Kyrri-Royle & Ors v Oldham & Ors

A shareholder cannot recover personally for loss suffered by a company merely because the alleged harm was intentional. The claim belongs to the company, subject to the established exception where those controlling it abuse the privilege of incorporation.

An assignee can pursue only causes of action actually transferred by the assignment. A subsequent statement of the assignor’s intention cannot enlarge an assignment whose defined asset does not include the claim.

A claim that administrators sold assets at an undervalue requires evidence that a higher price was obtainable. Commercially self-interested dealings, a conflict allegation, or unexplained events do not establish an unlawful conspiracy without evidence of impropriety and loss.

The claimants were members of a family partnership which operated Burger King restaurants and held shares in an associated company. After insolvency, administrators sold the partnership business to Allied Leisure. The claimants later alleged that the sale was at an undervalue and resulted from a conspiracy involving the administrators, the Royal Bank of Scotland and others.

Mr Justice Blackburne struck out the remaining claims against the administrators and the bank. The claimants made renewed applications to the Court of Appeal for permission to appeal that ruling and, separately, concerning refusal of permission to seek judicial review of the Legal Services Commission’s funding decision. The central issue was whether any surviving claim, particularly conspiracy and breach of duty in the sale, had a real prospect of success.

1. Application refused. The court refused permission to appeal from Blackburne J’s strike-out of the remaining claims. Sedley LJ held that none of the proposed grounds was viable, and Arden LJ agreed that the application should be dismissed.

2. The claimants could not recover losses suffered by their associated company. Such a claim offended the rule in Foss v Harbottle [1843] 2 Ha. 461 and Johnson v Gore Wood & Co [2001] 2 WLR 72. The rule concerned the claimant’s standing and the company’s separate legal personality, not the intention behind the alleged harm. Intentional wrongdoing therefore did not create a personal claim for shareholders.

3. The purported assignment did not transfer a conspiracy claim. It assigned only the causes of action comprised in the defined asset and described in the annexed letters before action. A later letter from the official receiver stating that a wider assignment had been intended could not alter that legal result. Arden LJ expressly agreed with Sedley LJ on this point.

4. The sale-at-an-undervalue claim had no real prospect of success. Earlier proposed prices did not show that a higher price was obtainable when the sale occurred. The claimants had produced no independent valuation capable of proving an undervalue. Arden LJ also agreed that valuation evidence was required.

5. The asserted conflict and the changed allocation of the buyer’s offer did not evidence conspiracy. It was legitimate for an office-holder acting in two capacities to ask a bidder to reconsider an allocation, provided the intervention was not improperly directed towards a secured creditor. No evidence showed impropriety, unlawfulness, or loss. Mere commercial self-interest and suspicion could not substitute for proof of an unlawful conspiracy.

• Court of Appeal (Civil Division): Refused the renewed application for permission to appeal from Blackburne J’s strike-out of the remaining claims: [2007] EWCA Civ 1504.
• High Court, Chancery Division (Blackburne J): Struck out the remaining claims against the administrators and the bank as unsustainable. Citation not stated in the judgment.
• High Court (Davis J): Refused, on grounds of time and merits, permission to seek judicial review of the Legal Services Commission Funding Review Committee’s refusal to restore public funding.