Welcome!

To all those reading this I am David Gibbs; I am a Lecturer in Company and Commercial Law at the University of Hertfordshire.

I created this blog as a general out-let of ideas for my research, as well as keeping those interested up-to-date on my research and general interests.

I completed my PhD thesis at the University of East Anglia in 2014. The thesis was recommended for the award of PhD with no corrections. My external examiner was Prof. Simon Deakin (Cambridge) and internal examiner was Prof. Morten Hviid.
My PhD research centred on directors' duties and company law. The thesis was titled 'Non-Executive Self-Interest: Fiduciary Duties and Corporate Governance'. It was a doctrinal and empirical study on whether self-interest was suitably controlled amongst non-executive directors.

My supervisors were Prof. Mathias Siems, Prof. Duncan Sheehan, Dr. Sara Connolly and Dr. Rob Heywood

All opinions of any existing or future blogpost are my own. They do not necessarily represent the views of any of my associated institutions.


Wednesday, 15 April 2015

Derivative Claims: Where are we Part IV

A short update to the information earlier posted on derivative claims after the decision in Cullen Investments Ltd v Brown [2015] EWHC 473 earlier this year. A full judgment is not yet available. When it is the tables can be updated accordingly.

One interesting aspect to note from Cullen Investments is the consideration of the mandatory bars. The judge adopted a flexible approach to the statutory procedure, which has been seen previously by ignoring the ex parte application. Here the judge was faced with claims by the defendant that the claim should be barred as no director, acting in accordance with s.172 would continue the claim, and that the conduct had been authorised.

The judge did not consider exactly whether the conduct had been authorised but seemingly combined the two bars to find that the claim should not be barred since a hypothetical director would consider that  there were 'good prospects of establishing that [the defendant] had not made full and frank disclosure necessary to release him from his duties' and that there was 'good evidence that [the defendant] had deliberately concealed his personal participation in the opportunity, and that such concealment was inconsistent with his defence that his participation was authorised'.

The flexibility may mean that the procedure is not weighed down by technicalities such as wrongdoer control and what legally amounts to authorisation on a preliminary hearing. However, the statute does not permit derogation from it. The judge is meant to consider whether the conduct had or had not been authorised and if so bar it. It is not a balance of probabilities on whether a hypothetical director would consider there to be enough evidence consider the authorisation invalid.


Case
Type of company
Costs indemnity sought
Financial State of the company
Shareholding % (respondent/claimant)
Amount Claimed for*
Concerned a conflict of interest?
Length of proceedings
Bamford
Ltd
Yes
Solvent
50/50
£3,500,000
No
N/A
Cinematic Finance
Ltd
N/A
Doubtful solvency
0/100

N/A
Yes
N/A
Cullen Investments
N/A
No
N/A
N/A
“Scant evidence”
Yes
N/A
Fanmailuk
Ltd
N/A
Solvent
Majority/minority
£70,000,000
Yes
N/A
Franbar
Ltd
N/A
Solvent
75/25
N/A
Yes
N/A
Hughes
Ltd
Likely
To be dissolved
50/50
£100,000+
Yes
N/A
Iesini
Ltd
N/A
Doubtful solvency
Majority/minority
N/A
Yes
4 days
Kleanthous
Ltd
N/A
Solvent
84.5/15.5
£120,000,000
Yes
N/A
Kiani
Ltd
Yes
Solvent
50/50
£296,000
Yes
1 day
Mission Capital
Plc
N/A
Solvent
N/A
N/A
Yes
N/A
Parry
Ltd
N/A
No assets
50/50
£248,577.24
Yes
N/A
Phillips
Ltd
N/A
Solvent
50/50
N/A
Yes
N/A
Seven Holdings
Ltd
N/A
Effectively no assets
50/50
£1,693,212.32
No
1 day
Singh
Ltd
Yes
Solvent/not trading
50/50
£873,000
Yes
1 day
Stainer
Ltd
Yes
Solvent
87/0.08
£7,000,000
Yes
N/A
Stimpson
Ltd by guarantee
N/A
No assets
Majority/minority
£5,300,000
Yes
N/A




Case Name
Dismissed For/Allowed
Significant Circumstances Considered
Bamford
Dismissed at court’s discretion
Wrongdoer control
Cinematic Finance
Dismissed at court’s discretion
Majority bringing derivative claim; wrongdoer control; side-stepping insolvency rules
Cullen Investments
Permission granted
Hypothetical director would question if full and frank disclosure was given for authorisation; and case was simple on this premise; significant sum could be recovered based on lack of evidence to contrary; no basis for lacking good faith; hypothetical director would attach considerable importance; claim being funded by C so no financial risk to company and possible benefit; claimant’s action may give rise to action in own right but this was not a decisive consideration since the defence necessitated it and as a precaution since the company was entitled to some or all of the relief
FanmailUK
Case adjourned
Case adjourned
Franbar
Dismissed at court’s discretion
Strength of legal claims; ratification; alternative remedy
Hughes
Permission granted
Strength of legal claims; ratification; alternative remedy
Iesini
Mandatory Bar
Weak legal claims
Kleanthous
Dismissed at court’s discretion
Independent review of whether litigation was beneficial; strength of legal claims; alternative remedy; and benefit would be small
Kiani
Permission granted
Failure of defendant to produce any evidence to the contrary; alternative remedy
Mission Capital
Dismissed at court’s discretion
Alternative remedy; little weight to a claim for wrongful dismissal of a director
Parry
Permission granted
Strength of legal claims; ratification; good faith; alternative remedy
Phillips
Permission granted
Alternative remedy; matter of urgency case was brought to recover sums taken from the company without good reason
Seven Holdings
Mandatory Bar
Claims did not relate to a breach of duty, care, negligence or default
Singh
Mandatory Bar
No director would continue the claim if acting in accordance with s.172; fides of the claimant in question; s.994 more appropriate
Stainer
Permission granted
Strong grounds that there had been a breach of duty; strength of legal claims; disinterested shareholders deceived in to approving the loan
Stimpson
Mandatory Bar
The impact an action would have on the interests of the employees; claim of little value compared to cost of claim; legal claims were not realistically arguable