The latest derivative claim to be reported has resulted in another success for the claimant shareholder. In SDI Retail Services Ltd v King [2017] EWHC 737 (Ch) permission was granted where directors of a company that had the purpose of selling football club merchandise under a licence were part of the decision to revoke that licence to force the company to negotiate from a position of weakness.
The claim was distinguished from Iesini v Westrip Holdings Ltd [2009] EWHC 2526 (Ch) where the claim arose independently of the breach of duty permission would be refused. Here it was clear from the pleadings that the claim arose squarely from the directors' breach of fiduciary duty to revoke the licence.
Of note is the potential ease in which claims for breach of fiduciary duty can be maintained under the new procedure. The strict nature of liability for a fiduciary breach means the claimants often need to do little more than identify a conflicting position. While not always as straightforward as this claim, and other circumstances might bar relief, all the claimant had to do here was demonstrate the directors of the company who were meant to act in the company's interests had been involved in the decision to revoke its licence and it was enough to satisfy the court a hypothetical director would attach weight to the claim as the legal merits were described as "so powerful" and "sufficiently substantiated".
In respect to the figures on derivative claims:
Claims n = 21
Permission - 42.9% (9/21)
Refused - 57.1% (12/21)
Mandatory Bars - 33.3% (7/21)
When discounting those that are frivolous i.e. had mandatory bars (see here for why):
Claims n = 14
Permission - 64.3% (9/14)
Refused - 35.7% (5/14)
The claim was distinguished from Iesini v Westrip Holdings Ltd [2009] EWHC 2526 (Ch) where the claim arose independently of the breach of duty permission would be refused. Here it was clear from the pleadings that the claim arose squarely from the directors' breach of fiduciary duty to revoke the licence.
Of note is the potential ease in which claims for breach of fiduciary duty can be maintained under the new procedure. The strict nature of liability for a fiduciary breach means the claimants often need to do little more than identify a conflicting position. While not always as straightforward as this claim, and other circumstances might bar relief, all the claimant had to do here was demonstrate the directors of the company who were meant to act in the company's interests had been involved in the decision to revoke its licence and it was enough to satisfy the court a hypothetical director would attach weight to the claim as the legal merits were described as "so powerful" and "sufficiently substantiated".
In respect to the figures on derivative claims:
Claims n = 21
Permission - 42.9% (9/21)
Refused - 57.1% (12/21)
Mandatory Bars - 33.3% (7/21)
When discounting those that are frivolous i.e. had mandatory bars (see here for why):
Claims n = 14
Permission - 64.3% (9/14)
Refused - 35.7% (5/14)
