han one legal dimension to the same set of facts. Millett J. came to *Comp.Law. 99 the conclusion that if the essence of the complaint was not of mismanagement of thecompany but was of breaches of duty to, or other misconduct actionable by, the company, in such acase a derivative claim rather than unfair prejudice action was the appropriate vehicle for relief.This restrictive approach is not an English peculiarity--it was adopted in Hong Kong in Re ChimeCorp, 10 in which Millett J.'s dicta in Re Charnley Davies were considered at length by the Hong Kong
Court of Final Appeal. In that case, an unfair prejudice petition was presented by the administratorsof the estate of the deceased shareholderdirector, against the widow. One of the allegations in the
petition was that the respondent had procured the company to advance a loan to another company inPage1
which the respondent was said to be beneficially interested. Thepetitioners sought leave to amendthe petition so as to obtain the repayment by the respondent and her company to the victim company
in respect of the allegedly unauthorised loan. The court refused permission.
Lord Scott, sitting as a judge of the Hong Kong Court of Final Appeal, held that it was an abuse of
process to use an unfair prejudice petition in order to circumvent the rule in Foss v Harbottle 11
where the nature of the complaint was misconduct rather than mismanagement. Where the nature of
complaint was misconduct and the appropriate remedy was for the benefit of the company, the proper
claim was a derivative claim.12
Significantly, the judge reformulated the circumstances in which the court would have jurisdiction to
grant corporate relief in an unfair prejudice petition. Lord Scott noted the dictum of Hoffmann L.J. inRe Saul D Harrison 13 that “enabling the court in an appropriate case to outflank the rule in Foss vHarbottle was one of the purposes of [s.459]”. On this point, the judge emphasised that as a generalrule, the court should not in an unfair prejudice petition make an order for payment to be made by arespondent to the company. Whether or not the court dealt with such claims in an unfair prejudicepetition was a matter of discretion. Relying on the principles set out in Prudential Assurance vNewman Industries 14 the judge held that it would be an appropriate case to allow the rule to beoutflanked only if two conditions were satisfied15 : (1) first, the order sought under an unfair prejudicepetition corresponded with the order that would have made if obtained in a derivative claim; (2)secondly, it was clear from the outset that the issue could be conveniently dealt with at the hearing ofthe petition. Otherwise, the appropriate relief would be an order permitting a derivative claim to bebrought for the recovery of the sums. The general principle is that it would be proper for the company
to express its views as to whether it would be in its interests for such an action to be brought. On thefacts of the case, Lord Scott held that those conditions were not satisfied. Lord Scott also questioned
whether the court should grant relief in favour of the petitioner rather than the company.16
This case is significant on a number of levels. First, Lord Scott made it clear that a court hearing anunfair prejudice petition has jurisdiction, in a strict sense, to grant relief in favour of the company.17Secondly, Lord Scott had clear reservations against the use of the unfair prejudi
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