No. 2) [1982] Ch. 204, 222–223, the Court of Appeal insisted that a wrong to the company does not become additionally a wrong to the members merely because the wrongdoing adversely affects the share price.

²⁰ [1982] Ch. 204, 225–226, 235.

²¹ Ibid, at pp. 222–223.

²² (1981) 44 M.L.R. 202.

²³ [1957] C.L.J. 194 and [1958] C.L.J. 93.

²⁴ (1981) 44 M.L.R. 202, 212.

²⁵ Ibid, at p. 211.

²⁶ Ibid, at p. 212.

²⁷ “Such consideration of [Foss v. Harbotile] as appears in this judgment is, apart from a few submissions made by Mr. Bartlett, merely a reflection of our own thoughts without the benefit of sustained argument,” [1982] Ch. at pp. 220–221.

²⁸ [1982] Ch. at pp. 221–222.

²⁹ See pp. 244–245 below.

³⁰ See note 27 supra.

³¹ [1982] Ch. at p. 219, and p. 246 below.

³² Sealy [1982] C.L.J. 247, 247.

³³ “It does not seem yet to have become very clear exactly what the word ‘fraud’ means in this context but I think it is plainly wider than fraud at common law …” per Megarry V.-C. in Estmanco (Kilner House) Ltd. v. Greater London Council [1982] 1 W.L.R. 2, 12.

³⁴ “Fraud lies rather in the nature of the transaction than in the motives of the majority,” [1985] C.L.J. 93, 96.

³⁵ If the wrongdoers control the general meeting, they can prevent action in the company name, as in East Pant Du United Lead Mining Co. v. Merryweather (1864) 2 H. & M. 254.

³⁶ [1958] C.L.J. at pp. 96–106.

³⁷ “A notoriously vague concept,” Report of the Company Law Committee (Cmnd. 1749), para. 206.

³⁸ As in Atwool v. Merryweather (1867) L.R. 5 Eq. 464n.

³⁹ Burland v. Earle [1902] A.C. 83, 93.

⁴⁰ (1981) 44 M.L.R. 202, 206.

⁴¹ See Maudsley, “Constructive Trusts” (1977) 28 N.I.L.Q. 123, 124.

⁴² Metropolitan Bank v. Heiron (1880) 5 Ex.D. 310; Lister & Co. v. Stubbs (1895) 45 Ch.D. 1.

⁴³ Phipps v. Boardman [1967] 2 A.C. 46.

⁴⁴ Vaughan Williams L.J. in Kaye v. Croydon Tramways Co. [1898] 1 Ch. 358, 374–375.

⁴⁵ Re Horsley and Weight Ltd. [1982] Ch. 442, 445, 446. The dicta in Horsely were sceptically scrutinised by Lawton and Dillon L.JJ. in Multinational Gas and Petrochemical Co. Ltd. v. Multinational Gas and Petrochemical Services Ltd. [1983] Ch. 259. The matter is further discussed at p. 252, infra.

⁴⁶ [1916] 1 A.C. 554.

⁴⁷ (1967) 2 A.C. 134n.

⁴⁸ [1916] 1 A.C. 554, 564.

⁴⁹ [1967] 2 A.C. 134n. 150.

⁵⁰ This was the assumption of the Editor of the All England Law Reports in his note on the case ([1942] 1 All E.R. 378, 379) which has been widely accepted as correct, e.g. Gower, Principles of Modern Company Law, 4th ed. (1979), at p. 593. But see infra, p. 248.

⁵¹ See Wedderburn (1981) 44 M.L.R. 202, 206.

⁵² Consul Developments Lid. v. D.P.C. Estates Ltd. (1975) 132 C.L.R. 373, 398.

⁵³ Canadian Aero Service Ltd. v. O'Malley (1973) 40 D.L.R. (3d) 371; Industrial Development Consultants Ltd. v. Cooley [19721 1 W.L.R. 443.

⁵⁴ [1967] 2 A.C. 46.

⁵⁵ Ibid, at pp. 105, 109. See too Zwicker v. Stanbury [1954] 1 D.L.R. 257, where a constructive trust was imposed on shares, applying Regal.

⁵⁶ “… the taking of bribes now appears to be the only instance in which the recipient of an asset is personally accountable without also being a constructive trustee”: Goode, “The Right to Trace and its Impact in Commercial Transactions” (1976) 92 L.O.R. 360, 536.

⁵⁷ Zwicker v. Stanbury [1954] 1 D.L.R. 257, 269; Furs Ltd. v. Tomkies (1936) 54 C.L.R. 583, 590–591, 599.

⁵⁸ Gower, op. cit. note 50, supra, at 618. Professor Beck also uses good faith as a ground of distinction between Cook and Regal (Canadian Company Law (Vol. 2) ed. Zeigel) at pp. 232, 238.

⁶⁰ [1967] 2 A.C. 134n. 150.

⁶¹ As in Regal and in Alexander v. Automatic Telephone Co. Ltd. [1900] 2 Ch. 56. In both cases allegations of dishonesty were not sustained at trial and financial liabilities were imposed on directors on grounds not dependent on findings of bad faith.

⁶² “The rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides …” per Lord Russell [1967] 2 A.C. 134n., 144.

⁶³ Regal (Hastings) Ltd. v. Gulliver [1967] 2 A.C. 134n.

⁶⁴ Daniels v. Daniels [1978] Ch. 406.

⁶⁵ Industrial Development Consultants Ltd. v. Cooley [1972] 1 W.L.R. 443; Canadian Aero Service Ltd. v. O'Malley (1973) 40 D.L.R. (3d) 371.

⁶⁶ Piercy V. Mills (S.) & Co. [1920] 1 Ch. 77; Hogg v. Cramphorn Ltd. [1967] Ch. 254; Bamford v. Bamford [1970] Ch. 212; Re Roith (W. & M.) [1967] 1 W.L.R. 432.

⁶⁷ Smith (Howard) Ltd. v. Ampol Petroleum Ltd. [1974] A.C. 821.

⁶⁸ Wedderburn, [1958] C.L.J. 93, 101 treats Alexander v. Automatic Telephone Co. Ltd. n. 61, supra, as a case where the directors acted in good faith, whereas in Boyle and Birds, Company Law (1983) at p. 616, Alexander is treated as a case involving bad faith. Professor Gower treats Re Roith (W. & M.) [1967] 1 W.L.R. 432 as an authority on the unratifiable nature of acts perpetrated in bad faith (Modern Company Law, 4th ed. (1979) at pp. 577, 619), but Buckley L.J. in Re Horsley and Weight Ltd. [1982] Ch. 442, 451 firmly concluded that the directors in Roith had acted in good faith.

⁶⁰ Bamford v. Bamford [1970] Ch. 212. Gower regards Bamford as a case where the directors were acting in good faith (Modern Company Law, 4th ed. (1979), p. 619, note 44) and at trial Plowman J. stated, “The assumption is merely that the board exceeded its powers, not that it acted mala fide” ([1968] 2 All E.R. 655, 658). Seemingly then Plowman J. was applying, in substance, the proper purposes doctrine, a limitation on action applicable to directors acting in good faith: Smith (Howard) Ltd. v. Ampol Petroleum Ltd. [1974] A.C. 821. But the action was tried on the explicit assumption that the challenged allotment “was not made bona fide in the interests of Bamfords Ltd.” ([1970] Ch. 212, 215) and Harman L.J. (at p. 238) uses the terms “mala fide” and “bad faith” without any qualification. In Gaiman v. National Association for Mental Health [1971] Ch. 317 Megarry J. asserted that the mala fide use of a power of expulsion would not result in nullity, a conclusion which necessarily implies that such an excess is ratifiable (at p. 330).

⁷⁰ Alexander v. Automatic Telephone Co. [1900] 2 Ch. 56; Daniels v. Daniels [1978] Ch. 406.

⁷¹ Vinelott J. in Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (No. 2) [1981] Ch. 257, 307.

⁷² Ibid.

⁷³ Ibid, at pp. 323–325.

⁷⁴ Ibid, at pp. 316–317.

⁷⁵ The Court of Appeal considered that Vinelott J. had undermined the rationale of Foss v. Harbottle by allowing the action to proceed to full trial on the basis of allegations in the statement of claim. It was of the view that a full hearing should be postponed until, if ever, the plaintiff furnishes prima facie proof of his allegations. The Court of Appeal also recommended that the judge, before entertaining the full hearing of a derivative action, should investigate the possibility of whether the general meeting and/or board of directors were, at the time of the action, independent of the wrongdoers and able to come to a disinterested decision on whether the company should sue ((1982) Ch. 204, 211, 221).

⁷⁶ It is implicit in the Court of Appeal's judgment ([1982] Ch. at p. 221) that the board or general meeting must be accurately acquainted with the main facets of the wrongdoing, if not as well acquainted as they would have been after a lengthy hearing.

⁷⁷ The text refers to a decision by the general meeting, reflecting the assumption that directors must receive absolution from the general meeting, a position fully in accord with the trustee-beneficiary analogy: see Benson v. Healhorn (1842) 1 Y. & C. Ch.Cas. 326, 341–342; imperial Mercantile Credit Association (Liquidators) v. Coleman (1871) 6 Ch.App. 556, 567; Regal (Hastings) Ltd. v. Gulliver [1967] 2 A.C. 134n. 150, 154. There is support from Prudential (C.A., supra note 76) and Queensland Mines Ltd. v. Hudson (1978) 52 A.L.J.R. 399, for the view that directors are similarly empowered vis-á-vis fellow directors. Rich, Dixon and Evatt JJ. took a contrary view in Furs Ltd. v. Tomkies (1936) 54 C.L.R. 583, 599. In Shaw (John) and Sons Salford Ltd. v. Shaw [1935] 2 K.B. 113, particular articles gave the directors an exclusive competence over the initiation of corporate litigation. To what extent a company's articles can overturn the basis of Foss v. Harbottle and remove from shareholders any say in litigation remains obscure (see Wedderburn [1975] C.L.J. 194, 201–202). Under the typical Art. 80 Table A Companies Act 1948 it is established that shareholders by ordinary resolution can override directors in a dispute concerning bringing action by the company: Marshall's Valve Gear Co. v. Manning, Wardle & Co. [1909] 1 Ch. 267. Under the corresponding provision of the new Table A (1984 S.I. 1717), article 70, such intervention will require a special resolution-an additional reason for taking a liberal view of the scope of the derivative action.

⁷⁸ Pace the Court of Appeal (at [1982] Ch. 204, 221–222), Vinelott J. was not using the “interests of justice” as a “practical test” for use in determining the right to bring a derivative action, but as indicative of the need for such an action should fraud and control, as he defined them, be present.

⁷⁹ Wedderburn considers that these “new principles” would be impracticable, particularly in large companies where a court would have to determine who, out of thousands of possible shareholders, were precluded from voting because of an interest contrary to the company's ((1981)44 M.L.R. 202, 211). But, on the face of it, Vinelott J. would disenfranchise only those who were guilty of the breaches of duty to be considered at the meeting and, presumably, any other shareholder who could be proved to be in privity with or suborned by the wrongdoers. The presumption, which would only be shifted in relation to specific individuals by particularised evidence, is that all shareholders who are not among the original wrongdoers are entitled to vote.

⁸⁰ Russell v. Wakefield Waterworks Co. (1875) L.R. 20 Eq. 474; Mason v. Harris (1879) 11 Ch.D. 97; Gray v. Lewis (1873) 8 Ch.App. 1035; Pavlides v. Jensen (1956] Ch. 565.

⁸¹ Pickering, “Shareholders' Voting Rights and Company Control” (1965) 81 L.Q.R. 248.

⁸² [1982] Ch. 204, 219.

⁸³ Wedderburn (1981) 44 M.L.R. 202, 205.

⁸⁴ [1981] Ch. 257, 321.

⁸⁵ Kaye v. Croydon Tramways Co. [1898] 1 Ch. 358; Normandy v. Ind. Cooper & Co. Ltd. [1908] 1 Ch. 84.

⁸⁶ [1916] 1 A.C. 554.

⁸⁷ Ibid, at p. 564.

⁸⁸ Estmanco (Kilner House) Ltd. v. Greater London Council [1982] 1 W.L.R. 2, 12.

⁸⁹ [1981] Ch. at p. 307.

⁹⁰ “Every shareholder has a perfect right to vote upon any such question, although he may have a personal interest in the subject-matter opposed to, or different from, the general or particular interests of the company” (1887) 12 App.Cas. 589, 593. For similar assertions see Pender v. Lushington (1877) 6 Ch.D. 70; Phillips v. Manufacturers' Securities Ltd. (1917) 116 L.T. 290.

⁹¹ [1967] 2 A.C. 134n.

⁹² Wedderburn (1981) 44 M.L.R. at p. 206, citing Harman L.J. in Bamford v. Bamford [1970) Ch. 212, 237. Wedderburn states this to be the position for all breaches of fiduciary duty not involving expropriation of corporate “money, property or advantages.” The present writer would accept that self-interested ratification is possible on facts such as Bamford (validation of allotment of shares), but takes issue with the width of Wedderburn's proposition. See further at pp. 253–255, below.

⁹³ [1981] Ch. 257, 308.

⁹⁴ [1967] 2 A.C. 134n. 150.

⁹⁵ (1981) 44 M.L.R. at p. 210.

⁹⁶ Loc. Cit., note 94, supra.

⁹⁷ Luxor (Eastbourne) v. Cooper [1941] A.C. 108.

⁹⁸ There is no indication in Luxor that the executors had sought registration as members, or, indeed, that such a course was open to them under the articles of Regal. In the absence of registration, executors are not to be treated as members: Bowling and Welby's Contract, [1895] 1 Ch. 663, 670. Although the estate will take dividends and bonuses and can be made subject to contributions, the right to vote the shares appears to be conditional on registration: Burns v. Siemens Brothers Dynamo Works (No. 2) [1919] 1 Ch. 225; Allen v. Gold Reefs of West Africa [1900] 1 Ch. 656.

⁹⁹ [1981] Ch. 257, 310.

¹ Joint Stock Companies by Patent Act 1869 (32–33 Viet. Cap. 13, Canada) s. 22.

² The date of the shareholders' meeting was decided upon at the same time as the date for the directors' meeting, with a view to considering whether to implement proposals from the directors to enter the contract. See (1887) 12 App.Cas. 589, 595.

³ (1887) 12 App. Cas. 589, 600–601.

⁴ (1889) 40 Ch. D. 135.

⁵ [1967] Ch. 254.

⁶ [1970] Ch. 212.

⁷ A profit from a contract in Grant.

⁸ In Bamford and Hogg it was ruled that share allotments made in breach of duty could be validated by the general meeting and no reference was made to any restriction on voting rights (save, of course, of the improperly alloted shares). The allotments were made to fend off take-overs. If retention of a seat on the board is regarded as a benefit stemming from a breach of duty, these cases are irreconcilable with Vinelott J.'s restatement.

⁹ Estmanco (Kilner House) Ltd. v. Greater London Council (1982) 1 W.L.R. 2 (controllers blocking action by shareholders in respect of breaches of covenant by the company but taking no personal benefit from the corporate breach). Re Horsley and Weight Ltd. [1982] Ch. 442 (doubts expressed, obiter, by Templeman and Cumming-Bruce L.JJ. as to whether a gratuity paid by directors to a third party in circumstances constituting gross negligence could be ratified by self-interested votes).

¹⁰ “Restrictions on capacity” refers to situations where, because of a lack of authority, or a conflict of duty and interest, or an improper purpose, a transaction which a director has effected for the company is voidable at the instance of the company.

¹¹ (1887) 12 App. Cas. 589, 596.

¹² [1956] Ch. 565.

¹³ The majority shareholder in the selling company was another company whose directors, the defendants in the action, were also the directors of the selling company. Danckwerts J. refused to “pierce the veil” and investigate whether the defendants controlled the votes of the majority shareholder.

¹⁴ Turquand v. Marshall (1869) L.R. 4 Ch.App. 376, an action by a liquidator, is also commonly cited as ruling out derivative actions founded on directors' negligence. The relevant dicta (at p. 386) seem undisposed to any actions founded on negligence.

¹⁵ [1981] Ch. 257, 307 In Taylor v. N.U.M. (Derbyshire Area) [1984] The Times, December 29 1984, Vinelott J. held that it was open to a majority of the union members to resolve that no action be taken by the union against union officers responsible for misapplication of union funds. A disinterested waiver would have seemed possible, with all members entitled to vote apart from those proved to have received ultra vires payments.

¹⁶ Estmanco (Kilner House) Ltd. v. Greater London Council [1982] 1 W.L.R. 2. And see note 9, p. 249, supra.

¹⁷ [1982] Ch. 442.

¹⁸ [1983] Ch. 258.

¹⁹ The doctrine is not invoked in terms but the decision asserts an identity between shareholders and the company. In Re Attorney-General's Reference (No. 2 of 1982) [1984] 2 W.L.R. 447 the doctrine was perceived as irrelevant to the issue of whether an offence had been committed against the company. The Court of Appeal held that sole owners could steal from their company. The alter ego doctrine was only in point if the issue concerned offences by the company (at 461). Likewise, in civil law, the notion of alter ego should be employed to secure claims against companies and not used to defeat claims brought by companies against company controllers.

²⁰ He argued that the majority judgments failed to differentiate between a decision to enter a transaction and waiver of breaches of duty alleged to arise from the transaction.

²¹ In Re Attorney General's Reference, note 19, supra, Multinational was distinguished on the ground that it did not involve breach of trust or dishonesty. Logically, given the separate personality of the company, the position should be the same for all breaches of duty. See further Belmont Finance Corp. Ltd. v. Williams Furniture Ltd. [1979] Ch. 250.

²² Dillon L.J. refers to the unanimous agreement of the shareholders in Multinational (1973 Ch. 258, 289) because, it is submitted, the agreement did not manifest itself in the form of a resolution passed at a general meeting. Unanimous assent informally expressed is properly characterised as an alternative mode of shareholder decision-making operating to the same effect and within the same constraints as decisions affected by formal resolution. Formal resolutions are acts binding on the company but not acts of the company: Northern Counties Securities Ltd. v. Jackson & Steeple Ltd. [1974] 1 W.L.R. 1133, 1144. The analysis would seem equally applicable to informal decision-making and could have changed the outcome in Multinational.

²³ The shareholders of Multinational were three oil companies, distinct from and not controlled by the directors. The plaintiff alleged that the directors acted, in all relevant matters, in accordance with the directions of the shareholders. All three judgments treat the oil companies as shareholders simpliciter, owing no fiduciary duties to the company. It follows that they would not have been implicated in any breach of duty on the part of the directors, if such had been proved, and would have been in a position to ratify disinterestedly any wrongdoing—an odd conclusion on the particular facts. The fault lies not in the principle of disinterested ratification but in the failure to impose fiduciary status on shareholders who are de facto managers.

²⁴ Grant v. U.K. Switchback Rly. Co. (1889) 40 Ch.D. 135.

²⁵ Hogg v. Cramphorn [1967] Ch. 254; Bamford v. Bamford [1970] Ch. 212.

²⁶ Weddcrburn at (1981) 44 M.L.R. 202, 208, notes 43, 44, maintains that this is an “exceptional duty” confined to changing the articles and voting at class meetings. See t o o B. H. McPherson (1963) 36 A.L.J. 404. The leading case, Allen v. Gold Reefs of West Africa [1900] 1 Ch. 656 imposed the duty in the context of changing the articles, but as an instance of a general principle, “applicable to all powers conferred on majorities and enabling them to bind minorities” (Lindley M.R. at p. 671). Cozens-Hardy M.R. denies a general principle in Phillips v. Manufacturers' Securities Ltd. (1917) 116 L.T. 290, 296, but the majority in that case found that the votes were cast bona fide. McPherson, op. cit. argues against a general duty but concedes that there is no “necessary reason” limiting the duty to changing the articles (at p. 408). In British American Nickel Corp. Ltd. v. O'Brien [1927] AC. 369, Viscount Haldane imposed a cognate duty on a vote at a class meeting but queried, obiter, whether similar constraints applied to voting “under a general title which confers the vote as a right of property attaching to a share” (at p. 371). But Allen (op. cil.) had already decided that such a duty could apply to votes exercised, “under a general title.” In Re Holders Investment Trust Ltd. [1971] 1 W.L.R. 583, Megarry J. perceived the duty to vote in good faith in the interests of the class as an adaptation of a general duty to vote in good faith in the interests of the company (at p. 586). Support for a duty of general application is to be found in Clemens v. Clemens Bros. Ltd. [1976] 2 All E.R. 268 (voting to increase capital); Re Westbourne Galleries Ltd. [1971] Ch. 799, C.A. (voting to dismiss a director from the board); Clark v. Workman [1920] 1 I.R. 107, 114, Wotherspoon v. Canadian Pacific Ltd. (1979) 92 D.L.R. (3d) 545, 709 (voting on a sale of assets by the company); Re Halt Garage Ltd. [1982] 3 All E.R. 1016, 1037 (voting on directors' remuneration). In North-West Transportation Co. v. Beany (1887) 12 App.Cas. 589 and Pender v. Lushington (1877) 6 Ch.D. 70 an unrestricted freedom to vote is emphatically asserted; in neither case was there any oppressive or discriminatory voting on the facts.

²⁷ Lord Wilberforce in Ebrahimi v. Westbourne Galleries Ltd. [1973] A.C. 360, 381.

²⁸ Re Holders Investment Trust Ltd. [1971] 1 W.L.R. 583; Clemens v. Clemens Bros. Ltd. [1976] 2 All E.R. 268.

²⁹ The different content in differing contexts is recognised by Oliver J. in Re Halt Garage Ltd. [1982] 3 All E.R. 1016, 1035.

³⁰ Whereas directors probably do have to balance long and short term interests of the company; Gower, Principles of Modern Company Law, 4th ed. (1979) at pp. 578–579.

³¹ Greenhalgh v. Arderne Cinemas Ltd. [1951] Ch. 286; Parke v. Daily News [1962] Ch. 297. Greenhalgh, of course, involved changing the articles, Parke, a gratuity to redundant employees (and see now Companies Act 1985, s.719). In the latter kind of case, particularly when members are voting to commit the company to a business transaction, there is much to be said for the view that the interests of the company as a business entity should be paramount. But in Multinational Gas and Petrochemical Co. Lid. v. Multinational Gas and Petrochemical Services Ltd. [1983] Ch. 258, in the context of shareholders agreeing in a form binding on the company that the company should enter certain contracts, Dillon L.J. stated, “the members … owed no duty to the company as a separate entity” (at p. 290). And see too Lawton L.J. at p. 269.

³² [1951] Ch. 286, 291: Mills v. Mills (1938)60C.L.R. 150,169–171. Peter's American Delicacy Co. Ltd. v. Heath (1939) 61 C.L.R. 451, 504.

³³ As in Daniels v. Daniels [1978] Ch. 406 (voting at a general meeting to transfer company asset at an undervaluation t o majority shareholder'director). Discrimination taking the form of a direct infringement of a member's personal rights will entail a personal action or a petition under section 459 o f the Companies Act 1985. The Court of Appeal in Prudential Assurance Ltd. v. Newman Industries Ltd. (No. 2) [1982] Ch. 204, insisted on a sharp differentiation between wrongs to the company and wrongs to members (at pp. 222–223).

³⁴ (1887) 12 App.Cas. 589, 596.

³⁵ Daniels v. Daniels supra, note 33; Re Halt Garage Ltd. supra, note 29.

³⁶ (1867) L.R. 5 Eq. 464n.

³⁷ (1898) 14 T.L.R. 402.

³⁸ [1978] Ch. 406.