Wilton UK Ltd & Anor v Shuttleworth & Ors [2018] EWHC 911 (Ch)

Case No C30LS697[2018] EWHC 911 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
INSOLVENCY AND COMPANIES LIST (ChD)
Venue Leeds Combined Court Centre, 1 Oxford Row, Leeds LS1 3BYDate 1 May 2018
Before
HIS HONOUR JUDGE DAVIS-WHITE QC(SITTING AS A JUDGE OF THE CHANCERY DIVISION)
Between
WILTON UK LIMITED (SUING ON BEHALF OF ITSELF AS SHAREHOLDER IN BANKS MOUNT OSWALD LIMITED, THE FIFTH DEFENDANT)ClaimantJOHN MICHAEL SHUTTLEWORTHDefendantsGRAHAM SMITHDefendantHARRY JAMES BANKSDefendantTHE BANKS GROUP LIMITEDDefendantBANKS MOUNT OSWALD LIMITEDDefendant
Mr Gregory Pipe (instructed by Clarion Solicitors Limited) for ClaimantMr James Ayliffe QC (instructed by Ward Hadaway) for 1 st-4 th Defendants for The 5 th Defendant was not represented and did not appearHearing Hearing dates: 23-24 January 2018
JudgmentThis Transcript is Crown Copyright.  It may not be reproduced in whole or in part other than in accordance with relevant licence or with the express consent of the Authority.  All rights are reserved.If this Transcript is to be reported or published, there is a requirement to ensure that no reporting restriction will be breached. This is particularly important in relation to any case involving a sexual offence, where the victim is guaranteed lifetime anonymity (Sexual Offences (Amendment) Act 1992), or where an order has been made in relation to a young person.His Honour Judge Davis-White QC :Introduction
[1]On this resumed hearing the questions before me are: i) Whether permission to continue company derivative proceedings should now be given pursuant to s263 Companies Act 2006 (“CA 2006”); ii) Whether retrospective permission should be granted to begin the proceedings, thereby validating certain procedural steps that have been taken in the proceedings without permission of the court, namely service of the proceedings and service of particulars of claim.[2]In my earlier judgment ([2017] 2195 (Ch)), I had to determine the validity, potential validity, or otherwise, of service of the claim form and particulars of claim in the CPR Part 7 claim before me. The claim form was issued on 9 November 2016. The proceedings had been brought as a derivative claim pursuant to Chapter 1 of Part 11 of the CA 2006. The claim is launched for the benefit of the 5th defendant, Banks Mount Oswald Limited (“BMO”). As such it is a nominal defendant. Unless the context otherwise requires, references in this judgment to the defendants are to the 1st to 4th defendants, excluding BMO.[3]Service of the claim form and particulars of claim had taken place at the latest by 8 March 2017. However, the circumstances were that permission of the Court to continue the proceedings had not been first obtained in accordance with, and as required by, s261 CA 2006 and CPR r19.9A.[4]At the time of the hearing before me, in August 2017, the period of four months during which service of the claim form was permitted had long expired. I described the claim as then statute barred by the Limitation Act 1980, so that new proceedings could not successfully be commenced. As will become apparent, that may have been an oversimplification but was substantially true. The conclusion that I reached (see paragraph [79]) was that service in this case was not valid but that the court has jurisdiction to validate it retrospectively. This is so, I held, whether the default is to be viewed as a default under the CA 2006 (which is my preferred view of what it was) or a procedural error under CPR Part 19.[5]This is the resumed hearing of the three applications before me on the earlier occasion. As I then explained, they are three in number:5.1 an application by the claimant dated 9 November 2016, issued at the same time as the claim form, asking the court for permission to continue the proceedings, and for an extension of 6 weeks from its date for service of the particulars of claim. This application was, at the claimant’s request, not initially listed for a hearing and only became so more recently;5.2 an application by the defendants dated 3 April 2017 seeking a declaration that the court has no jurisdiction to try the current Part 7 claim and setting aside service of both the claim form and particulars of claim; and5.3 a further application of the claimant dated 23 June 2017 seeking interim permission to continue the claim up and until determination on an inter-parties basis of its applications dated 9 November 2016 and 23 June 2017, and an order that the claim form and particulars of claim are deemed served on 8 March 2017.[6]Representation before me on this resumed hearing was as before. Mr Pipe appeared for the claimant and Mr Ayliffe QC for the defendants. I am again grateful to both of them for their submissions, both written and oral. After the hearing before me I received further written submissions from Mr Ayliffe QC (dated 23 February 2018) and Mr Pipe (dated 5 March) on the relevance of Barton v Wright Hassall [2018] UKSC 12 to the applications before me. Pursuant to my request to all parties, dated 18 April 2018, I received further written submissions in relation to the case of Roberts v Gill referred to below.[7]The written evidence before me comprised, on behalf of the Claimant, two witness statements of Mr Wilkes (see below) and three witness statements of Mr Young of Clarion, Solicitors for the Claimant. As regards the defendants, the evidence comprised two witness statements of Mr Glassford, of Ward Hadaway, solicitors for the defendants.

The Part 7 Derivative Claim

[8]Although I set out brief details of the claim made in my earlier judgment, I repeat that summary with some further detail so that this judgment can be self-standing. The time for filing a defence has not yet arrived and the essentials of the claim are contested.[9]In brief terms, the claim relates to an opportunity to acquire and develop the site of the Mount Oswald Golf Club in Durham (the “Site”).[10]The claimant company, Wilton UK Limited (“Wilton”) is indirectly owned (by way of a holding company, Wilton UK Holdings Limited) by a Mr David Wilkes (“DW”) and a Mr Trevor Charlton (“TC”).[11]In about early 2006, TC and DW became aware that the owner of the Site, North of England Estates Limited (“NEE”) was interested in selling the Site. They did not have the financial resources to purchase and develop the site and so looked for a joint venture partner. However, they made what they assert to be valuable contact with NEE which was of value to a potential joint venture partner.[12]Ultimately, in their search for a joint venture partner, DW and TC made contact with directors of companies within the Banks group of companies.[13]The Banks group of companies is a group of mining, development and renewable companies, ultimately owned by the third defendant, Mr Banks and his family interests. In the Particulars of Claim the term “Banks” is used to describe all or any of the relevant Banks companies with any involvement in the Site and matters relating thereto and I use the same description unless the context otherwise requires.[14]Mr Banks was the group chairman of the Banks’ companies and the managing director of the fourth defendant, Banks Group Limited (“BGL”). He held the controlling equity shareholding in BGL. He was also a director of the other Banks group companies referred to below. The first defendant, Mr Shuttleworth (from about August 2008, managing director of Banks Property Limited (“BPL”)) was one of the persons with whom the claimants say that they were in negotiations over a joint venture.[15]There is a dispute as to when arrangements were made and whether particular arrangements or understandings were in any event contractually binding or of legal effect. The claimant says that a joint venture agreement was entered into in about August/September 2006. The express terms of the joint venture (defined in the pleading as “Contract 1”) were that: “ in consideration of TC and DW introducing the opportunity to develop the site to Banks, Banks TC and DW would be joint venturers in the development of the Site and would share the profits, after costs and interest on costs, on a 50:50 basis”.[16]The defendants deny this, though as I understand it they do not deny that, at this time and following, there were ongoing negotiations about entry into a joint venture agreement. The claimant alleges that variations to Contract 1 were later made, but I need not go into those.[17]In October 2006 a conditional sale agreement (“Option 1”) was entered into between NEE and BGL under which, in the event of planning permission for the Site being obtained, NEE would become bound to sell the Site to BGL for £18 million. A non-refundable deposit of £350,000 was paid under Option 1. Under Option 1 BGL was obliged to apply for planning permission in respect of the Site. If such permission was not obtained by 23 October 2008, either party could terminate Option 1. This deadline was subsequently extended by agreement on 23 April 2010.[18]Planning permission and the finalisation of entry into formal agreements giving effect to a joint venture between TC and DW on the one hand, and the Banks group of companies on the other hand, were, in the meantime, pressed on with.[19]By August 2008, the details of implementation of the joint venture were agreed. The joint venture company was to be the fifth defendant, BMO, for whose benefit the current proceedings are sought to be continued. BMO was to be owned 50% by the Claimant and 50% by another Banks’ company, BPL. Each of the Claimant and BPL would have the right to appoint 2 directors to the board of directors of BMO. Until planning permission was granted BPL would have the right to appoint one of its directors as chair and such chair would have a second casting vote at board and general meetings. BGL was to enter into a sub-sale agreement with BMO, effectively giving BMO the benefit of Option 1. BMO would in turn reimburse BGL for the costs incurred to date on the project. The claimant and BPL would each lend 50% of the sums required to enable BMO to do this. The further seeking of planning permission and the other development works would be carried out under contract with, and for, BMO. That work would be undertaken by another Banks group company, Banks Development Limited (“BDL”). Separate agreements were entered into to give effect to these arrangements on 7 August 2008, including a shareholders’ agreement, a sub-sale agreement, loan agreements and a services agreement.[20]The services agreement was entered into between BMO and BDL. Under that agreement, BDL was to provide project management, architectural, landscape architectural, engineering, public relations/communications and other services of a very wide compass. All intellectual property created during the provision of these services was to belong to BMO. It is asserted that BDL did substantial work and obtained significant confidential information from BMO and generated much valuable material which belonged to BMO.[21]Economic conditions became hostile. The deadline for obtaining planning permission under Option 1 passed without permission having been obtained. NEE terminated the Option. The sub-sale agreement between BGL and BMO lapsed as did the services agreement between BMO and BDL. The defendants say that the agreed joint venture was only in relation to Option 1. When Option 1 came to an end, they say, so did the joint venture.[22]The claimant on the other hand, and TC and DW, say that there was still an agreed joint venture arrangement which was the one that they say was reached in 2006 (Contract 1 as varied). It is also alleged in the particulars of claim, that it was contemplated that the Site would be developed and exploited through the medium of a joint venture company set up for that purpose and that BMO, incorporated in December 2007, was that company. It is also alleged that the Shareholders’ Agreement remained in operation under which the shareholders had agreed to use all reasonable means to maintain, improve and extend the business of BMO and to give effect to the spirit and intendment of the agreement. Such spirit and intendment is said to be summarised by recital B of the same: namely to acquire and develop the Site through BMO[23]Both TC and DW on the one hand and the Banks group on the other hand remained interested in a joint venture to acquire and develop the Site. TC and DW say that they continued to be personally involved in the negotiations. As with Option 1, negotiations to acquire an option from NEE and the negotiation of detailed joint venture terms continued in parallel.[24]The negotiations with NEE were ultimately successful. BGL entered into a new option agreement with NEE on 16 November 2010. For a price of £5 million it acquired a right exercisable within 4 years from 31 January 2011 to acquire the Site for a price of £10 million (less the option fee price of £5 million) (“Option 2”). This option was said to have been the result of negotiations in which TC and DW participated and also to flow from work carried out by BDL using and generating information confidential to and/or owned by BMO. Mr Shuttleworth and the 2nd defendant, Mr Smith, are said by the claimant to have been instrumental in negotiating Option 2 and in circumstances where no or no adequate steps were taken to ensure that BMO’s interests were protected and without ensuing that any profit would be passed to BMO.[25]These actions, or failures, by Mr Shuttleworth and Mr Smith are said to amount to breaches of fiduciary duty by them as directors of BMO. It is said that this was all under the direction of Mr Banks and that he too is in breach of fiduciary duty as de facto and/or shadow director of BMO.[26]Negotiations over a detailed suite of documents for the implementation of a, (I leave open the question whether it was “the”), joint venture agreement ultimately did not reach a successful conclusion.[27]Again, TC/DW were expected to come up with 50% of the relevant funding. Initially, TC and DW had found a potential funder in the person of a Mr Hogan. Although it is said that he deposited money with solicitors this was not used in paying for Option 2. It is said that in December 2010 Mr Banks met with TC and DW and asked them to find an alternative funder and reduce any potential interest of Mr Hogan (I anticipate through a shareholding in the Claimant), down to 25%. TC and DW told him that they would have to find a new funder.[28]It is alleged that in persuading TC and DW not to use funding from Mr Hogan, Mr Banks acted in breach of fiduciary duty as a director of BMO because it was not in BMO’s best interests not to obtain funding. The result is said to be that it was less likely that BMO could pay (or reimburse) Banks companies of the costs they had incurred in acquiring and developing the opportunity under Option 2 for BMO.[29]It is also alleged that Mr Shuttleworth (and Mr Banks) also acted in breach of fiduciary duty subsequently as directors of BMO in a similar manner, by vetoing alternative funders, such as a Mr Monk.[30]A number of further breaches of fiduciary duty are alleged. In the course of oral argument I became concerned that these were matters of illegality relied upon for an unlawful means conspiracy claim, but that they did not appear to give rise to any relevant loss or substantive claim for breach of fiduciary duty in terms of equitable compensation or a duty to account. It seemed to me that it would be a heavy factor weighing in the balance against permitting these causes of actions to be continued if no remedy was being sought in relation to them. If that was the case, my initial view was that permission to proceed with such claims for breach of fiduciary duty should not be permitted.[31]Mr Pipe clarified, by a document dated 2 February 2018, that the following alleged breach of fiduciary duty was one in relation to which a remedy per se was not being sought. The claim was however part of a claim for damages for unlawful means conspiracy. The relevant claim is, in the particulars of claim, given the heading “Breach of fiduciary duty in attempting to exclude BMO from benefitting from the Joint Venture”. It is set out in paragraphs 105-106 of the particulars of claim. The allegation, in short, is that Mr Shuttleworth suggested an alternative arrangement under which TC and DW would have a profit share and that, in so doing, he was acting in breach of his fiduciary duty as director of BMO because such an arrangement was not in BMO’s best interests.[32]Further funding was sought to assist TC/DW to fund their half share of the sums needed by BMO with a gentleman called Mr Meade. This source of funding is said to have been put off by the conduct of Mr Shuttleworth in failing to meet him and thus making it unlikely that funding would be available for BMO from TC/DW. This is said to amount to a breach of fiduciary duty by Mr Shuttleworth as director of BMO and also to have been caused or approved by Mr Banks and therefore in breach of his fiduciary duty owed to BMO.[33]The Banks group decided that a deadline should be set for the putting in place of funding from TC/DW. Instead of demanding the sums directly from TC/DW, it sought relevant sums from BMO. By letter dated 28 February 2011 addressed to BMO, BGL required reimbursement from BMO of the expenses it had incurred within the following 30 days. It is said that Mr Shuttleworth has said that he was responsible for instigating this letter and, to the extent that he was, then he was in breach of his fiduciary duties owed to BMO. He knew, it was said, that it was unlikely the money could be raised in 30 days and therefore the letter made it more likely that BMO would not be able to acquire the benefit of the profit from the Site. Again, it is also said that Mr Banks was involved and that he too was in breach of fiduciary duty owed to BMO.[34]On 1 April 2011 BGL sent a letter to BMO, refusing any extension of time to BMO to pay, and confirming that from that date it held Option 2 for its own use and benefit absolutely and stating that it intended to exploit Option 2 for its own purposes.[35]Planning permission for the Site was subsequently acquired. The Site was developed. The project ultimately proved highly successful. BGL has made and is continuing to make substantial profits from the development.[36]Other allegations of breach of fiduciary duty, in each case as director of BMO, are that Mr Banks and Mr Shuttleworth as directors of BGL did not prevent BGL from exploiting the Site (for its own benefit). In addition, it is said that each of them, and Mr Smith, acted in breach of their respective fiduciary duties as directors of BMO in “causing assisting and encouraging” BGL to exploit the Site (for its own benefit) and/or in not causing BGL to account to BMO for benefits that it has obtained from exploiting the Site.[37]BGL is said wrongfully to have misused confidential information of BMO. In addition, the permitting of BGL so to act is said to amount to breaches of fiduciary duty as directors of BMO by each of Messrs Shuttleworth and Banks (and I apprehend Smith though the reference is to wrongful acts of BMO and some amendment to the statement of case may be necessary).[38]Mr Banks and BGL are said to be liable as accessories to breaches of duty, by way of dishonest assistance in breach of trust (or fiduciary duty) by Mr Shuttleworth, Mr Smith and/or (in the case of accessory liability of BGL) Mr Banks. Such liability is said to extend to the breaches of fiduciary duty that I have identified including the breaches relating to the alleged misuse of confidential information.[39]Finally, there is a conspiracy plea. It is asserted that Mr Shuttleworth, Mr Banks and BGL conspired together in an unlawful means conspiracy with the intention of causing BMO harm and caused BMO harm thereby. The unlawful means are asserted to be the breaches of fiduciary duty owed to BMO and the misuse of confidential information, in each case that I have referred to above.[40]The anticipated amount of damages, if the claim is made out, is said to be one that is measured by reference to the valuation of the entire site obtained from expert Chartered Surveyors in November 2010 of some £75 to £80 million which, even allowing for costs, is obviously substantial.

Derivative claim proceedings: the chronology

[41]On 1 June 2015 letters of claim were sent by the claimant’s solicitors to the defendants.[42]The Derivative Claim was commenced by Claim Form dated 9 November 2016. On the same day, an application notice was issued by the claimant seeking an order that it be granted permission pursuant to s261 CA 2006 to continue the claim and an order that the time for the provision of particulars of claim to the 5th defendant, BMO (the company in whose favour the derivative claim was sought to be brought) be extended to 6 weeks from the date of the application. The application notice was supported by a witness statement of DW in which he said, among other things, that further information was being gathered, that his witness statement therefore set out only a summary of the claims and their background and that detailed particulars of claim and evidence were to follow. In the circumstances, the claimant requested that the court should not determine the application until the further documentation had been filed. Until the defendants’ application dated 3 April 2017 the application for permission was taken no further.[43]Separately a personal claim for breach of what is said to be a contractually binding joint venture agreement was advanced in separate proceedings by TC and DW and the claimant (the “Direct Claim”). That claim was commenced by claim form dated 14 November 2016. I deal with that in more detail below.[44]The claim form in the proceedings before me expired four months after issue, in the sense that service had to be within 4 months of issue (see CPR r.7.5). The particulars of claim are dated 8 March 2017. They were served on that date. The claim form had, apparently, been served under cover of a letter dated 6 March 2017. At those points the claimant’s application for permission to continue the proceedings had not been pursued further.[45]Acknowledgements of service dated 21 March 2017 were filed by each of the 1st to 4th defendants.[46]On 3 April 2017, the 1st to 4th defendants issued the Notice of Application that I have referred to seeking an order under CPR r11(1) and (6) declaring that the court had no jurisdiction to try the claim and setting aside service of the claim form and the particulars of claim.[47]By application dated 22 June 2017 the claimant issued the further application that I have mentioned seeking orders that the claimant have permission to continue the claim in the proceedings before me and that the claim form and particulars of claim “are deemed served”.

The Direct Claim

[48]The Direct Claim is, as I have said, brought by DW, TC and Wilton. The Defendants are BGL(1), BPL(2), BDL(3), two further Banks companies, H.J. Banks and Company Limited(4) and H. J. Banks Developments Limited(5) and Mr Shuttleworth(6).[49]The Particulars of Claim in the Direct Claim largely mirror those in the Derivative Claim, at least so far as the facts are concerned. So far as the legal claim is put:(1) Contract 1 is said to have been reached between BGL (alternatively such other Banks company of defendants 1 to 5 as the Court might conclude) and TC and DW.(2) The first claim is for damages for breach of Contract 1, which breach has said to have been accepted and the contract terminated. The loss and damage is said to be the value of payments that should have been made to them under Contract 1 and/or the increase in the value of their shares in WHL, had the development and exploitation of the Site taken place through the medium of BMO.(3) The second, alternative, claim is that if the obligation under Contract 1 to share profits with TC and DW was discharged in whole or part by the JV documentation entered into in August 2008 then BPL, in breach of the shareholders agreement, has failed to maintain and extend the business of BMO, to further its interests or to do all things reasonably necessary to give effect to the spirit and intendment of the shareholders’ agreement. The loss and damage is said to be the diminution in value of Wilton’s shareholding in BMO.(4) The third claim is in conspiracy against Mr Banks, Mr Shuttleworth and BPL, the conspiracy being an unlawful means conspiracy to harm the claimants. The unlawful means are said to be the misuse of the confidential information and the breaches of the Shareholders’ Agreement and/or Contract 1.(5) The fourth claim, is against Mr Banks for inducing breach of contract (being Contract 1);(6) The fifth claim is that Mr Banks induced BPL to breach the shareholders’ agreement, thereby causing loss to Wilton.(7) The sixth claim, in the event that Contract 1 was not a binding contract, is one in mistake (that TC and DW provided valuable services to BGL in the mistaken belief that Contract 1 was binding) and that they are entitled to a quantum meruit for such services.[50]The time for service of a defence in the Direct Claim has been extended by consent to 28 days after disposal of the applications before me.

The statutory regime and the CPR

[51]As I said in my earlier judgment, under the statutory regime, the court’s discretion is exercised in a two-stage process. First, the court considers whether there is a prima facie case to permit the proceedings to proceed. This is normally considered on a “without notice” basis. If that hurdle is passed, the court then convenes an inter-parties hearing at which it applies the relevant statutory tests to decide whether to permit the proceedings to continue and to what stage. At the point of convening the inter-parties hearing, the court may also decide that one or more of the defendants who are not the company be joined to the application.[52]The statutory provisions are contained in Chapter 1 of Part 11 of the CA 2006. I set them out fully in my previous judgment. So far as relevant to these proceedings they are as follows: Chapter 1 Derivative claims in England and Wales or Northern Ireland 260. Derivative claims(1) This Chapter applies to proceedings in England and Wales or Northern Ireland by a member of a company— (a) in respect of a cause of action vested in the company, and (b) seeking relief on behalf of the company. This is referred to in this Chapter as a “derivative claim”.(2) A derivative claim may only be brought— (a) under this Chapter, or (b) in pursuance of an order of the court in proceedings under section 994 (proceedings for protection of members against unfair prejudice).(3) A derivative claim under this Chapter may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company. The cause of action may be against the director or another person (or both).(4) It is immaterial whether the cause of action arose before or after the person seeking to bring or continue the derivative claim became a member of the company.(5) For the purposes of this Chapter— (a) “director” includes a former director; (b) a shadow director is treated as a director; and (c) references to a member of a company include a person who is not a member but to whom shares in the company have been transferred or transmitted by operation of law.[261]Application for permission to continue derivative claim(1) A member of a company who brings a derivative claim under this Chapter must apply to the court for permission (in Northern Ireland, leave) to continue it.(2) If it appears to the court that the application and the evidence filed by the applicant in support of it do not disclose a prima facie case for giving permission (or leave), the court— (a) must dismiss the application, and (b) may make any consequential order it considers appropriate. (3). If the application is not dismissed under subsection (2), the court— (a) may give directions as to the evidence to be provided by the company, and (b) may adjourn the proceedings to enable the evidence to be obtained. (4). On hearing the application, the court may— (a) give permission (or leave) to continue the claim on such terms as it thinks fit, (b) refuse permission (or leave) and dismiss the claim, or (c) adjourn the proceedings on the application and give such directions as it thinks fit. 262 ….[263]Whether permission to be given (1) The following provisions have effect where a member of a company applies for permission (in Northern Ireland, leave) under section 261…. (2). Permission (or leave) must be refused if the court is satisfied— (a) that a person acting in accordance with section 172 (duty to promote the success of the company) would not seek to continue the claim, or (b) …. (c) where the cause of action arises from an act or omission that has already occurred, that the act or omission— (i) was authorised by the company before it occurred, or (ii) has been ratified by the company since it occurred. (3) In considering whether to give permission (or leave) the court must take into account, in particular— (a) whether the member is acting in good faith in seeking to continue the claim; (b) the importance that a person acting in accordance with section 172 (duty to promote the success of the company) would attach to continuing it; (c) where the cause of action results from an act or omission that is yet to occur, whether the act or omission could be, and in the circumstances would be likely to be— (i) authorised by the company before it occurs, or (ii) ratified by the company after it occurs; (d) where the cause of action arises from an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company; (e) whether the company has decided not to pursue the claim; (f) whether the act or omission in respect of which the claim is brought gives rise to a cause of action that the member could pursue in his own right rather than on behalf of the company. (4) In considering whether to give permission (or leave) the court shall have particular regard to any evidence before it as to the views of members of the company who have no personal interest, direct or indirect, in the matter. (5). …. (6) ….. (7) ….[53]The further detail with regard to seeking permission is one of procedure governed by, and set out in, the CPR.[54]CPR Part 19 provides, so far as relevant, as follows: “Derivative claims – how started 19.9(1) This rule – (a) applies to a derivative claim (where a company is alleged to be entitled to claim a remedy, and a claim is made by a member of it for it to be given that remedy), …under Chapter 1 of Part 11 of the Companies Act 2006…. (b) ……(2) A derivative claim must be started by a claim form.(3) The company, ….for the benefit of which a remedy is sought must be made a defendant to the claim.(4) After the issue of the claim form, the claimant must not take any further step in the proceedings without the permission of the court, other than – (a) a step permitted or required by rule 19.9A or 19.9C; or (b) making an urgent application for interim relief. Derivative claims under Chapter 1 of Part 11 of the Companies Act 2006 – application for permission 19.9A (1) In this rule – ‘the Act’ means the Companies Act 2006; ‘derivative claim’ means a derivative claim under Chapter 1 of Part 11 of the Act; ‘permission application’ means an application referred to in section 261(1), 262(2) or 264(2) of the Act; ‘the company’ means the company for the benefit of which the derivative claim is brought. (2) When the claim form for a derivative claim is issued, the claimant must file – (a) an application notice under Part 23 for permission to continue the claim; and (b) the written evidence on which the claimant relies in support of the permission application. (3) The claimant must not make the company a respondent to the permission application. (4) Subject to paragraph (7), the claimant must notify the company of the claim and permission application by sending to the company as soon as reasonably practicable after the claim form is issued – (a) a notice in the form set out in Practice Direction 19C, and to which is attached a copy of the provisions of the Act required by that form; (b) copies of the claim form and the particulars of claim; (c) the application notice; and (d) a copy of the evidence filed by the claimant in support of the permission application.(5) The claimant may send the notice and documents required by paragraph (4) to the company by any method permitted by Part 6 as if the notice and documents were being served on the company.(6) The claimant must file a witness statement confirming that the claimant has notified the company in accordance with paragraph (4).(7) Where notifying the company of the permission application would be likely to frustrate some party of the remedy sought, the court may, on application by the claimant, order that the company need not be notified for such period after the issue of the claim form as the court directs.(8) An application under paragraph (7) may be made without notice.(9) Where the court dismisses the claimant’s permission application without a hearing, the court will notify the claimant and (unless the court orders otherwise) the company of that decision.(10) The claimant may ask for an oral hearing to reconsider the decision to dismiss the permission application, but the claimant – (a) must make the request to the court in writing within seven days of being notified of the decision; and (b) must notify the company in writing, as soon as reasonably practicable, of that request unless the court orders otherwise.(11) Where the court dismisses the permission application at a hearing pursuant to paragraph (10), it will notify the claimant and the company of its decision.(12) Where the court does not dismiss the application under section 261(2) of the Act, the court will – (a) order that the company and any other appropriate party must be made respondents to the permission application; and (b) give directions for the service on the company and any other appropriate party of the application notice and the claim form. (a) applies to a derivative claim (where a company is alleged to be entitled to claim a remedy, and a claim is made by a member of it for it to be given that remedy), …under Chapter 1 of Part 11 of the Companies Act 2006…. (b) …… (a) an application notice under Part 23 for permission to continue the claim; and (b) the written evidence on which the claimant relies in support of the permission application. (a) a notice in the form set out in Practice Direction 19C, and to which is attached a copy of the provisions of the Act required by that form; (d) a copy of the evidence filed by the claimant in support of the permission application. (a) must make the request to the court in writing within seven days of being notified of the decision; and (b) must notify the company in writing, as soon as reasonably practicable, of that request unless the court orders otherwise. (a) order that the company and any other appropriate party must be made respondents to the permission application; and (b) give directions for the service on the company and any other appropriate party of the application notice and the claim form.[55]The provisions of CPR 19 are supplemented by the Practice Direction, Practice Direction 19C-Derivative Claims. So far as relevant it provides as follows: .”Early intervention by the company 5 The decision whether the claimant's evidence discloses a prima facie case will normally be made without submissions from or (in the case of an oral hearing to reconsider such a decision reached pursuant to rule 19.9A(9)) attendance by the company. If without invitation from the court the company volunteers a submission or attendance, the company will not normally be allowed any costs of that submission or attendance. (Sections 261, 262 and 264 of the Companies Act 2006 contain provisions about disclosing a prima facie case in applications to continue a derivative claim.) Hearing of applications etc. 6…..”

Prospective Permission: the test

[56]I was invited to consider first, ignoring the question of whether retrospective permission was appropriate, whether I should give prospective permission to proceed, leaving out of account the question of retrospective permission. If I would not grant permission to proceed then the question of retrospective permission would be academic. I agree that this is the correct order in which to consider matters because the issue of retrospective permission is itself likely to involve consideration of the strength of the case for prospective permission.[57]I therefore turn first to the question of whether prospective permission should be granted, leaving aside, for the moment, the issue of retrospective permission and whether a refusal of the same would prevent the grant of prospective permission now.[58]Further insight into, or guidance regarding, the operation of the relevant provisions regulating permission is provided by a number of authorities. I did not understand there to be disagreement on the relevant principles, as opposed to the question of the application of the relevant principles and statutory provisions to the facts of this case.[59]The first point to note is that, as in other reported cases, the normal two stage process has been avoided. I am faced with an inter-parties application at which I have heard (without objection from the claimant) from the defendants and read their evidence. The first stage would normally require me to consider, on the evidence and submission of the claimant alone, whether I am satisfied that there is not a prima facie case for permission (rather than there not being a prima facie case on the substantive merits of the Part 7 claim), applying the criteria laid down in s260 and s263 CA 2006 (see Wishart v Castlecroft Securities Limited [2009] CSIH 65, [2009] SLT 812 at [33]). If so satisfied, permission would be refused at that stage. Before me, it was assumed that I should move straight to the second stage of the process, which also requires me to apply the criteria in ss260 and 263 CA 2006 but to all the evidence before me.[60]It seems to me that that suggested approach is the correct approach, in the sense that I should treat the first stage as having taken place. However, in my judgment, the passing of the first stage would not prevent a court deciding at the second stage that there was not even a prima facie case for permission. The court would be re-considering the matter usually on further evidence and certainly with further submissions. Of course, in the absence of new evidence, it is likely to be rare that, the first stage having been passed, a court would decide at the second stage that there was not even a prima facie case. If it did, however, it would be obliged to dismiss the application. That would not be because of s261(2) CA 2006 (unless, possibly, there had been no further evidence from anyone other than the claimant) but because the court would be so required to act properly in exercising its discretion. In practice, if satisfied permission should not be granted it would refuse permission and it would not be necessary (unless possibly for costs reasons) to decide how weak was the case for permission.[61]In conclusion, I have to reach a conclusion as to the strength of the case for permission, and whether it is strong enough that permission should be granted or not, but I do so as a one stage process rather than considering the matter in two stages.[62]Accordingly, I do not need formally to consider first whether there is a prima facie case for permission (whether on all the evidence or on the claimant’s evidence alone) and then, if satisfied that there is (or rather if not satisfied that there is not) then go on to consider whether permission should be granted. I simply consider whether permission should be granted or refused. A two stage process would be an unnecessarily complicated approach (see in this context e.g. Franbar Holdings Ltd v Patel [2008] EWHC 1534 (Ch), [2009] 1 BCLC 1 at [24]; Stimpson v Southern Private Landlords Association [2009] EWHC 2072 (Ch), [2010] BCC 387 at [3]; Bridge v Daley [2015] EWHC 2121).[63]Although the parties addressed the position as it is now, the defendants accept that there is no material difference between the position as it is now and as it was prior to service of the claim form (i.e. at the time when permission ought to have been sought and obtained). The only difference is that I now have submissions and evidence from both the claimant and the defendants.[64]It was not disputed that the Derivative Claim contains derivative claims falling within s260(3).[65]Under s263 CA 2006, I must refuse permission if satisfied:(1) That a person acting in accordance with s172 CA 2006 would not seek to continue the claim (s263(2)(a)). (As regards this, the test is that I must be satisfied that no director, acting in accordance with s172 CA 2006 would seek to continue the claim. If some directors might and others would not, seek to continue the claim then I should not refuse permission under this provision (Iesini v Westrip Holdings Limited [2009] EWHC 2526, [2011] 1 BCLC at [85], [86] but go on to consider the importance that a director would attach to continuing the claim under s263(3)(b))); or(2) The cause of action arises from an act or omission that was authorised by the Company before it occurred or subsequently ratified by the Company (s263(2)(c)). If not so satisfied, then I have to consider the wide range of matters set out in s263(3).[66]In the present case the relevant matters that I have to consider under s263 are:(1) whether the member is acting in good faith in seeking to continue the claim (s263(3)(a));(2) the importance that a person acting in accordance with s172 CA 2006 would attach to continuing it (s263(3)(b));(3) whether the relevant act or omission could be or is likely to be ratified by the Company (s263(3)(d));(4) whether the Company has decided not to pursue the claim (s263(3)(e));(5) whether the relevant act or omission gives rise to a cause of action that the member could pursue in his own right rather than on behalf of the Company.[67]So far as concerns the hypothetical person, or director, acting in accordance with s172 CA 2006, such director would have to consider a wide range of matters. These would include matters such as the strength of the cause of action concerned; the quantum of a likely claim, if successful; the likelihood of recovery if successful; the potential consequences if the claim fails; funding considerations; (possibly) the question of available alternative remedies; the effect of the proceedings on the reputation and any ongoing business of the company (in the latter case whether by way of reputational damage or from involvement in the proceedings and the management time and costs needed to deal with the claim). “A director [and I would add the court under s263] will often be in the position of having to make what is no more than a partially informed decision on continuation without any very clear idea of how the proceedings might turn out”. (per Mr William Trower QC sitting as a Deputy High Court Judge in the Franbar Holdings case (infra) at [36]).[68]Applying the s263 CA 2006 test, a number of witness statements have been served by both sides which I have read and considered carefully.[69]Putting matters in a slightly different order to that advanced before me, the defendants submit that permission should be refused (as regards some or all of the claims) because:(1) In relation to the acquisition of Option 2, the decision was agreed to by TC and DW and Wilton.(2) The Derivative Claim lacks merit;(3) The claimant has an alternative remedy, namely pursuit of the Direct Claim;(4) Costs considerations militate against leave;(5) There is at present no decision by BMO as to whether or not to pursue the derivative action. (1). Agreement to BMO acquiring Option 2[70]Mr Ayliffe QC submitted that pursuant to s263(2)(a) at least part of the claim is one for which permission should be refused. The relevant allegation is one that there was a breach of fiduciary duty by the relevant directors of BMO in failing to ensure that BMO’s interests in acquiring and developing the Site were protected and that BGL could not profit from exploitation of the Site without passing the benefit to BMO. It is submitted that the taking by BGL of Option 2 before completion of any anticipated joint venture documentation was a step that everyone agreed to. Therefore, it is said that this claim cannot be made out and indeed that it cannot be permitted to proceed under s263(2)(c).[71]In my judgment the short answer to this point is that although it can be said that there is a respectable argument that the company agreed (through operation of the principle in re Duomatic [1969] 2 Ch 365) to the precise sequence by which BGL obtained the benefit of Option 2 without all the remaining documentation regarding the joint venture being in place, it was not agreed that BMO should be without any protection or that steps should not be taken to try and obtain such protection. Indeed, the allegations concerning steps taken so that BGL could purportedly terminate BMO’s rights in relation to Option 2 may also be encompassed by this allegation. In any event there may be some readjustment of pleadings in the light of disclosure and it seems to me premature at this stage to be able to come to a considered and concluded view on this point for the purposes of s263(2)(c) CA 2006. For all these reasons I am therefore not satisfied at this stage that there is a cause of action which arises from an act or omission that was authorised by the company before it occurred. (2). Lack of legal merit[72]In my assessment, and subject to the points that I am about to deal with, the evidence to date discloses that there is a case, beyond the merely arguable, that the facts and substance of the case as set out in the particulars of claim will be established. In saying that I am of course dealing with the position on the basis of the materials before me, without a pleaded defence and with disclosure not having taken place.[73]The main submission of the defendants regarding the merits is that the joint venture being pursued through BMO had come to an end with the lapse of Option 1. Thereafter, the only function of its directors was to wind up its affairs. TC and DW, it is said, were free to pursue their own course in trying personally (or through Wilton) to acquire rights in relation to the Site. Alternatively, it is submitted, BMO’s interest was limited to a hope of(a) Banks companies obtaining a fresh right to acquire and develop the Site and(b) agreeing to pass the same onto BMO, and that this is what was pursued. However, TC and DW were unable to come up with funds. There was no obstruction by any Banks companies or personnel but, even if there was, that was “a matter for complaint at shareholder level. The fund-raising was not a matter for BMO’s directors”.[74]At this stage, I am unpersuaded by these submissions. The main submission, that BMO’s existence as a joint venture company came to an end with the expiry of Option 1 and that TC and DW (and Wilton) were then free to pursue their own path in competition with Banks sits inconsistently with the evidence that TC and DW rowed together with Banks in attempting to obtain a substitute right to Option 1 from NEE and which was achieved by Option 2. It is also inconsistent with the course taken by BGL of serving notice on BMO that it had to come up with money and that if it failed to do so any right or expectation that it had in relation to Option 2 would come to an end. In my judgment this is very supportive of the case that the obtaining of the benefit of the Option 2 was not just a corporate opportunity of BMO but one that had some legal backing to it (whether a direct right in BMO or as part of joint venture arrangements under which BMO would obtain the benefit of Option 2.[75]The alternative hypothesis, that funding was the matter over which everything broke down, involves the defendants in having to face the difficulty that it is wholly unclear on what basis BGL was entitled to set a period for funds to be provided by BMO within the time period laid down, as it did. So far as obstruction of funding for BMO is concerned, assuming that there was such obstruction as alleged by the claimant, then so far as directors of BMO were involved in the process, as alleged, in my judgment there would be a cause of action against them by BMO.[76]The question of whether there was in fact relevant obstruction regarding funding is a matter that is also challenged by the defendants. As regards this, there are some difficulties in the evidence. Further, it seems to me that there is a real possibility that some of the instances asserted are simply examples of the obvious being pointed out, rather than obstructing fund raising. Be that as it may and given the early stage at which these proceedings have reached it seems to me wrong at this stage to refuse to permit certain detailed parts of a legal case to proceed when it would make no difference to the overall factual matters that would have to be gone into. Specific alleged instances giving rise to the same cause of action would, if not permitted to proceed, not prevent the cause of action itself from being permitted to proceed,[77]So far as particular breaches are formulated in terms of the directors of BMO having caused or procured BGL to act in the manner that it did in purportedly terminating any ongoing interest of BMO in the Site, it is submitted by the Defendants that they arose from a failure of the relevant individuals to exclude themselves from involvement in BGL’s affairs. If they had done this, BGL would have acted in exactly the same manner. I am far from certain that is factually correct. Had BMO stood up to BGL, it is far from clear to me that BGL would necessarily have acted in the same manner. In any event and even if it would, there is a further question, which is whether this is the correct approach to causation for the breach of duty in question to the extent that it comprised an active step rather than simply a failure to take steps (see by analogy Bishopsgate Investment Management Limited v Maxwell [1994] 1 All E.R. 261).[78]A further causation point is taken, which is that it is submitted by the defendants that the claimant has failed to advance any compelling evidence to show a serious prospect that TC/DW would actually have been able to come up with necessary funds. At this stage it seems to me that the claimant’s case is that they could and on the limited material before me I cannot possibly say that the case is weak on this front.[79]Finally, on behalf of the second defendant, Mr Smith, it is said that there are two claims only against him and that the claims are based solely upon the fact of him being a director of BGL through most of the relevant period and a director of BMO through part of the overall period. It is submitted there are no particular acts or omissions alleged against him. However, at this stage it seems to me that there is enough to say that there is a case against him.[80]At the end of the day I have to be careful to avoid an attempt to have a pre-trial of the issues which will be fought at trial. I am satisfied that, on the materials currently before me, the claims are ones of substance and that they are not weak. Although I have doubts about some limited instances pleaded as one occasion (among a number of other instances) of a relevant breach of duty I am not satisfied in the overall circumstances that this would cause a person acting under s172 CA 2006 to jettison such pleaded instances at this stage given the other material in the pleading and in the evidence before me. (3). Alternative remedy[81]Mr Ayliffe QC submitted to me that the issue of the claimant having an alternative remedy falls to be considered both when applying the s172 CA 2006 test (as required by s263(2)(a) and (3)(b)) and as required by s263(3)(f). I disagree. In my view this overcomplicates the position. On the face of things, a director acting in accordance with s172 CA 2006 has to consider the interests of the company (even accepting that these are very wide). He or she does not have to consider the interests of the claimant seeking to bring the derivative claim. In particular, a director does not have to consider whether the overall interests of the claimant are adequately served by it relying on an alternative remedy or not and how that is to be balanced against risks to the company. Even though the interest of a company can be very wide, in this case at least there is no argument that there is any reputational risk or the like to the company if the company does not take action but leaves the claimant to pursue an alternative claim. BMO is no longer trading. It has no real stakeholders save the shareholders who are also its creditors. Generally, but certainly on the facts of this case, it seems to me that the exercise of considering an alternative remedy is one carried out by the court when it considers the overall position under s263(3), the court only reaching that position if satisfied, in effect, that a director acting properly could consider that it would be in the company’s best interests for the company to advance its claim[82]In this case I am not satisfied that there is clearly an alternative remedy. I accept that there is a large overlap in the facts and the wrongs complained of, although these are characterised as giving rise to different causes of action in the two sets of proceedings. I also accept the need in this context to focus on the acts and omissions rather than the precise legal characterisation of the wrong alleged to be committed (see e.g. Franbar Holdings Ltd v Patel [2008] BCC 885 at [50].)[83]However the mere fact that, in many of the causes of action pleaded in the Direct Claim, the allegation of damage is damage to the value of the Wilton’s shareholding in BMO, raises the point that the claim would appear to be one for reflective loss. Of course, that cannot be determined without knowing whether BMO does have a claim itself or not. For present purposes I have to assume that it does.[84]There is a second point, also raised by Mr Pipe. That is that there is the possibility that on the facts relied upon by the claimant the Direct Claim would fail but the Derivative Claim might succeed. This would be the case if, for example, it were to be found that any joint venture agreement had been subsumed into the legal structure set up in relation to BMO and that there are no outstanding contractual joint venture binding agreements outside that overall corporate structure in its widest sense (i.e. including the accompanying agreements, such as the shareholders’ agreement, and/or understandings).[85]There are also differences of detail between the two sets of proceedings, for example in terms of the parties, but in light of the two factors that I have dealt I do not need to consider these points further. (4). Costs[86]As regards costs relating to the proceedings, the defendants’ evidence is to the effect that at a board meeting of BMO on 16 December 2016 TC provided an estimate of £2-3 million for BMO to pursue the Derivative Claim “both in terms of the Claimant’s costs and its potential exposure to the Defendant’s costs”. Mr Glassford gives evidence that although he had not by then prepared a formal budget for the defendants through to trial, the upper end of Mr Charlton’s estimated overall costs and exposure for BMO, “in the region of £3 million-does not appear unrealistic”. There is no direct challenge to this evidence as such.[87]I should note that, in practice, if both proceedings continue together, the costs of the Derivative Claim are likely to be at least halved on the basis that the costs are split equally between the proceedings. In the scale of things, the costs of having the two proceedings heard together are unlikely greatly to expand the overall costs because the same factual background will have to be gone into on both claims. The court may of course apportion the costs between the two sets of proceedings otherwise than on a 50:50 basis. Further, of course, the Direct Claim may not proceed or the result may not be the same as in the Derivative Claim as regards success or otherwise for the claimant. At this stage, I consider that I should proceed on the basis that, absent any arrangements by the claimant, the costs of the Derivative Claim which BMO might face (including any hostile cost award) could realistically be expected to be in the region of £3 million, even though that sounds very large. If the matter proceeds it is to be hoped that costs budgeting would keep the costs well below this figure.[88]The undisputed evidence is also that BMO is now dormant, but that its last available accounts, which are unaudited, for the period ending 30 September 2015 comprise a balance sheet with net liabilities at the year-end of £733,000. This is made up of current assets of £2,000 and (as against) £730,000 in shareholders’ loans and £5,000 owed to BPL.[89]As regards the claimant, its accounts for the year ended 31 December 2016 also disclose a net liability position on the balance sheet. The sum is £527,568 with net current liabilities shown as being £527,618. Mr Young confirms in his evidence that the claimant has in place a funding arrangement with a third party which will enable the derivative claim to be brought.[90]As I have indicated there are two different types of costs which are relevant, first there is the question of the shareholders’ own legal costs, secondly there is the question of any costs that may be awarded against them if the proceedings fail. If the derivative claim is permitted to proceed then prima facie those permitted to bring the claim would be entitled to a court order permitting them an indemnity from the company in respect of both types of costs that I have identified (see Wallersteiner v Moir (No 2)[1975] QB 373). Of course, if the claim succeeds (and the defendants are good for the money), then the indemnity will not need to be resorted to (or only in respect of any shortfall between the actual costs incurred and any assessed costs ordered to be paid) but there is obviously a concern as to what the position would be in event that the defendants are not good for the money or the claim fails.[91]On my reading of the judgments in the Wallersteiner case, the entitlement is one based in equity but is one that is only crystallised when the court makes an order. In my judgment two things follow. First, the Court must have some discretion in deciding whether or not to make such an order and secondly the right (whether crystallised or “nascent”) to an indemnity is one that must be capable of being waived or given up by a claimant.[92]The next point that I should mention is my view as to the position of a successful defendant on the receiving end of (failed) derivative proceedings. Where the derivative proceedings are derivative trust proceedings rather than derivative company proceedings, the trust is not a legal person against whom a costs order may be made. In the normal course, the claimant asserting a derivative claim would be given the right to an indemnity from the trust assets. The defendant would be entitled to a costs order against the claimant and would also be entitled to be subrogated to the claimant’s right of indemnity against the trust assets. So far as a derivative company claim is concerned, the claimant sues in his own right even if as “agent” of the company (as Lord Denning MR put it). If, at the end of the day the defendant succeeds in defeating the claim, he would normally be entitled to a costs order against the claimant, who is the substantive claimant. The company is a nominal defendant. Although in such circumstances the court might also make a costs order against the company in favour of the successful defendant, that will normally be a recognition of the fact that the claimant has a right of indemnity against the company to which the defendant can be subrogated. The costs order would be a shorthand way of giving effect to this legal position. In my view, the court would (at least usually) not be making an order against the company on some wider basis of costs law that a third party order (against the company) would be just because the claim was for the company’s benefit, analagous to the cases, for example, where costs orders may be made against a non-party where it is the “real” party to the litigation (see e.g. Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UK PC 39; [2004] 1 WLR 2807) and proceedings have been brought by it at their instigation and for their benefit. It follows that, in my view, just as a derivative claimant may give up its right of indemnity against the company to its own legal costs, it may also give up its right to an indemnity against the company in respect of costs orders made against the claimant. In that event there would be nothing for the defendant to be subrogated to and there would be no ability to obtain a costs order against the company on whose behalf the proceedings were brought. This would not usually be unjust. The defendant would still have the usual ability to seek security for costs against the claimant in an appropriate case. Of course, the existence (or not) of an indemnity is likely to be a relevant factor in the exercise required by the CA 2006 in relation to derivative proceedings. A claimant should make clear to the court and the defendant whether there is or is not intended to be any release or waiver of the right of indemnity, and if so, the extent of the same.[93]The defendants say that the funding position, and in particular the costs and the ability of the company to fund the claim and to meet any adverse costs order, is relevant (1) in assessing the stance that a person would take to the proceedings when acting in accordance with s. 172 CA 2006 as required by ss. 263(2)(a) and (3)(b) and (2) to the exercise of the court’s overall discretion as to whether to give or to refuse permission. They pray in aid both the company’s financial position and their own position.[94]The claimant has offered an undertaking not to seek to rely on any indemnity regarding its own costs (the precise terms are to be worked out but as I understand it this undertaking may not apply to the extent that there is recovery by BMO from the defendants of sufficient sums to pay such costs). No undertaking has yet been offered to give up any indemnity that might be available in respect of any costs awarded against the claimant in respect of which, if permission is granted, BMO would prima facie be liable to indemnify them. I suspect that the waiver of such indemnity might be a condition that the court could impose as a term of permission but I have not heard submissions on that point. At this point I turn to the authorities.[95]This area of costs in the context of derivative proceedings has been considered by the courts on a number of occasions.[96]In Roberts v Gill & Co. [2009] 1 WLR 531, the Court of Appeal gave some consideration to the impact of costs on the decision to permit derivative proceedings to continue. In that case a beneficiary under a will, in a personal capacity, had brought a claim in negligence against two firms of solicitors who had earlier advised the personal representative. In essence, the claim was that the solicitors had allowed his brother, also a beneficiary and the then administrator of the estate, to acquire and dispose of land which should have been part of the residuary estate.[97]The claimant sought permission to amend the claim form to sue additionally in a derivative capacity. It was common ground that the direct claim as beneficiary had difficulties in its way. At first instance the special circumstances required to enable a derivative claim to be brought were found to be lacking. On the claimant’s appeal, the defendant solicitors raised for the first time the issue as to whether, if the claimant’s application were allowed, the personal representative of the estate would have to be joined as a party and if so, the limitation period having expired, whether CPR r 19.5(2)(b) permitted this to be done. The Court of Appeal decided that such an amendment was not permitted given the limitation consideration. That decision was later upheld by a majority decision of the Supreme Court.[98]The Court of Appeal went onto consider the main holding at first instance. By a majority it disagreed with the trial Judge and held that if the combined effect of the Limitation Act 1980 and the Civil Procedure Rules had not been to prevent the amendment, there would have been such special circumstances as to justify a derivative claim. By a majority the Supreme Court disagreed with this decision. The majority decided that the decision was one that the Judge was entitled to reach in the exercise of his discretion and which accordingly an appellate court should not interfere with.[99]As Lord Collins said in the Supreme Court, the first instance Judge had considered 18 circumstances. Of those, (16), (17) and (18) were as follows: (16) in the absence of argument on the point, [the administrator, Mr Sainter] left out of account the question whether Mr Sainter as administrator might be liable to pay the costs if a derivative action were permitted and proceeded and failed; (17) Mark Roberts had legal services funding to bring the present proceedings and it might very well be the case that he had or would obtain legal services funding to bring a derivative claim; (18) the court had power under CPR r 17.4 to give Mark Roberts permission to amend the present proceedings to add a derivative claim (if special circumstances existed) and thereby defeat a limitation defence. He went on: `“[75] The judge took the view that, although the list of “special circumstances” was not closed and “special circumstances” had never been exhaustively defined, the circumstances as to legal services funding and limitation were of a different character from anything contemplated in the cases as to special circumstances. The circumstances in (17) and (18) were not special circumstances which would justify the court in permitting Mark Roberts to bring a derivative claim against the defendants. Arden LJ (with whom Patten J agreed) seems to have taken the view that the judge was wrong (among other reasons) because he had not given sufficient weight to the fact that the derivative claim would enable an asset to be realised, which otherwise could not be realised, and because Mark Roberts had legal aid the estate would not have to fund his costs.”[100]In the Court of Appeal, Arden LJ (for the majority) considered the position in the light of an earlier case: a decision of Judge Paul Baker QC in Bradstock Trustee Services Limited v Nabarro Nathanson [1995] 1 WLR 1405. As explained by Arden LJ at paragraphs [19] of Roberts:
“[19] In Bradstock Trustee Services Ltd v Nabarro Nathanson [1995] 1 WLR 1405 the plaintiffs were trustees of an occupational pension scheme which had started proceedings to recover a sum thought to represent surplus which had been repaid to the employer. They brought proceedings for professional negligence against the solicitors who had advised on the matter. However, they were informed that the costs of both sides might exceed the total assets of the scheme and that they were personally at risk as to costs. They obtained directions from the court allowing willing beneficiaries to be substituted as plaintiffs. These beneficiaries obtained legal aid to take over the proceedings. They then applied to the court to be substituted as plaintiffs. Judge Paul Baker QC, sitting as a judge of the Chancery Division, dismissed the application….”
[101]As

Judge Baker QC put it:

“I conclude, therefore, …that the applicants cannot be substituted as plaintiffs to continue the action against the defendants for the following reasons. (a) The applicants have no property, legal or equitable, in the subject matter of the action. The trustees and no one else have a cause of action against the defendants. This is not a case where the defendants are alleged to have wrongly received, retained or paid away the trust property or part of it. (b) In all probability, it will not protect the trust against the risk of being resorted to for the defendants' costs if the action fails, which is what prompted the application in the first place.”
[102]As regards his first conclusion (a),

the Judge had said:

“In my judgment, the conduct of the trustees does not amount to a failure by them in the performance of their duty to protect the trust estate. It is true that they are unwilling to incur personal liability, but, before that point is reached, the entire trust fund as presently constituted would have been exhausted in indemnifying the trustees. They can reasonably take the view that they should not put the fund to that risk, a view apparently shared by Walker J., in that he withdrew their liberty to prosecute the action further if this application fails.”
[103]As regards his second conclusion (b), the Judge had said, having considered the Wallersteiner case and McDonald v. Horn [1995] I.C.R. 685:
“…the beneficiaries suing in a derivative action are entitled to obtain their costs out of the assets of the company or the pension fund, as the case may be. That will comprise both their own costs and any that they may be ordered to pay. It is true that in the case of legally aided plaintiffs any costs order against them will, in all probability, not be enforceable. Yet that would appear not to preclude an order being made against the trustees, who remain parties to the action, in favour of the present defendants if they succeed in their defence. Accordingly, I accept Mr. Steinfeld's submission that, in so far as the present application is designed to protect the fund and the trustees from the effects of an adverse costs order, it is unlikely to be successful.”
[104]At paragraph [42] of her judgment in the Roberts case Arden LJ said the following:
“[42] The court must naturally consider the financial impact of the bringing of the proceedings on the estate or trust. As Goff J held in In re Field [1971] 1 WLR 555, the fact that the personal representative is unwilling to sue is not in itself enough. However, in very many cases, the fact that the derivative claim will enable an asset that could not otherwise be realised to be realised will be a very powerful consideration, subject, however, to bringing into account the risk to the estate involved in bringing the action. In the present case, the claimant has legal aid and thus the estate will not have to fund his costs. There is no suggestion of a counterclaim. The only claim is for the recovery of damages. If that were to be successful, the estate’s assets would be increased. But the estate would also have a contingent liability for the costs of the solicitors. In the present case there are no assets out of which those costs could be paid”
As I have said, the financial impact referred to by Arden LJ is, in the corporate derivative claim sphere, now taken account of at various stages in the exercise that the Court must engage in, as laid down by the CA 2006 and as reflected in the submissions of the defendants.[105]Arden LJ went on to say: [43] In Bradstock Trustee Services Ltd v Nabarro Nathanson[1995] 1WLR1405, referred to at para 19 above, Judge Paul Baker QC left open the question whether permission to bring a derivative claim should be brought in these circumstances. No doubt the reason for his concern was that, if the court gave permission for a claim, it was likely that the defendants, if successful, would not recover their costs. This is a most unsatisfactory state of affairs, but it must often be the case that defendants are faced with a claimant who has the benefit of public funding for his costs. If there were other persons who could bring the claim who were not publicly funded, I would expect the court to consider refusing permission. Subject to that, in my judgment, a publicly-funded claimant should be able to bring a derivative claim. The fact that the estate has no assets means that it is not at risk if a derivative claim is brought. [44] I proceed, therefore, on the basis that it is no objection in this case that the claimant has the benefit of costs protection as a publicly-funded litigant. On this basis, the next question is whether, if there had been no limitation objection as I have concluded above, the claimant would have been able to show that there were special circumstances justifying the grant of permission to amend to bring a derivative claim[106]In this case the company has ceased trading and is dormant. It is insolvent. The only creditors are the shareholders. As regards any claim by the claimant for an indemnity in respect of the claimant’s own legal costs, the company is protected, by the claimant’s proffered undertaking.. As such it benefits from the bringing of proceedings on the current basis, in that the proceedings are funded at no cost to the company (unless the claim succeeds, in which event the sum will be deducted from the overall damages obtained).[107]As regards any costs awarded against the claimant the position is as follows. There is at present no claimant’s undertaking regarding an indemnity for costs awarded against the claimant in favour of the defendants. There is currently exposure of the company in this respect. The claimant may yet offer an appropriate undertaking. On the assumption that it does not, although on the current hypothesis the deficiency would increase no shareholder (in that capacity) suffers (the company is already insolvent and the shareholders have the benefit of limited liability). Neither do creditors of the company in reality suffer. The only asset as at 30 September 2015 was £2,000 cash at bank. That too is likely now to have been disposed of, given likely administrative costs. In any event £2,000 is de minimis compared with liabilities of £735,000. The persons affected by further liabilities would be the existing creditors, BPL and Wilton, whose creditor dividend rights would be diluted on a winding up. If Wilton is affected it can hardly complain. If BPL’s existing potential dividend is affected, the effect is minimal (little more than £1,000).[108]Looking at the position of the defendants as being on the receiving end of litigation on which they might succeed and might obtain a costs order, their position is one where there is an apparent serious risk that any costs awarded in their favour will not be recoverable because of the financial position of the claimant. That does not arise because the claim is brought derivatively. The defendants have the same ability to seek security for costs that any defendant has.[109]Finally, considering the position of the directors, it does not seem to me that it could be said that they would be in breach of section 214 Insolvency Act 1986 if the proceedings were to continue: quite simply it could not be said (at least at this stage) that the proceedings were bound to fail and that the company was bound to go into insolvent liquidation, nor that there is no reasonable prospect that the company will avoid insolvent liquidation. Further, I am not satisfied that it could be said that the taking of proceedings would amount to failing to take every step to avoid minimising loss to creditors. The company is currently insolvent. The proceedings, if successful, will remedy that position.[110]I have to add into the equation my assessment of the strength of the claimant’s case which also impacts upon the risks of adverse orders being made against the claimant and/or BMO.[111]It follows that I consider that the submissions raised by the defendants as regards the exposure of BMO the company to claims for costs in relation to the proceedings carry very little weight in the balancing exercise to be conducted by the person acting in accordance with s172 Companies Act 2006 as provided for by s262(2)(a) and 262(3)(b). Further, I consider that the costs position of the defendants quae defendants carries very little, if any, weight as a factor weighing against the grant of permission, as a matter of the exercise of the court’s discretion. (5). No decision by BMO regarding the proceedings[112]Under s263(3)(d) the court has to consider the likelihood of the alleged wrong bring ratified. Under s263(3)(e) the court must consider whether the company has decided not to pursue the claim.[113]Ratification will not occur given the shareholdings in question. The board of BMO has not formally made a decision regarding pursuit of the claim.[114]As regards the board’s position the board did go through the process of having a meeting to discuss the proceedings in December 2016. Issues were raised about the merits of the alleged claim, funding and the pursuit of independent claims by Wilton and/or TC/DW. TC/DW did not in the event provide further information. Although (by reason of the casting vote provision, the effect of which in the circumstances which have occurred may be open to argument) Banks may still control the board of BMO, Banks had changed the composition of the board of BMO by removing the 1st defendant as director and appointing another.[115]Had there been a decision not to pursue the current Derivative Claim as a direct claim by BMO, the court would have had to consider any reasoning of the board and the weight to be accorded to the decision. Given that the company is effectively now a dormant shell and given the fact that in reality half the board comprises persons appointed by Banks and the other half appointees of the claimant (in fact TC/DW who would themselves be conflicted), it is unlikely that such a decision would have carried much, if any, weight. There being no decision there is in one sense nothing specifically required by statute for me to take into account. The real question might be seen to be whether the court should adjourn the case to enable (or even require) a decision to be put to the board for decision. I am satisfied however that a decision of the board not to pursue the proceedings would not greatly assist me, if at all, and that on the facts of this case the court is well able to consider the relevant matters without the assistance of such a board decision.[116]The short point here is that if the refusal to pursue proceedings was based on absence of funding the position is different in relation to the claim once brought derivatively. If pursuit of the proceedings would be refused on bases such as alternative remedy or the strength of the case then these are matters that I am able to judge as well as the board, on the information given.

Application of test under s263

[117]As I have already said I am not satisfied that I must dismiss the claim or any individual cause of action pleaded on the basis that it falls within s263(2)(c) CA 2006.[118]Turning to the person acting in accordance with s172 CA 2006, I am satisfied that such a person would attach importance to the continuation of the proceedings and would wish to continue them.[119]I have dealt with the legal merits of the claim and costs considerations above. These are matters relied upon by the defendants as ones that would either compel a person acting under s172 not to continue the claim or to attach little weight to it. For the reasons given above, I do not agree that these matters lead to either conclusion. (In this respect my answer is the same whether the alternative remedy arguments are ones to be considered by a director under s172 or not).[120]In addition, it is submitted that the company, being an “inactive shell” would achieve no benefit from a successful conclusion to the proceedings in its favour and that only the claimant would (by a distribution) and that in pursuing the claim the company would be “taking sides”. However, if the company receives substantial sums by way of damages it truly benefits. Whether it then goes on to distribute such assets (having paid off its debts) does not mean that it is not for the benefit of the company’s shareholders, and therefore the company, that such sums have been obtained (it will also benefit the shareholders quae existing creditors and the company benefits by becoming solvent).[121]Whether or not the company is “taking sides” seems to me again to be irrelevant if the company is indeed a shell that is not going to trade. Such characterisation by the defendants may be a further reason though why the company should not be visited with any of the costs of the proceedings, whether those proceedings are successful or not.[122]I have dealt with the other matters relied upon by the defendants above (alternative claim and absence of decision by BMO).[123]Otherwise I am satisfied that the claimant is acting in good faith in seeking to continue the claim (s263(3)(a)) and I have dealt with the considerations under s263(d), (e) and (f) above. S263(4) does not come into play.[124]Accordingly, subject to the question of whether retrospective permission is available, I would otherwise grant permission to continue the proceedings. The parties have agreed that this permission should extend to completion of the disclosure process.

Retrospective permission: the principles

[125]Having decided that I would grant prospective permission to continue with the proceedings, and that I have jurisdiction to grant retrospective permission, the remaining issue is whether I should grant retrospective permission. If I should refuse such retrospective permission, then it would follow that prospective permission should also be refused.[126]The defendants’ position was that the appropriate principles to be applied in this context were those which apply to the obtaining of relief from sanctions under CPR r 3.9. In the course of oral submission discussion also took place regarding a test analogous to that under CPR 16.5(2). In the light of the decision of the Supreme Court in Barton v Wright Hassall [2018] UKSC 12; [2018] 1 WLR 1119, the defendants’ submitted further written submissions regarding the application of the principles to validate retrospectively non-compliant service of originating process under CPR r6.15(2) to the case before me. Further written submissions dated 23 February 2018 on this issue were received by me from Mr Ayliffe QC on that date. The claimant’s position (at least at one point) was that permission was at large, taking into account all of the circumstances, and that the essential test was “the best interests of justice” and that neither cases regarding the discretion to grant relief from sanctions nor that relating to the discretion to validate service under CPR r6.15(2) was an appropriate analogy. However, by his written submissions (on their face dated 5 February 2018 but actually dated 5 March 2018) I understood Mr Pipe to accept the applicability of the Denton principles (as subsequently developed).[127]Although there is an initial attraction to the idea that CPR 6.15(2) is dealing with non-compliant service of a claim form and I am dealing with non-compliant service of a claim form (because prior court permission was not obtained), in my view this is an oversimplification.[128]First, the question of whether retrospective permission should be given as regards particular steps in a derivative action taken without permission is not limited to cases where the step is service of the claim form. It could (as here) cover service of particulars of claim or it could relate to later steps in the litigation (for example where permission had been down to a certain stage but steps thereafter had been taken without permission). Thus, although in this case service of the claim form is one of the relevant steps for which permission is sought, the question would not necessarily arise in that context.[129]Further, the underlying issue is one as to authority to take the relevant step in the proceedings and that is primarily an issue between BMO and the claimant rather than between the claimant and the defendants. It is clear that where there is a question as to authority to bring proceedings the defendant is entitled to (and indeed should) challenge the absence of authority at an early stage rather than leaving it to its defence. Where the proceedings are commenced without authority, and in areas where the court cannot grant authority in the proceedings, the court may well permit an adjournment so as to enable the question of authority to be taken further and if appropriate resolved (see e.g. cases where proceedings are brought in the name of a dissolved company). In such cases, authority may be conferred retrospectively by the company itself being restored to the register and adopting the proceedings. If that is correct it is difficult to see why steps in derivative proceedings could not be subsequently validated, for example, by company resolution and the adoption of the proceedings by the company. Thus, although to some extent the rules regarding derivative proceedings confer some protection on the defendant and the defendant is usually (although this is a discretionary matter) permitted to participate in the issue of whether authority to continue proceedings should be granted by the court, the rules are not there to protect the defendant in the way that the rules regarding service of originating process are for the defendant’s protection.[130]Accordingly, the distinction drawn by Lord Sumption between cases involving relief from sanctions, itself encompassing weight being given to the factor of the disciplinary element of the CPR, and the provisions of CPR r6.15 is not one that, in my judgment, holds good for retrospective permission regarding the bringing of derivative proceedings and a factor which puts the exercise of the relevant discretion in that context on the CPR r6.15(2) side of the line.[131]True it is that I have held that the ability to grant retrospective permission and the effects of permission not having been granted are regulated by statute rather than the CPR. Nevertheless, in my view the process and timing of permission being regulated by the CPR (just as the process and timing of permission to appeal is regulated by the CPR though the requirement for permission is (largely) statutory see e.g. s54 Access to Justice Act 1999), the failure to obtain permission should be viewed as carrying a sanction (see, by analogy, the position regarding appeals).[132]Accordingly, I also reject the claimant’s case (at least as I understood it at one point to be) that the matter is simply one at large to be considered against all the circumstances and that I should simply apply a “best interests of justice” test.[133]In reality, each of the three tests, that under CPR r6.15(2), that under Denton for relief from sanctions and that advocated by the claimant of “the best interests of justice” are directed at the court achieving a just result in all the circumstances. The circumstances in which the issue arises are capable of giving rise to a different structure of questions to determine what is just. In my judgment, each test involves application of a different structure to reach the “just” result in that each involves particular questions being asked in a structured process so as to assist in identifying the key considerations. Further, each results in different emphasis or weight being given to particular factors. Thus, to take one example, the disciplinary factor of encouraging rule compliance and effect on third parties carries less if any weight in carrying out the CPR r6.15(2) test compared with the Denton test.

Retrospective Permission: the facts

[134]Before applying the relevant test, there are two major areas that I have to consider. First, the circumstances and reasons why permission was not sought in time and secondly whether the claims or any of them are now barred by limitation (subject to the exercise of my discretion).[135]The letter before claim in this case was sent on 6 June 2015.[136]The claim form and the application notice were originally sent to the court under cover of a letter dated 9 November 2016 asking that the claim form be issued for service by the claimant’s solicitors, Clarion. The claim was described as “being issued for limitation reasons”. So far as the application for permission was concerned, the letter asked the court for time for the claimant to file particulars of claim and a supplemental witness statement which, the letter anticipated, would be filed “within 4 to 6 weeks”. A “fair determination” of the application was said to require consideration of the additional evidence and particulars of claim. The court was told that once the additional material was filed, the court’s attention would be drawn to the letter “so that the Court may progress the matter”. In those circumstances the application was not issued and the application was not put before a Judge. The claim form however was duly issued at that date, thus stopping the running of the limitation period.[137]By letter to the court dated 21 December 2016, Clarion apologised for the delay. They explained that the delay had been caused by a recent family bereavement suffered by Counsel and anticipated that the particulars would be with the court in early January so that thereafter the court could consider the application for permission to proceed. The court replied to confirm that no Judge had yet seen the file and that the court would await the particulars in January 2017 before putting the application before a Judge.[138]By letter dated 2 February 2018, Clarion wrote to the court to say that it had taken counsel longer than anticipated to complete the drafting of particulars of claim and that he anticipated having them ready in the week commencing 6 February 2017.[139]By letter dated 20 February 2017, addressed to Ward Hadaway, solicitors acting for the Banks companies and others, Clarion asked Ward Hadaway if they had instructions to accept service on behalf the named persons who were the individuals in the Direct Claim.[140]By various letters dated 6 March 2017, Clarion served the derivative claim form and the application for permission and supporting evidence on the defendants to those proceedings. This was a matter of days before expiry of the four-month period of validity for service of the derivative claim form.[141]The particulars of claim were lodged with the court on 8 March 2017. Also, under cover of letters dated 8 March 2017 from Clarion, the particulars of claim in the derivative proceedings, plus response packs, were served on the defendants to the derivative proceedings. The letter went on to say that “The matter is with the Court and no further steps need to be taken pending the Court’s determination on permission to proceed.”[142]By letter dated 16 March 2017 Ward Hadaway asked for confirmation that the court’s permission had been obtained in accordance with CPR r19.9(4) “in advance of purporting to effect service”.[143]Despite a chasing letter from Ward Hadaway dated 17 March, it appears that Clarion did not reply substantively. By letter dated 21 March 2017, Ward Hadaway said that they assumed that court permission had not been obtained and they enclosed copies of acknowledgements of service filed with the court, indicating that it was intended to contest jurisdiction and that an application would follow within 14 days.[144]Under cover of a letter dated 30 March 2017, Clarion lodged with the court the second witness statement of Mr Wilkes (and exhibits) and asked that that witness statement be put before the Judge with the application dated 9 November 2016.[145]Clarion responded to Ward Hadaway, by letter dated 31 March 2017, that the question of whether the claim should be pursued was one between the claimant and BMO and that within the existing application for permission they were “seeking approval of the course of action that we have taken”.[146]Under cover of a letter dated 31 March 2017 the second witness statement of Mr Wilkes in support of the application for permission was served.[147]On 3 April 2017 the defendants issued their application for an order that the court has no jurisdiction to try the claim and setting aside service of both the claim form and the particulars of claim.[148]Under cover of letter dated 4 April 2017, Ward Hadaway served on Clarion the defendants’ application dated 3 April 2017 and supporting evidence.[149]The matters were referred to District Judge Kelly who ordered that both matters should be listed before me for an oral hearing.[150]By letter dated 13 April 2017, Ward Hadaway raised the question of whether I should first deal on paper with the first stage of the permission application under the derivative procedure, then hear the defendants’ application that there was no jurisdiction to hear the claim and then, only if that was not successful, should I have a separate hearing to consider the second stage of the permission application. I considered that this was potentially creative of wasted costs and delay taking up potentially 3 hearings or determinations by the court rather than having the matter dealt with at one hearing. I declined to hear the (then) two applications separately.[151]As a result of the refusal of Ward Hadaway, on behalf of the defendants, by letter dated 4 May 2017 to accept that the question of possible retrospective permission was sufficiently encompassed by the existing application of 9 November 2016, the further application dated 22 June 2017 was made by the Claimant.[152]I turn now to the second area that I have to consider, which is that of limitation. The assumption has been that the earliest relevant damage suffered was on or about 16 November 2010 when Option 2 was entered into. The claim form was issued on 9 November 2016 within 6 years of the grant of Option 2. It is accepted that 6 years is, in general, the limitation period. The result would be that most if not all of the claims are well outside the 6 year period were a new claim form to be issued now.[153]Mr Pipe however submits that the claims against the directors are ones of dishonesty and that accordingly no period of limitation applies to them by reason of them being treated as trustees for the purposes of s21 Limitation Act 1980 and the causes of action against them falling within s21(1)(a) Limitation Act 1980. He submits that retrospectively to grant permission under CPR r19 does not remove any existing Limitation Act defence. I largely accept this submission.[154]This however leaves the (alternative) claim against Mr Banks based on dishonest knowing assistance in director’s breaches of trust and the similar claim against BGL. It seems to me that both of these fall outside s21(1)(a): see Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] AC 1189. Further, as Mr Pipe acknowledged, there are problems as regards the conspiracy and confidential information claims (at least as regards non-directors). Mr Pipe submits that, so far as the claims in knowing assistance are concerned, Mr Banks (assuming he is not a director) falls within the “privy” head of s21(1)(a) Limitation Act 1980. As I understand it, he accepts that on any view BGL would not fall within s21(1)(a). He also submits that in light of Burnden Holdings (UK) Ltd v Fielding and Anr [2018] UKSC 14 some claims are not barred by virtue of s21(1)(b) Limitation Act 1980. However, at this stage it suffices to say that I am not satisfied that there are no claims that would be statute barred.[155]There are it seems to me at least three possible answers to the limitation problems: i) To refuse permission retrospectively (and therefore prospectively) and to leave the claimant to bring fresh proceedings so that the limitation point is then determined by the court and, if any claims are barred by limitation for the claimant to be bound accordingly; ii) To give retrospective permission as regards those claims where it is clear that limitation does not bar the claim but to refuse permission where it is arguable that they are bound; iii) To give retrospective permission. I return to consider this issue when applying the Denton/Mitchell principles.

Application of the Denton/Mitchell principles

[156]The relevant principles were agreed. I need not cite them in detail. My summary should not be taken as any more than a shorthand indication of the applicable test rather than a full description of the same. I need to consider:(1) The seriousness and significance of the breach;(2) The reasons why the default occurred;(3) All the circumstances of the case (including those set out in CPR r3.9(1)(a) and (b)).[157]In my assessment the breach was serious and significant. The making of an application for permission was simply not pursued and instead the proceedings were continued with. One point of the procedure is to weed out unmeritorious claims and to ensure that defendants (and companies) are not troubled by them. Although this has not turned out to be such a case, the breach of the rules (and the statute) was serious and/or significant.[158]The reason given for not putting the matter before the court was essentially one that it would be better for the evidence to be in a better state than proceeding on inadequate evidence. In my view, this is not a satisfactory explanation. The matter should have been placed before the court well before expiry of the validity of the claim form so the court could judge whether the case should be got on with and make directions accordingly and/or whether there should be limited permission to serve documents or not. Instead of that the claimant took the matter out of the court’s hands. Although I understand some of the reason for the delays in getting the case ready for the hearing that eventually took place I am not satisfied that they can be fully excused.[159]Turning to, and in looking at, all the circumstances, I take into account that the breach in this case was not abusive in the sense of recklessness or a deliberate self-serving breach. The breach occurred in circumstances where the decision was an error as to what the overriding objective required rather than a deliberate abuse.[160]I also take into account the fact that the defendants have not in reality been much harmed by the delay. At most an inter-parties application may have occurred a little earlier. The defendants were however properly served in terms of mode and time of service. Their complaint is one of lack of authority, which can now be rectified.[161]I take into account the fact that all of the facts will have to be gone into on the Direct Claim and that the Derivative Claim of itself should not add too much to the overall costs (though I also bear in mind the difference in the identity of the parties in the two proceedings and particularly the defendants). It would be unjust if causes of action were made out in the Direct Claim but which were only vested in the company and which could not be pursued because I now refused relief.[162]So far as limitation is concerned, the purpose of the requirement of permission from the court is primarily to protect the relevant company. The defendants were served by proper mode and on time. However, service was without authority. If authority is now provided (or had been by the company) it is difficult to see how they could object. Further, had the correct procedure been followed permission would have been granted ex parte and would have permitted service if, as seems reasonable to assume, an inter parties hearing could not have been accommodated prior to expiry of the period of validity of the claim form for service. In the circumstances, I do not regard limitation as a factor which should prevent my now granting permission with retrospective effect.[163]I am acutely aware of the need not to encourage(a) the subversion of the statutory process by bringing about rolled up applications such as this as routine (though in some cases it may well be sensible to agree the same) and(b) the need to avoid encouraging claimants bringing these claims to think that they can sit back and if the merits are otherwise on their side, rely on the court giving retrospective permission. However, I do take into account the point that, in light of this judgment, the appropriate approach will have been reinforced and claimants will have less excuse for taking such a course as was taken by the claimant in this case.[164]I also take into account the ironic fact that the court has only been troubled by one hearing regarding the question of whether permission should eb granted rather than a two-stage consideration of the issue. Against this is to be balanced the point that much of the time has been taken up with the retrospectivity arguments (jurisdiction and exercise of discretion), which has expanded the argument and led to the matter being dealt with over a longer time frame than would otherwise have been the case..

Conclusion:

[165]I grant retrospective permission to continue with the claim and also prospective permission, subject to further argument, down to a period after completion of the disclosure process.[166]I invite the parties to agree a form of order if they are able in advance of the formal handing down of this judgment. It is likely that further directions will have to be given for a CCMC in any event. It is obviously sensible that the Direct Claim and the Derivative Claim are case managed and tried together. If an order cannot be agreed within 2 days of the formal handing down of this judgment then a further hearing should be set as soon as possible for the purposes of determining all consequential matters (including permission to appeal) which are reserved to that hearing. I extend the time for filing a notice of appeal so that the 21 days period starts at the date an order dealing with consequential matters is made. If a hearing is necessary I direct that the contending forms of order sought are lodged with the court 2 clear days before the hearing together with skeleton arguments and any authorities.

Cited in 1 later judgment