Wallersteiner v Moir [1975] QB 373 is a UK company law case, concerning the rules to bring a derivative claim. The updated law, which replaced the exceptions and the rule in Foss v Harbottle

Foss v Harbottle

Foss v Harbottle 67 ER 189 is a leading English precedent in corporate law. In any action in which a wrong is alleged to have been done to a company, the proper claimant is the company itself. This is known as "the rule in Foss v Harbottle", and the several important exceptions that have been...

, is now contained in the Companies Act 2006

Companies Act 2006

The Companies Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules but it has since...

 sections 260-264, but the case remains an example of the likely result in the old and new law alike.

Facts

Mr Moir, a minority shareholder, in the course of an ongoing battle over a company owned Dr Wallersteiner, applied for money to continue a claim against Dr Wallersteiner for fraud. Dr Wallersteiner had bought a company called Hartley Baird Ltd using money from the company itself, in contravention of the prohibitions on financial assistance (under Companies Act 1948 s 54 and 190). He had got 80% of the company. Mr Moir was one of the 20% remainder shareholders. Wanting to expose Dr Wallersteiner’s various dealings, he circulated a letter to shareholders. Dr Wallersteiner sued for libel.

Mr Moir counterclaimed, and joined two of his companies as defendants, for £500,000 to be repaid. In a first judgment (Wallersteiner v Moir

Wallersteiner v Moir

Wallersteiner v Moir [1974] 1 WLR 991 is a UK company law case concerning piercing the corporate veil.-Facts:Dr Wallersteiner had bought a company called Hartley Baird Ltd using money from the company itself, in contravention of the prohibitions on financial assistance . He had got 80% of the company...

) the Court of Appeal held that the libel action would be struck out for deliberate delay and awarded £235,000 in damages to Mr Moir, but gave Dr Wallersteiner leave to defend the remaining issues, including fraud

Fraud

In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...

. Dr Wallersteiner claimed that interest could not be awarded under Law Reform (Miscellaneous Provisions) Act 1934. As this was going on, Mr Moir was running out of money and made an application for funds to continue the action.

Judgment

The Court of Appeal held, after noting that interest was awardable under the court's equitable jurisdiction, that Mr Moir could be indemnified by the company for his costs. Since the derivative claim meant the company was proceeding against Dr Wallersteiner, Mr Moir was ineligible for legal aid

Legal aid

Legal aid is the provision of assistance to people otherwise unable to afford legal representation and access to the court system. Legal aid is regarded as central in providing access to justice by ensuring equality before the law, the right to counsel and the right to a fair trial.A number of...

. Moreover, contingency fee arrangements with Mr Moir's lawyers could not be sanctioned (although Lord Denning MR opined that public policy might approve it in some derivative claims). Hence, the costs of litigation for minority shareholders would be indemnified by the company.

On the problem of a derivative claim, and the question of funding by the company, Lord Denning MR said the following.