Iesini v Westrip Holdings Ltd
Under the Companies Act 2006, the court must refuse permission for a derivative claim if a director acting in accordance with the duty to promote the success of the company would not seek to continue it, and otherwise has a discretion.
Facts
The claimants were shareholders in Westrip Holdings, a company that held an interest in a licence to explore for minerals in Namibia. They claimed that the directors had wrongly transferred the company's interest to another company, and brought a derivative claim against them under Part 11 of the Companies Act 2006. They applied for permission to continue the claim.
Legal principle
Lewison J refused permission for most of the claims. He explained the two stage procedure under section 261 of the 2006 Act: first, the applicant must show a prima facie case for permission, and second, the court considers whether to grant permission. Under section 263(2), the court must refuse permission if a person acting in accordance with section 172 would not seek to continue the claim, which means that no director acting in accordance with that duty would do so. Otherwise, the court has a discretion, considering the factors in section 263(3), including the importance that a director acting in accordance with section 172 would attach to continuing the 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
- Franbar Holdings Ltd v Patel [2008] EWHC 1534 (Ch), [2009] 1 BCLC 1
- 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.
