Wilton UK Ltd v Shuttleworth & Ors

In a statutory derivative claim, permission under Companies Act 2006, s 261 is not merely a procedural requirement under the CPR. Service undertaken before permission is obtained is therefore invalid, rather than valid unless set aside. However, the court has jurisdiction to validate the service retrospectively when exercising its statutory control over the derivative claim. The court must distinguish between the existence of a mandatory requirement and the consequences of non-compliance. Those consequences depend on statutory construction, the protection intended by Parliament, the procedural context and the circumstances of the default. The general power in CPR r 3.10 cannot cure a breach which is statutory in character.

Wilton UK Ltd brought a derivative claim for the benefit of Banks Mount Oswald Ltd against directors and associated companies. The claim form was issued together with an application for permission to continue under s 261 of the Companies Act 2006, but the permission application was not pursued before particulars of claim were served. The four-month period for service expired, and the claim was thereafter said to be statute-barred.

The defendants sought declarations that the court had no jurisdiction and orders setting aside service. The claimant sought permission to continue and an order deeming the claim form and particulars served. The preliminary issue was whether service without prior permission was valid, and, if invalid, whether the court could retrospectively validate it.

1. Statutory character of the requirement. The requirement to obtain permission to continue a derivative claim arises from s 261 of the Companies Act 2006. CPR 19.9A supplies the detailed procedure and timing, but the underlying requirement is statutory. CPR r 3.10 therefore cannot directly validate the failure as a mere procedural error under the CPR.
2. Effect of non-compliance. Service undertaken before permission is obtained is not valid. It is not correct to treat all steps as valid unless and until the court sets them aside, since that would give insufficient weight to the permission requirement and would inadequately protect the company and other defendants.
3. Retrospective validation. The court nevertheless has jurisdiction to validate retrospectively steps taken without permission. That power is consistent with the statutory policy of placing control of derivative claims in the court. It may permit the company, or in an appropriate case another shareholder, to adopt proceedings where service was otherwise timely but the limitation period has since expired.
4. Construction and context. The question is not resolved simply by labelling a requirement mandatory or directory. The court must determine the consequence Parliament intended, considering the statutory language, the factual circumstances of non-compliance, the protection intended for the company and defendants, and the history and policy of derivative proceedings. Seal v Chief Constable of South Wales Police was distinguishable because its result depended on the particular legislative and case history of the provision there considered.
5. Alternative CPR analysis. If the matter were governed solely by the CPR, the failure would fall on the Vinos v Marks & Spencer plc side of the line, because the claimant had failed to obtain the required permission rather than merely making an erroneous application. Even on that hypothesis, the court would have power to grant retrospective permission.
6. The applications were formally adjourned for further argument. Costs were reserved, and consequential matters, including the form of order and any permission to appeal, were left for the adjourned hearing.

Not an appeal. The judgment determined preliminary issues within applications to challenge jurisdiction and service. The remaining questions, including whether retrospective validation should be exercised on the facts, were adjourned.