William Kurt Wallersteiner (Plaintiff Appellant) M. J. G Moir (Defendant Respondent) M. J. G Moir (Plaintiff on counterclaim) William Kurt Wallersteiner Hartley Baird Ltd and Another (Defendants on counterclaim)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date29 Jan 1975
Judgment citation (vLex)[1975] EWCA Civ J0129-1

[1975] EWCA Civ J0129-1

In The Supreme Court of Judicature

Court of Appeal

Appeal by plaintiff from judgment of Mr. Justice Geoffrey Lane on 26 july 1973.


The Master of The Rolls (Lord Denning),

Lord Justice Buckley and

Lord Justice Scarnam.

William Kurt Wallersteiner
Plaintiff Appellant
M. J. G Moir
Defendant Respondent
M. J. G Moir
Plaintiff on counterclaim
William Kurt Wallersteiner Hartley Baird Limited
H.J. Baldwin & Company Limited
Defendants on counterclaim

Mr. JOHN BEVERIDGE and Mr. OLIVER THOROLD (instructed by Messrs. Bates Wells & Braithwaite) appeared on behalf of Mr. Moir.

Me. PETER SHERIDAN (instructed by Messrs. Michael Sears & Co.) appeared on behalf of Dr. Wallersteiner.

Mr. MICHAEL LYNDON-STANFORD and Mr. WILLIAM CHARLES (instructed by Messrs. David Alterman & Sewall) appeared on behalf of Hartley Baird Ltd. and H.J. Baldwin & Co. Ltd.

Mr. PETER WEBSTER, Q.C., and Mr. MARK POTTER appeared as amici curise on behalf of the Law Society.






When we gave judgment last May each of us said that Dr. Wallersteiner was to pay the sums with interest, see 1964 1 W.L.R. at pages 1017, 1028 and 1033-4. But it is now suggested that we made a mistake in ordering Dr. Wallersteiner to pay any interest. His Counsel asserted that we had no power to award interest save under Section 3(1) of the Law Reform (Miscellaneous Provisions) Act 1934: and that section, he said, did not apply to the present case. It applied only to "proceedings tried in any Court of record": and here there were no proceedings "tried". The judgment we gave was a judgment in default of pleading: and that, he says, did not involve a trial. He relied on a note in the White Book to Order 6 Rule 2/7A, which says:


"Interest under this Section can only be awarded in proceedings that are 'tried' and, therefore, cannot be awarded on a judgment obtained in default of appearance or defence or failure to comply with an order on the Rules, nor presumably in proceedings under Order 14: but in such cases the plaintiff may ask for final judgment for the principal sum and for interlocutory judgment for interest to be assessed, by analogy with an assessment of damages".


I think that that note may be putting too narrow a construction on the word "tried" It seems to me that, after all the evidence and arguments which were had in this case, it could well be said that those were proceedings tried in a Court of Record. Similarly with proceedings under Order 14. But. it is unnecessary to go into this for this simple reason: we did not order interest to be paid under the 1934 Act, but under the equitable jurisdiction of the Court. Equity now prevails in all Courts: and equity was in thehabit of awarding interest when it was considered equitable to do so. In some cases it awarded simple interest. In others compound interest, i.e. with yearly rests.


The principles on which the Courts of Equity acted are expounded in a series of cases of which I would take the judgment of Sir John Romilly, Master of the Rolls, in Jones v. Foxall (1852) 15 Bacon 388: of Lord Cranworth, Lord Chancellor, in A.G. v. Alford (1855) 4 De G.M. & G. at page 851: of Lord Hatherley, Lord Chancellor in Burdick v. Garrick (1870) L.R. 5 Ch. App at page 241-2: of Lord Justice Sir W.M. James in Vyse v. Foster (1872) L.R. 8 Ch. App. At page 333, L.R. 7 J.L. 318. Those judgments show that, in equity, interest is never awarded by way of punishment. Equity awards it whenever money is misused by an executor or a trustee or anyone else in a fiduciary position - who has misapplied the money and made use of it himself for his own benefit. The Court presumes "that the party against whom relief is sought has made that amount of profit which persons ordinarily do make in trade, and in these cases the Court directs rests to be made", i.e. compound interest, see Burdick v. Garrick (1870) L.R. 5 Ch. App. at page 242 by Lord Hatherlny, Lord Chancellor. The reason is because a person in a fiduciary position is not allowed to make a profit out of his trust: and, if he does, he is liable to account for that profit or interest in lieu thereof.


In addition, in equity interest is awarded whenever a wrongdoer deprives a company of money which it needs for use in its business. It is plain that the company should be compensated for the loss thereby occasioned to it. Mere replacement of the money - years later - is by no means adequate compensation, especially in days of inflation. The company should be compensated by the award of interest. That was done by Sir William Page Wood, V.C. (afterwards Lord Hatherley) inone of the leading cases on the subject, Atwood Meryweather (1870) L.R. 5 Eq. at pages 468-9. But the question arises: Should it "be simple interest or compound interest? On general principles I think it should be presumed that the company (had it not been deprived of the money) would have made the most beneficial use open to it, c.f. Armory v. Delamire (1723) 1 Strange 953. It may be that the company would have used it in its own trading operations '9 or that it would have used it to help its subsidiaries. Alternatively, it should be presumed that the wrongdoer made the most beneficial use of it. But, whichever it is, in order to give adequate compensation, the money should be replaced at interest with yearly rests, i.e. compound interest.


Applying these principles to the present case, I think we should award interest at the rate of If per annum above the official bank rate or minimum lending rate in operation from time to time and with yearly rests.






1. Mr. Moir's anxiety as to future costs


This case has brought to light a serious defect, in the administration of justice. Mr. Moir is a shareholder in a public company. He discovered that Dr. Wallersteiner had been guilty of grave misconduct in the management of the company's affairs. He tried every known way to get an inquiry held. He applied many times to the Department of Trade to appoint an inspector: but that Department put him off. They suggested that he had a remedy in the Courts. He applied to the Ombudsman, but he could do nothing. He raised the matter at shareholders' meetings, but was abruptly cut off. The only way in which I he has been able to have his complaint investigated is by action in these Courts. And here he has come to the end of his tether. He hasfought this case for over ten years on his own. He has expended all his financial resources on it and all his time and labour. He has received contributions from other shareholders but these are now exhausted. He has recovered judgment for over £250,000 against Dr. Wallersteiner. It may be difficult to get the money out of Dr. Wallersteiner, but if it is obtained, not a penny of it will go into Mr. Moir's pocket. It will all go to benefit the companies Hartley Baird and Baldwins. Yet the litigation is by no means finished. There is yet to be fought: (i) in inquiry into the damages suffered by Hartley Baird in respect of the £50,000 transaction; (ii) the remaining issues on the counterclaim on which Dr. Wallersteiner seeks to put in a defence; and (iii) an appeal to the House of Lords, if leave is obtained. There is also (iv) the cost of enforcing the existing judgment against Dr. Wallersteiner. He is in Germany and it may cost much time and expense to get anything cut of him. Mr. Moir tells us - and I have no doubt it is true - that he has not any money left with which to pay the costs in further matters. He is fearful, too, that, if he should lose on them or any of them, he may be ordered to pay personally the costs of Dr. Wallersteiner on them. Even if he wins all the way through, no part of it will redound to his own benefit. It will all go to the benefit of Hartley Baird and Baldwins. His few shares might appreciate a little in value, but that is all. In this situation he appeals to this Court for help in respect of the future costs of this litigation. If no help is forthcoming, all his efforts will have been in vain. The delaying tactics of Dr. Wallersteiner will have-succeeded. Mr. Moir will have to give up the struggle exhausted in mind, body and estate.


We felt the force of these points. So keenly indeed that we asked the Law Society to help. They instructed Mr. Peter Webster as amicus curiae. He analysed the legal position in a most illuminatingmanner. We are much indebted to him. He took us through the three ways in which it was suggested that Mr. Moir could be protected: (1) Indemnity from the Company; (2) Legal Aid; and (3) Contingency Pee, As the discussion proceeded, it appeared very necessary to be clear as to the nature of Mr. Moir's counterclaim. he is a "minority shareholder seeking to redress a wrong done to the Company.




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 wrongdoer, the company itself is the one person to sue for the damage. Such is the rule in Foss v. Harbottle (1843) 2 Hare 461. 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 deirauded by insiders who control its affairs - by directors who hold a majority of the shares - who then can sue for damages? Those directors arc themselves the wrongdoers. If a board meeting is held, they will not authorise proceedings to be taken by the Company against themselves. If a general meeting is called, they will vote down any suggestion that the company should sue them themselves....

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