DISTRIBUTED BY VERITAS TRUST Tel: [263] [4] 794478 Fax & Messages [263] [4] 793592 E-mail: veritas@mango.zw Veritas makes every effort to ensure the provision of reliable information, but cannot take legal responsibility for information supplied. Judgment No. SC 34/18|10 Civil Appeal No. SC 165/16 action on behalf of the company if the company is able to vindicate its rights. However, the rule as explained in Foss v Harbottle is not inflexible and can be relaxed where necessary in the interest of justice. Gibson, South African Mercantile and Company Law, 8th Ed at pages 370-371, states the following: “But the rule in Foss v Harbottle is not universal. It is subject to exceptions. It does not apply where the interests of justice require the rule to be dispensed with (Russell v Wakefield Waterworks Co (1875) LR 20 Eq 474). So where a wrong has been done to a company, a court will allow dissentient members to bring an action in their own names against those responsible, where the latter hold and control the majority of the shares in the company and will not allow any action to be brought in the name of the company. “(emphasis added) The rule in Foss v Harbottle does not in appropriate circumstances prevent an individual member from suing through derivative action. Derivative action is an exception to the rule in Foss v Harbottle. In Zimbabwe, derivative action has been recognised in many cases. (See L Piras and Sons (Private) Limited v Piras 1993 (3) ZLR 245 (S) and Lameck Kufandada v Dairiboard Zimbabwe and Others HH 564/15). In the Piras case GUBBAY CJ said the following: “The derivative action is an exception to the rule in Foss v Harbottle (1843) 67 ER 189 and was expounded thus by Lord Denning MR in Wallersteiner v Moir (No 2) [1975] 1 All ER 849 (CA) at 857 d-f: “It is a fundamental principle of our law that a company is a legal person, with its own corporate identity, separate and distinct from the directors or shareholders, and with its own property rights and interests to which alone it is entitled. If it is defrauded by a wrongdoer, the company itself is the one person to sue for the damage. Such is the rule in Foss v Harbottle. The rule is easy enough to apply when the company is defrauded by outsiders. The company itself is the only person who can sue. Likewise, when it is defrauded by insiders of a minor kind, once again the company is the only person who can sue. But suppose it is defrauded by insiders who control its affairs — by directors who hold a majority of the shares — who then can sue for damages? Those directors are themselves the wrongdoers. If a board meeting is held, they will not authorise proceedings to be taken by the