Derivative Claims data

Since September I have been working with the Eastern Academic Research Consortium (EARC) as part of my Quantitative Skills Award from the British Academy. We have been working with a dataset I have collected on derivative claims under common law and statute.


The dataset consists of 46 cases looking, generally, at whether the reform of the derivative claim under the Companies Act 2006, part 11 is meeting its objectives, such as allowing claims to continuing in appropriate circumstances whilst dismissing frivolous claims, and whether there is practical convergence of shareholder protection in a sense of whether the UK will see more private enforcement of directors' duties in public companies.


Below is some of the descriptive frequency data from all of the cases observed under common law (27 cases) and statute (19 cases). Arguably there are 4 time periods for 'derivative claims' but this data is simply split in to two, common law and statute. Those four periods are: 1) 1843-1950; 2) 1950-1982; 3) 1982-2008; 4) 2008-present. The first period was Foss v Harbottle (1843) 67 ER 189 recognising majority rule but subsequently the need for exceptions. Up until Edwards v Halliwell [1950] 2 All ER 1064 when this case recognised categories of exceptions, albeit only the fraud on the minority was the true exception. This was the state of common law until 1982 when Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 recognised the criteria for setting out a prima facie case that was inserted in to the Civil Procedure Rules. Claims were brought under these procedural rules until 2008 when the Companies Act 2006, part 11 came in to force. However, the common law procedure does have some application still in respect of double derivative claims.


Ultimately this trend shows a climb down from total freedom of contract to the law recognising a need to mitigate against the harshness of separate legal personality and granting shareholders more power to protect the interests of the company from those who control it or cause it harm.


The tables below indicate the legal features of the case:

Prima facie case
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	No	12	26.1	26.1	26.1
	yes	34	73.9	73.9	100.0
	Total	46	100.0	100.0

Mandatory Bar
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	No	13	28.3	68.4	68.4
	Yes	6	13.0	31.6	100.0
	Total	19	41.3	100.0
Missing	System	27	58.7
Total		46	100.0

Frivolous Claims - Conduct covered
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	No	38	82.6	82.6	82.6
	Yes	8	17.4	17.4	100.0
	Total	46	100.0	100.0

Strength of Case 3 - discretion
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	weak case	17	37.0	50.0	50.0
	middle case	4	8.7	11.8	61.8
	strong case	13	28.3	38.2	100.0
	Total	34	73.9	100.0
Missing	System	12	26.1
Total		46	100.0

Permission - successful derivative claim
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	No	27	58.7	58.7	58.7
	Yes	19	41.3	41.3	100.0
	Total	46	100.0	100.0

The following tables represent practical features of the case:

Company Form
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	plc	4	8.7	8.7	8.7
	Ltd (s)	35	76.1	76.1	84.8
	other	7	15.2	15.2	100.0
	Total	46	100.0	100.0

Company Shareholding
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Minority(c)/Majority(d)	17	37.0	37.0	37.0
	Equal	14	30.4	30.4	67.4
	Majority(c)	2	4.3	4.3	71.7
	dispersed minority(c)/majority(d)	9	19.6	19.6	91.3
	shareholder(c)/director(d)	4	8.7	8.7	100.0
	Total	46	100.0	100.0

Conduct complaint - nature of complaint
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Other	5	10.9	10.9	10.9
	Fiduciary Breach	32	69.6	69.6	80.4
	Negligence	2	4.3	4.3	84.8
	Ultra vires	3	6.5	6.5	91.3
	Multiple Claims 1-4	4	8.7	8.7	100.0
	Total	46	100.0	100.0