Franbar Holdings Ltd v Patel
In deciding whether to give permission for a derivative claim, the court considers the factors in section 263 of the Companies Act 2006, including whether the claimant has an alternative remedy.
Facts
Franbar, a minority shareholder in a company called Medicentres, claimed that the company's directors, who were associated with the majority shareholder, had breached their duties by diverting business to the majority shareholder and by other breaches. It brought both a derivative claim and an unfair prejudice petition, and applied for permission to continue the derivative claim.
Legal principle
William Trower QC, sitting as a deputy judge, refused permission. He considered the factors in section 263(3) of the Companies Act 2006, including the importance that a person acting in accordance with section 172 would attach to continuing the claim, and the availability of alternative remedies. He said that the claims could be adequately pursued through the unfair prejudice petition, which would achieve substantially the same result, so it was not appropriate to give permission for the derivative claim.
Related cases on derivative claims and reflective loss
- Daniels v Daniels [1978] Ch 406
- Edwards v Halliwell [1950] 2 All ER 1064
- Foss v Harbottle (1843) 2 Hare 461
- Iesini v Westrip Holdings Ltd [2009] EWHC 2526 (Ch), [2011] 1 BCLC 498
- Johnson v Gore Wood & Co [2002] 2 AC 1
- Kiani v Cooper [2010] EWHC 577 (Ch), [2010] 2 BCLC 427
- Mission Capital plc v Sinclair [2008] EWHC 1339 (Ch), [2010] 1 BCLC 304
- Pavlides v Jensen [1956] Ch 565
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
