10 - Members' Remedies

• The two mechanisms that allow for collective action are the Representative Action and the Group Litigation Order.
• A member may bring a derivative claim on behalf of the company in respect of an actual or proposed act or omission by a director which involves negligence or breach of duty (or default or breach of trust).
• A derivative claim is a claim brought by a member of a company in respect of a cause of action vested in the company, which seeks relief on behalf of the company
• A derivative claimant must submit the claim to the Court, alongside an application for permission to continue the claim.
• The derivative claimant must provide evidence of their claim to the Court and the defendant may also submit evidence in answer to the claim.
• The steps for determining whether a derivative claim is granted permission are 1) establishing a prima facie case; and 2) Determining whether to grant permission.
• Can former members of a company petition the Court of the unfair prejudice remedy?

  No
• Can the Court be petitioned for an unfair prejudice remedy for a proposed act or omission?

  Yes
• Unfairly prejudiced conduct can include the following:

  ·         Abuse of controlling position such as selling company assets at an undervalue to another company they control, excessive remuneration

  ·         Mismanagement is not unfairly prejudicial unless serious mismanagement

  ·         Breach of directors duties

  ·         Breach of company’s constitution

  ·         Criminal conduct

  ·         Exclusion from management in a quasi partnership

  ·         Failure to consider paying dividends
• A share purchase order is the usual remedy for unfair prejudice.
• A ‘contributory’ is a ‘person liable to contribute to the assets of a company in the event of its being wound up’.
• Foss V Harbottle (1843) – Any action in which wrong is alleged to have been done to a company, the proper claimant is the company.