Montgold Capital LLP v Ilska & Ors

Permission to continue a derivative claim should not be refused under section 263(2) of the Companies Act 2006 merely because the company may be insolvent or because substantially similar relief could be pursued in unfair prejudice proceedings. The mandatory refusal gateway is passed where the court can envisage at least one person acting in accordance with the duty to promote the company’s success who might properly decide to continue the claim. The assessment is commercial and must not become a mini-trial. The court must then exercise its discretion, considering the statutory factors, including good faith, the importance of the claim to the company, alternative remedies and the views of disinterested members. A realistic claim with substantial potential benefit to the company and its creditors justified permission.

The claimant held 50 per cent of Agushia Limited. The company had entered administration, followed by a pre-packaged sale of its restaurant business. The claimant alleged that the first to ninth defendants had participated in an unlawful means conspiracy which deprived Agushia of its undertaking and caused loss to the company.

The claimant was already pursuing misfeasance proceedings against the administrators and unfair prejudice proceedings against other defendants. It applied under section 261 of the Companies Act 2006 for permission under section 263 to continue a derivative claim on behalf of Agushia. The prima facie threshold had previously been passed on the papers. The central issues were whether permission was mandatorily barred and, if not, whether it should be granted in the court’s discretion.

1. Permission granted. The claimant was given permission to continue the derivative claim against the first to ninth defendants on behalf of itself and Agushia’s other members.
2. Under section 263(2) of the Companies Act 2006, refusal is mandatory only if no person acting in accordance with section 172 would seek to continue the claim. It is sufficient that the court can envisage one or more such persons properly deciding to continue it. The inquiry is essentially commercial, involving matters such as the size and strength of the claim, costs, funding, litigation risk and the ability of defendants to satisfy judgment. The court should avoid a mini-trial, but there must be more than a merely prima facie case and something worth litigating about. The approach in Iesini v Westrip Holdings Ltd [2011] 1 BCLC 498 and McCaskill v Fulton & Ors was applied.
3. The evidence supported a realistic and convincing unlawful means conspiracy claim. The evidence concerning Agushia’s solvency was incomplete and inadequate, and the court rejected the submission that the company was unquestionably insolvent. Even insolvency would not, by itself, bar a derivative claim, consistently with Gamlestaden Fastigheter AB v Baltic Partners Ltd [2008] 1 BCLC 468.
4. The existence of unfair prejudice proceedings, and the possibility of joining outsiders to them, did not itself justify refusal. Although the Court of Appeal decision in Clark v Cutland [2004] 1 WLR 783 established that relief available in a derivative claim could be granted in unfair prejudice proceedings, the derivative claim remained the logical, appropriate and fairest procedure on these facts.
5. In the discretionary assessment, the claimant acted in good faith despite having an additional commercial motivation. Continuing the claim was important to the company, offered significant potential benefit to creditors, and was not materially impeded by costs or funding concerns. There were no disinterested members whose views required consideration. Orders were made to preserve Agushia’s cash and require notice before the administrators drew funds, while the claimant did not pursue an indemnity from the company’s assets.