Smith v Croft (No 2) [1987] 3 All ER 909

Court: High Court

Facts: Plaintiff shareholders initiated a derivative action against directors for alleged breaches of duty. A significant portion of shares was held by an independent shareholder opposed to the litigation.

Issue: Should permission be granted for a derivative claim if the majority of disinterested shareholders oppose it?

Held: Permission was refused. The court found that if the overwhelming majority of disinterested shareholders is against the claim, it reflects the corporate will and justifies denial of the derivative action.

Key Judicial Statement: Knox J emphasized that the corporate will expressed by disinterested shareholders can prevent a derivative action if it aligns with the company’s best interests.

💡Leveluplaw: The corporate will, as expressed by disinterested shareholders, can influence whether a derivative claim proceeds, highlighting the importance of majority support.