The claimants were shareholders in Westrip, accusing the Defendant directors of deliberately engaging in a course of conduct which has led to Westrip losing ownership and control of a very valuable mining licence and which, but for their intervention, would have led to Westrip losing all or almost all of its remaining assets. They say that the course of conduct that they allege amounts to breaches of duty by the individual defendants.
Held: Section 263 (2) (a) will apply only where the court is satisfied that no director acting in accordance with section 172 would seek to continue the claim. If some directors would, and others would not, seek to continue the claim the case is one for the application of section 263 (3) (b).
Where the claimant brings a derivative claim for the benefit of the company, he will not be disqualified from doing so if there are other benefits which he will derive from the claim. However, in relation to the rescission claim a person may be prevented from bringing a derivative claim if he participated in the wrong of which he complains.
 EWHC 2526 (Ch),  1 BCLC 498,  BCC 420
Companies Act 2006 261
England and Wales
Cited – Foss v Harbottle 25-Mar-1843
A bill was lodged by two of the proprietors of shares in a company incorporated by Act of Parliament, on their own and the other shareholders’ behalf. They claimed against three bankrupt directors, a proprietor, solicitor and architect charging them . .
Cited – Wallersteiner v Moir (No 2) CA 1975
The court was asked whether Moir would be entitled to legal aid to bring a derivative action on behalf of a company against its majority shareholder.
Held: A minority shareholder bringing a derivative action on behalf of a company could obtain . .
Cited – Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) CA 1982
A plaintiff shareholder cannot recover damages merely because the company in which he has an interest has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in . .
Cited – In Re Little Olympian Eachways Ltd ChD 29-Jul-1994
A Jersey company (Supreme) had brought a petition under the section against the company. An application was made for security for costs against Supreme. It could only be made if Supreme was resident outside the UK. Supreme argued that, despite being . .
Cited – Lowe v Fahey 1996
Where there has been material misconduct, even in the shape of a single act, the primary remedy is under section 459, not by a shareholder’s derivative action. . .
Cited – Airey v Cordell and Others ChD 24-Aug-2006
Application by the claimant for permission to amend his Particulars of Claim to plead a new claim.
Held: Warren J pointed out that there are many cases in which some directors, acting in accordance with section 172, would think it worthwhile . .
Cited – Fanmailuk.Com Ltd and Another v Cooper and others ChD 11-Jun-2008
Claim for a declaration that the entire share capital was held on trust for the claimant.
Held: Engelhart QC said: ‘on an application under section 261 it would be ‘quite wrong . . to embark on anything like a mini-trial of the action’ . .
Cited – Franbar Holdings Ltd v Patel and others ChD 2-Jul-2008
Action alleging breach of shareholders’ agreement.
Held: Directors may have genuine and proper differences of opinion as to the correctness of making a section 172 claim. . .
Cited – Nurcombe v Nurcombe CA 1985
The court discussed a minority shareholder’s action to enforce the company’s claim as a derivative claim. Browne-Wilkinson LJ said that such an action, where a courts in equity permitted a person interested to bring an action to enforce the . .
Cited – Barrett v Duckett CA 15-Aug-1994
A shareholder is to show the court justification for derivative action in company name.
Peter Gibson LJ said: ‘The shareholder will be allowed to sue on behalf of the company if he is bringing the action bona fide for the benefit of the . .
Cited – Godden v Merthyr Tydfil Housing Association CA 15-Jan-1997
The Plaintiff was a building contractor; the Defendant a housing association engaged in developing suitable sites for residential accommodation for letting to tenants. Before the contract the parties had successfully completed what was been called . .
Cited – Shah v Shah CA 10-Apr-2001
The court was asked as to the enforceability of a document under the terms of which the defendants were to make a payment of pounds 1.5 million to the claimant. The document was described as a deed and provided for each defendant to sign in the . .
Cited – Konamaneni v Rolls Royce Industrial Power (India) Limited ChD 20-Dec-2001
The claimants founded their action on the assertion that the defendants had been corrupt in obtaining contracts in India. The defendants argued that the English courts had no jurisdiction. The claimants held various small shareholdings in a company . .
Cited – Central Estates (Belgravia) Ltd v Woolgar CA 1972
A lessee made a claim to acquire the freehold of his house under the 1967 Act. The making of such a claim prevented the landlord from forfeiting the lease unless lessee had not made his claim in good faith.
Lord Denning MR said: ‘To my mind, . .
Cited – Goldsmith v Sperrings Ltd CA 1977
Claims for Collateral Purpose treated as abuse
The plaintiff commenced proceedings for damages for libel and an injunction against the publishers, the editors and the main distributors of Private Eye. In addition, he issued writs against a large number of other wholesale and retail distributors . .
Cited – Smith v Croft (No 3) ChD 1987
Knox J said: ‘Ultimately the question which has to be answered in order to determine whether the rule in Foss v. Harbottle applies to prevent a minority shareholder seeking relief as plaintiff for the benefit of the company is, ‘Is the plaintiff . .
Cited – Jaybird Group Ltd v Greenwood 1986
An indemnity as to costs in a derivative claim is not limited to impecunious claimants. The justification for the indemnity is that the claimant brings his claim for the benefit of the company. Once the court has reached the conclusion that the . .
Cited – Smith v Croft ChD 1986
Walton J was concerned with two appeals from the Master. The first appeal was from an order made ex parte ordering the company to indemnify the claimant against costs. The appeal against that order was allowed, and Walton J decided that there was so . .
Cited – Dawson-Damer and Others v Taylor Wessing Llp and Others ChD 6-Aug-2015
The clamants sought orders under the 1998 Act for disclosure of documents about them by the defendant solicitors and others. The defendants said that the request would require the consideration of a very large number of documents, considering in . .
These lists may be incomplete.
Updated: 22 March 2021; Ref: scu.377212