The Wallersteiner v Moir case was a significant ruling in the UK's Court of Appeal.
The case centered around a dispute between two parties, Wallersteiner and Moir, over a guarantee given by Moir to a third party.
In 1974, the Court of Appeal delivered its judgment, which was later upheld by the House of Lords in 1975.
The court ultimately ruled in favor of Wallersteiner, holding that Moir was liable for the debt owed by the third party.
This decision had important implications for the law of guarantees and the liability of guarantors.
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Court Rulings
In the Wallersteiner v Moir case, the Court of Appeal made some important rulings that minority shareholders should be aware of. The court held that interest is awardable under the court's equitable jurisdiction.
Mr. Moir, the minority shareholder, was eligible for indemnification by the company for his costs because of the derivative claim against Dr. Wallersteiner. This meant that he wouldn't have to bear the costs of litigation himself.
The court also noted that contingency fee arrangements with Mr. Moir's lawyers couldn't be sanctioned, which is a significant point for minority shareholders to consider when seeking legal representation.
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Conditions and Orders
A Wallersteiner Order can be a game-changer for claimant shareholders, providing them with protection from costs whether their action succeeds or not. This is because the order requires the company to fund the proceedings in their entirety and provide the claimant with an indemnity against any adverse costs order.
The Court has a wide discretion to withdraw Wallersteiner Orders, so it's essential for the claimant to behave reasonably throughout the litigation to avoid losing their costs protection. This means being mindful of the Court's requirements and not abusing the permission to litigate or the Wallersteiner protection.
The Court may require further review after disclosure has taken place and possibly again at the pre-trial review hearing before the actual trial commences. This ensures that the claimant's position is continually assessed and that the Court is satisfied that the Wallersteiner Order is being used appropriately.
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Award of Costs
A Wallersteiner Order can provide significant protection for a claimant shareholder. This type of order can be applied for from the outset of proceedings and ensures that the company funds the entire case, regardless of its outcome.
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The Wallersteiner Order is named after the case Wallersteiner v Moir (No2) [1975] QB 373. This order provides two key benefits: the company funds the proceedings in their entirety, and the company provides the claimant shareholder with an indemnity against any adverse costs order.
If the action is successful, the defendant director would normally pay the costs. However, with a Wallersteiner Order in place, the company pays the costs, regardless of the outcome. This is because the claimant shareholder brings the action for the benefit of the company, not for personal gain.
The traditional winner/loser principle in costs can be applied to the defendant director, but not to the company. If the action fails, the defendant director's costs must be reimbursed.
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Conditions on Orders
The Court may require further review after disclosure has taken place and possibly again at the pre-trial review hearing before the actual trial commences.
In granting a Wallersteiner Order, the Court will often expressively direct that the matter come back to Court for review after the exchange of witness statements.
Recommended read: Independent Review Committee
The Court will have particular regard to the merits of the case in the course of the proceedings.
A claimant must ensure that they behave reasonably throughout the conduct of the litigation in order to avoid the loss of their costs protection.
The Court will be receptive to any arguments from the defendant director that either the permission to litigate or the Wallersteiner protection is being abused.
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