The paper 'A Derivative or Personal Action' is a perfect example of a human resources assignment. The issue of law is that of the action that Kate should bring; either derivative or personal. According to Hanrahan et al. , a derivative action is an action brought by a member on behalf of the company. It is brought in an individual capacity since the member has a personal right or is affected individually. It enables shareholders to bring an action on behalf of the company against the insiders for damages undergone by the company in situations where the company cannot or reluctant to bring the action.
If the derivative action is prosperous and the director is instructed by the court to pay compensation, the reparation is paid to the company and not to the single-member given that it is the company that has the right to institute the legal action. The derivative action is contained in Pt 2F. 1A of the Corporations Act. The individual requiring to bring a derivative action ought to seek the permission of the court, because, where a duty is owed to the company, the decree is that the company ought to carry out that duty.
This follows from the case of Foss v Harbottle, in which Sir James Wigram VC ruled that regarding crimes done to the company, “ the corporation should sue in its own name and in its corporate character, or in the name of someone whom the law has appointed to be its representative” . Section 236 of Pt 2F. 1A permits some categories of people to apply to the court for consent to bring a derivative action.
They include a member, previous member, or person eligible to be registered as a member of the company or of an associate company, or an officer or previous officer of the company. On the other hand, personal legal actions are instigated in a private capacity because the member has a personal right or is affected as a person. Since the legal action is not brought on behalf of the company, if the individual member is prosperous in the legal action, then he or she receives a direct benefit of any direction made by the court.
Personal action is brought if the person’ s personal right is affected. A member derives a personal right: as part of an express contract concerning the member and other members, or between the member and the company, or by decree or general law. Moreover, the member has a legal right to put in force the constitution as a statutory contract under s. 140 of the Corporations Act. Where an action of the directors or other members affects a personal right, the member has a personal action to enforce the right. An individual can either bring a derivative action or a personal action against the directors of a company.
The question is which action fits Kate’ s circumstances. Kate has been forced to resign from Artistic Property Developers Pty Ltd (APD) by the other two directors, Anna and Elizabeth. This infringes on her personal right since she reluctantly resigned from her position as one of the company’ s directors. Moreover, ever the director has the right to give their opinion regarding the decisions made. She was prosecuted for her decision to urge Anna and Elizabeth to change the company policy and start paying dividends.
Hanrahan, Pamela, Ian Ramsay and Geof Stapledon (2014). Commercial Application of Company Law 15th CCH Australia, Sydney.
Re Spargos Mining NL v Enterprise Gold Mines NL
Thomas v HW Thomas Ltd
Foss v Harbottle