Wilton UK Ltd v Shuttleworth

The court considered whether service of a Part 7 claim form and particulars in derivative proceedings commenced under Chapter 1 of Part 11 of the Companies Act 2006 was valid where the claimant had not obtained the permission to continue required by s.261 CA 2006 before taking further steps. The judge held that the failure to obtain permission under the Companies Act 2006 is not merely a procedural breach of the Civil Procedure Rules but a statutory defect which renders subsequent steps invalid unless the court validates them. The court nonetheless recognised a jurisdiction to validate retrospectively steps taken without permission and indicated that the exercise of that jurisdiction will involve consideration of the statutory scheme, the policy behind the permission requirement and relevant authorities.

Key legal principles: (1) Permission under s.261 CA 2006 is required before continuing a derivative claim; non-compliance is a statutory defect rather than a mere CPR irregularity. (2) Steps taken without such permission are invalid, but the court has jurisdiction to grant retrospective validation where appropriate. (3) In the alternative, if the matter is treated as governed solely by the CPR, CPR r.3.10 may operate to cure procedural errors in appropriate cases, subject to specific limiting rules (for example CPR provisions that restrict extension of time).

The claimant Wilton UK Limited issued a derivative Part 7 claim purportedly on behalf of Banks Mount Oswald Limited (BMO) on 9 November 2016 and served particulars on 8 March 2017. The claimant had not secured the permission to continue required by s.261 Companies Act 2006 before service. The first to fourth defendants applied for declarations that the court had no jurisdiction to try the claim and to set aside service; the claimant sought permission to continue and an order validating service.

Background and parties:

• The dispute concerned a project to acquire and develop the Mount Oswald site and alleged diversion of a corporate opportunity from BMO; Wilton advanced a derivative claim under Chapter 1 of Part 11 CA 2006.
• The claimant asked for permission under s.261 CA 2006 but did not pursue the application before serving particulars; limitation issues meant that if service were invalid no fresh claim could now be issued.

Nature of the application: (i) The claimant sought permission to continue the derivative claim (s.261 CA 2006) and validation that the claim form and particulars were treated as served; (ii) the defendants sought a declaration that the court had no jurisdiction and that service should be set aside.

Issues framed by the court:

• Whether failure to obtain permission under s.261 CA 2006 rendered service invalid in law or was a curable procedural irregularity under CPR r.3.10.
• Whether the court has power to grant retrospective permission or otherwise validate steps taken without permission.
• How authorities such as Seal v Chief Constable of South Wales Police and Re Saunders inform the consequences of non-compliance with statutory preconditions for commencing or continuing proceedings.

Reasoning and conclusions: The judge concluded that the requirement for permission is statutory and not merely a CPR procedural provision; accordingly CPR r.3.10 does not govern the primary consequence of failure to obtain permission. The court held that the failure to obtain permission invalidates subsequent steps (including service) but that the court has jurisdiction to validate retrospectively (i.e. to grant permission with retrospective effect) in suitable cases. The judge analysed the legislative history and authorities (including Seal and Re Saunders), explaining that Seal was explained by its particular statutory history and did not preclude retrospective validation in the derivative-claims context. The alternative hypothesis — that if the issue were purely procedural the CPR would permit cure under r.3.10 — was examined and the judge indicated that CPR-based validation would be possible in that scenario, subject to the limits identified in cases such as Vinos v Marks & Spencer plc. Finally, the judge declared service to be invalid but adjourned the applications for further argument on the exercise of the court's discretion to validate retrospectively and reserved costs.

This is a first-instance decision. The court held that service of the claim form and particulars was not valid because permission required by s.261 Companies Act 2006 had not been obtained, but the court has jurisdiction to validate retrospectively steps taken without such permission. The judge adjourned the applications for further argument on the exercise of that jurisdiction, reserved costs and indicated a preliminary view to extend the time for filing any appeal so that appeal time runs from final resolution of the adjourned matters.