JUDGMENT

Peh Swee Chin J:

Once again, a point of fairly frequent controversy has cropped up before me. I told Counsel I would deliver a short written judgment and here I do.

The point in question is that of a shareholder of a company suing, for the company; an supposedly erring director of the company but is faced with an immediate objection from the director that such action is not competent, or as is stated in the present case, that plaintiff has no locus standi.

The shareholder, i.e. the plaintiff, and the director, i.e. the defendant, both own equally the equity of the company. Plaintiff, in a nutshell, alleges that defendant has obtained secret profits by diverting the company's customers to another firm. Plaintiff claims therefore accounts and enquiries and payment of sum found due thereon.

By summons, the defendant has applied for the statement of claim to be struck out on the ground that plaintiff has no locus standi to file the present action, and in the alternative, on grounds which I need not deal with as no argument was advanced by both parties on them, neither was anything stated in any affidavit in regard to them. The real bone of contention has therefore been the question of locus standi.

Certain principles, relevant to this case, have to be briefly stated first. There is also that kind of democracy of rule by the majority in companies except that the rights and remedies of minority shareholders are fairly and adequately set out in our Companies Act. Since shareholders of the company exercise their control over the company through general meetings, they can bring about the appointment and removal of directors. Therefore the majority shareholders in effect control the directors. If the directors are supported by such majority shareholders, the minority shareholders are therefore rendered to being either spectators or victims. The leading case of Foss v. Harbottle, [1843] 2 Hare 461 testifies to this majority rule by holding to the effect that an individual shareholder of a company cannot sue, for a wrong done to the company, in his individual name on the grounds that the company is the true and proper plaintiff and that in any event, the alleged wrong could be, if need be, ratified by a simple majority of members, in other words, the majority shareholders should be left to decide whether to commence proceedings against the miscreants, viz. the misbehaving directors.

I pause to observe that the rule in Foss v. Harbottle applies to actions filed expressly or from their nature, impliedly by minority shareholders for the benefit of their company as in the instant case. It does not apply to action by shareholders in their own names for direct infringement of their personal rights qua shareholders which are usually conferred by Companies Act, to cite just one example, e.g. a shareholder of a company has a right to petition for winding up the company on ground that the affairs of the company are being conducted in an oppressive manner under s. 181(i)(a) of the Companies Act. An action of this kind concerning the infringement of personal rights of shareholders is also an internal fight or dispute in substance between a shareholder and his company, for an alleged wrong done to the shareholder by the company, and not the other way round as in this case.

The rule in Foss v. Harbottle however has given rise, through the cases to 3 exceptions i.e. when a shareholder of a company can sue in his own name for the benefit of the company. The 3 exceptions are acts which in effect, cannot be ratified by the majority shareholders at a general meeting. They are (1), any act which is ultra vires to the company, extending to any illegal act it being not necessary that it must be always an act ultra vires the memorandum or articles of association of the company. Please see Edwards v. Haliwel, [1950] 2 All ER 1064; (2) any act which is a fraud on the minority, and that the alleged wrongdoers control the company, and (3) an act, which ca