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.
ORCID 0000-0002-6596-8536


Tuesday, 8 December 2015

WINIR Symposium on Property Rights

WINIR is currently accepting calls for abstracts to present at its second annual symposium.
Please see the details below or in the link to submit an abstract.

Second WINIR Symposium

4-6 April 2016

University of Bristol, Bristol, UK



Property rights are a central institutional feature of all politico-economic systems where markets play a major role, and a key item of political controversy between liberal and socialist positions. The role of property rights in matters ranging from interpersonal exchange and power to innovation and economic development  is debated across several academic disciplines, including economics, history, law, philosophy, politics and sociology. The growing importance of intellectual and other intangible property in modern capitalism has further provoked important ongoing theoretical and policy discussions, part of which revolve around the very meaning of property as opposed to possession.

Bringing together internationally leading institutional researchers from several disciplines, the WINIR Symposium on Property Rights, hosted by Bristol University's Faculty of Social Sciences and Law, will address these and other related issues.

The Symposium will open in the afternoon of Monday 4 April and end in the afternoon of Wednesday 6 April.

Keynotes lectures, representing three academic disciplines, will be given by:
Benito Arruñada (Pompeu Fabra University, economics)
Gunnar Heinsohn (University of Bremen, sociology)
Larissa Katz (University of Toronto, law)

Abstract submissions from any discipline are welcome.

Submissions will be evaluated by the WINIR Scientific Quality Committee, currently composed of: Peter Boettke (George Mason University, economics), Simon Deakin (University of Cambridge, law), Geoff Hodgson (University of Hertfordshire, economics), Timur Kuran (Duke University, economics), Uskali Mäki (University of Helsinki, philosophy), Katharina Pistor (Columbia University, law), Sven Steinmo (European University Institute, politics), Wolfgang Streeck (Max Planck Institute Cologne, sociology).

In accordance with WINIR policy, all symposium participants must be members of WINIR.

Please note the following important dates:
31 Dec 2015Abstract submission deadline14 Mar 2016Registration deadline for accepted authors
21 Jan 2016Notification of acceptance15 Mar 2016Non-registered authors removed from programme
22 Jan 2016Registration opens31 Mar 2016Registration deadline for non-presenters
15 Feb 2016Early registration deadline1 Apr 2016Full paper submission deadline

The symposium organising committee includes: Francesca Gagliardi (f.gagliardi@herts.ac.uk), David Gindis (d.gindis@herts.ac.uk), Jeremy Green (jeremy.green@bristol.ac.uk), Tilman Hartley (tilman.hartley@bristol.ac.uk), Geoff Hodgson (g.m.hodgson@herts.ac.uk), Paddy Ireland (paddy.ireland@bristol.ac.uk) and Gregory Schwartz (gregory.schwartz@bristol.ac.uk).

Friday, 30 October 2015

Derivative Claims: Bridge v Daley [2015] EWHC 2121

Cases are slowly filtering through on the new derivative claim procedure as I work on my British Academy project on the subject. Bridge v Daley [2015] EWHC 2121. Bridge is the 18th derivative claim to be heard under the Companies Act 2006, part 11, and the 17th of note for my empirical study, since FanmailUK.com Ltd v Cooper [2008] EWHC 2198 was adjourned. (NB: table updated 11th Dec 2015 to incorporate 18th case Hook v Sumner [2015] Unreported)

The relevant factors from Bridge are detailed below, including practical circumstances and outcome. The particular points of note from this case relate to: 1) information asymmetries between weaker and stronger parties; 2) statutory procedure; 3) wrongdoer control; and 4) it involved a plc.

I will not say too much about these but briefly outline the points:

1) Information asymmetries
This was brought by a minority shareholder, Bridge, who owned 1.83% in an AIM company. He appeared as litigant in person but failed to substantiate any of his claims against the four directors since he had no proof of any of his claims nor could he direct any of his claims against any particular director. The judge (at [76]) was highly critical of this noting Bridge's submission that the directors were "all in it together" as insufficient for establishing a cause of action against all four. He also noted that Bridge was 'a highly opinionated individual who is incapable of any objective analysis of evidence placed before him' (at [85]).

Bridge surely should have taken legal advice but his lack of any evidence is a telling problem with derivative claims. His claims were severe, despite not substantiated, and the judge noted that he might have a remedy for unfair prejudice. He did also have the support of a further 4 minority shareholders as the claim progressed. Therefore, the information asymmetries that exist between shareholders and directors/controllers can be a difficult obstacle to seeking redress through the courts since it is difficult to turn suspicions in to substantive arguments.

2) Statutory Procedure
This links to a second point where one might be critical of the court for not following the statutory procedure. At [98] the judgment notes that Bridge should have seen his claim was "doomed" to failure. Why did it get this far then where time and expense of the company was taken up? The judge noted that it was unlikely that there was even a prima facie case but seemed very confused as to what was required for a prima facie case based on his citation of the incorrect statement from Stimpson on establishing one. In Stimpson v Southern Landlords Association [2009] EWHC 2072, as cited by Bridge, it was said by Judge Pelling that in considering whether there was a prima facie case that the court was bound to consider those factors in section 263(3) and (4) and all other relevant circumstances. This is wrong. A prima facie case is set out in s.261 that it must be: 1) a cause of action vested in the company; 2) in relation to a breach of duty, trust, negligence or default; and 3) brought by a shareholder. The discretion is for part two.

The judgment is littered with contradictions by the judge. Despite citing Stimpson he had earlier cited Iesini v Westrip Holdings Ltd [2009] EWHC 2526 (at [13]-[15]), which is the correct authority for the statutory procedure, where it was noted that at the second stage, something more is needed than a prima facie case to satisfy the court that permission should be given.

Therefore, in one part of the judgment the judge claims a prima facie case is about the whole circumstances of the case, whereas earlier he recognises that the procedure is two distinct parts.

This contradiction is followed by failing to hear the ex parte application separately, describing it as pragmatic to do so (at [9]). It is difficult to see how it is pragmatic to dispense with the need for establishing a prima facie case and involving the company when the judge later uses terminology such as the claim was 'doomed' and the claimant had failed to clearly demonstrate a prima facie case since Bridge could not direct his claims at any director in particular or submit them in the form of breaches covered by the Act.

By not hearing an ex parte application the company was involved unnecessarily, which is what is meant to be avoided by having an ex parte application. Both Stimpson and Bridge failed to hear a prima facie case but both were dismissed for mandatory bars. Both stated that not hearing the first stage was pragmatic but do not cite any authority for judges being permitted to avoid a statutory procedure on the basis of pragmatism.

3) Wrongdoer control
This case revisits the issue of wrongdoer control and confirms that wrongdoer control is not a bar to claim but can form part of the discretion when determining whether to grant permission. In this case, the judge found no reason why the company should not pursue this claim if it wished to do so, since independent shareholders did not support the claim nor did the company.

4) Plc
The final point is that this was a public limited company. It serves as some anecdotal evidence of attempts at frivolous litigation and the wider availability of the derivative claim itself. The fact the claim got as far as it did might cause some minor concern for companies.

Figures and tables updated 11th Dec 2015.

Therefore from the 18 cases the following stats on derivative claims are:
Prima Facie Case: 100% (18/18)
Mandatory Bars: 27.78%% (5/18)
Permission Refused Discretion: 38.46% (5/13)
Permission Allowed Discretion: 61.54% (8/13)
Permission Refused Overall: 55.56% (10/18)
Permission Granted Overall: 44.44% (8/18)


Case Name
Dismissed For/Allowed
Significant Circumstances Considered
Bamford
Dismissed at court’s discretion
Wrongdoer control
Bridge
Mandatory Bar
No reasonable director would pursue the claim; alternative remedy; company decision; independent views; 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
Hook
Permission Granted
Good faith; 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
McAskill
Permission granted
Good faith; Alternative remedy; director would attach weight to the claim under s.172
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

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
1 day
Bridge
Plc
Yes
Solvent
Minority (1.83%)/Director
N/A
Yes
2 days
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
2 days
Hook
Ltd
Yes
Solvent
Minority/Majority

Yes
2 days
Hughes
Ltd
Likely
To be dissolved
50/50
£100,000+
Yes
1 day
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
4 days
Kiani
Ltd
Yes
Solvent
50/50
£296,000
Yes
1 day
McAskill
Ltd
Yes
Solvent
50/50
£197,640
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
1 day
Phillips
Ltd
N/A
Solvent
50/50
N/A
Yes
2 days
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
1 day
Stimpson
Ltd by guarantee
N/A
No assets
Majority/minority
£5,300,000
Yes
4 days