Wilton UK Ltd & Anor v Shuttleworth & Ors

The court considered whether permission should be given under Chapter 1 of Part 11 of the Companies Act 2006 (in particular ss.261 and 263) for derivative proceedings to continue and whether retrospective validation should be granted for procedural steps (service of the claim form and particulars) taken without prior court permission as required by CPR r19.9A. The judge treated the two-stage statutory permission process as a single exercise for present purposes and applied the s.263 factors, concluding that a person acting in accordance with s.172 CA 2006 would attach importance to continuation of the claim and that the claimant acted in good faith. Limitation, costs and the company’s insolvency were considered but were not decisive against permission. Applying the established principles for relief/validation (consideration of seriousness of breach, reasons for the default and all the circumstances), the court found the failure to obtain prior permission serious but not abusive, the defendants were not materially prejudiced and limitation did not require refusal. The court therefore granted both prospective permission to continue the derivative claim and retrospective permission validating service, subject to further directions (including completion of disclosure).

Background and parties:

• The claim is a derivative claim brought by Wilton UK Limited for the benefit of Banks Mount Oswald Limited (BMO) against four individual and corporate defendants associated with the Banks group concerning the acquisition and development of the Mount Oswald Golf Club site.
• The claimant alleged breaches of fiduciary duty by directors of BMO, dishonest assistance by others, misuse of confidential information and an unlawful means conspiracy; substantial damages were alleged.

Procedural posture and relief sought:

• The claimant sought (i) permission under s.261 CA 2006 to continue the derivative proceedings, (ii) validation retrospectively of service of the claim form and particulars which had been effected without prior court permission, and (iii) interim and consequential relief.
• The defendants applied to set aside service and to seek a declaration that the court lacked jurisdiction to try the Part 7 claim.

Issues for decision:

1. Whether prospective permission should be granted under ss.260–263 CA 2006 (applying the s.263 criteria including whether a director acting in accordance with s.172 would seek continuation, good faith, alternative remedies, ratification and company decisions);
2. Whether retrospective permission/validation of steps taken without prior permission should be granted and, if so, on what principles (the judge considered the Denton/Mitchell structure for relief from sanctions and analogous validation principles);
3. The effect of limitation, costs exposure and the company’s insolvent/dormant position on permission.

Reasoning and conclusions:

• The judge proceeded to assess the s.263 factors on the available evidence (noting the unusual one‑hearing format but treating the two statutory stages as effectively merged for decision). He concluded that there was a substantive case on the pleaded facts, the claimant acted in good faith and a hypothetical director acting in accordance with s.172 would attach importance to continuation.
• Costs exposure and BMO’s insolvent/dormant state were carefully considered together with Wallersteiner principles on indemnity; the claimant had offered an undertaking not to rely on an indemnity for its own costs but had not yet waived any company indemnity for adverse costs. The judge concluded these matters did not outweigh grant of permission.
• On retrospective validation the judge applied the three-stage approach (seriousness of default; reasons for default; all circumstances) and found the default to be serious but not dishonest or abusive, defendants suffered no real prejudice from service and limitation considerations did not require refusal. The judge therefore granted retrospective permission validating service and granted prospective permission down to completion of disclosure, reserving consequential directions.

Wider observations: the judge emphasised the need not to encourage routine non-compliance with the statutory permission regime but explained the court’s jurisdiction and discretion to validate steps in appropriate cases.

The court granted permission to continue the derivative proceedings and also granted retrospective permission validating service of the claim form and particulars. The rationale was that, applying ss.260–263 Companies Act 2006, the claims were of substance, brought in good faith and a director acting in accordance with s.172 would attach importance to continuation; applying the structured test for retrospective validation (seriousness of the default; reasons for default; all the circumstances) the failure to obtain prior permission was serious but not abusive, the defendants were not materially prejudiced and limitation and costs considerations did not require refusal. Permission was granted subject to further directions (including completion of disclosure).