Wallersteiner v Moir (No 2) [1975] QB 373 is a UK company law case, concerning the rules to bring a derivative claim.

In a first judgment (Wallersteiner v Moir) the Court of Appeal held that the libel action would be struck out for deliberate delay and awarded £235,000 in damages to Mr Moir, but gave Dr Wallersteiner leave to defend the remaining issues, including fraud.

Dr Wallersteiner claimed that interest could not be awarded under Law Reform (Miscellaneous Provisions) Act 1934.

Since the derivative claim meant the company was proceeding against Dr Wallersteiner, Mr Moir was ineligible for legal aid.

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?

It is analogous to the indemnity to which a trustee is entitled from his cestui que trust who is sui juris: see Hardoon v Belilios [1901] AC 118 and In re Richardson, Ex parte Governors of St. Thomas's Hospital [1911] 2 KB 705 .

Seeing that, if the action succeeds, the whole benefit will go to the company, it is only just that the minority shareholder should be indemnified against the costs he incurs on its behalf.

If the action succeeds, the wrongdoing director will be ordered to pay the costs: but if they are not recovered from him, they should be paid by the company.

In order to be entitled to this indemnity, the minority shareholder soon after issuing his writ should apply for the sanction of the court in somewhat the same way as a trustee does: see In re Beddoe, Downes v Cottam [1893] 1 Ch 547, 557-558.

In a derivative action, I would suggest this procedure: the minority shareholder should apply ex parte to the master for directions, supported by an opinion of counsel as to whether there is a reasonable case or not.

The master may then, if he thinks fit, straightaway approve the continuance of the proceedings until close of pleadings, or until after discovery or until trial (rather as a legal aid committee does).

He can, if he thinks fit, require notice to be given to one or two of the other minority shareholders - as representatives of the rest - so as to see if there is any reasonable objection.

The master should simply ask himself: is there a reasonable case for the minority shareholder to bring at the expense (eventually) of the company?