Case Analysis: Foss V. Harbottle

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THE TRUE EXCEPTION: ‘FRAUD ON THE MINORITY’
Comparing the cases of Pavlides v Jensen and Daniels v Daniels
This has been described as ‘the only true exception’ to the rule in Foss v Harbottle, a fair description when it is considered that the others are really self-evident and, strictly speaking, not even within the ambit of the rule. It is also the broadest exception and thus the one most often invoked by complaining minorities. The exception included two components: Those against whom relief was sought had to control the company, thereby preventing an action being brought against them in the company’s name; and the conduct complained of must, in the view of the court, have constituted a fraud In early cases, control was equated only with actual control of voting rights,22 but more recently the courts have held the control requirement to be fulfilled not only in cases where the defendants themselves have held
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Harbottle".(4) Under Irish law, the intended plaintiff must show "a realistic prospect of success"(5) in that regard in order to be given leave by the court to bring a derivative action.
In Fanning v Murtagh(6) Judge Irvine identified that, as a matter of Irish law, there are four recognised exceptions to the Foss v Harbottle rule, which she summarised as comprising the following categories of wrongdoing:
"(a) an act which is illegal or ultra vires (sic) to the company;
(b) an irregularity in the passing of a resolution which requires a qualified majority;
(c) an act purporting to abridge or abolish the individual rights of a member;
(d) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the

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