Shareholder Litigation –
Personal Wrongs
Personal right can be a right whether in capacity of
employee, creditor, or shareholder! (Reflective loss rule STILL
applies: Position does not matter as long as there is a cause
of action: Gardner v Parker)
For employee your right will usually stem from the
employment contract, while for shareholder it will usually be
from the Constitution!
COMMON LAW
Personal Right OR
Corporate Right? (ISSUE #1)
ISSUE #1: When is it a
personal or corporate
right?
STATUTORY RELIEF: s216 CA
ISSUE #2: When is the
loss merely reflective of
the company's loss?
See other
mindmap
The Prudential Assurance Principle
Personal
Corporate
No Reflective Loss
Principle: Is the loss
merely reflective of
company's loss? (ISSUE #2)
Corporate Action (see
previous chpt)
Some questions to ask yourself
No
Yes
Personal action allowed
But does company have a cause
of action to remedy the wrong?
No
Yes
Personal action allowed
Corporate action
i.e. exception to the No Reflective Loss rule
Fischer (George) (Great Britain) v
Multi Construction (UK)
Heng well Development v Thing
Chiang Ching (SG)
Where the company does not have a
cause of action
sub-situation
Giles v Rhind
Where the inability of the company to pursue
an action is PRECISELY because of the wrong
done to the company
Will the
shareholder's loss
be made good if the
company's loss
were made good?
Is it a transfer of funds from
one pocket to the other (i.e. if
we compensate the
individual, the company's
assets will be diminished
correspondingly? (Pension
example)
He cannot recover a sum equal to the
diminution in the market value
of his shares, or equal to the likely diminution in
dividend, because such a 'loss' is merely a
reflection of the loss suffered by the company.
The shareholder does not suffer any personal
loss. His only 'loss' is through the company, in
the diminution in the value of the net assets of
the company, in which he has (say) a 3%
shareholding. At *52 of Johnson v Gore Wood
Affirmed in SG in Townsings Henry George v
Jentons