Saatchi v Gajjar & Anor

The court considered an application for permission under section 261 of the Companies Act 2006 for a derivative claim by a shareholder on behalf of Triptych Logistics Limited against its director, Mr Gajjar, and whether a director acting in accordance with section 172 would seek to continue the claim (sections 263(2) and 263(3)). The judge reviewed the pleaded causes of action (misfeasance, breaches of fiduciary and statutory duties and claims in restitution and constructive trust) arising from alleged unauthorised director's loans, payroll payments, purchase and use of company cars, payments to a marketing agency associated with a third-party business, payments to the director’s then-wife, small sponsorship payments and extensive credit-card payments.

The court found that, on the material before it, the pleaded claims were more than merely prima facie and that a director acting in accordance with section 172 would attach importance to pursuing most of them (notably the loans, payroll payments, the Tesla purchases, the Cognition payments, the payments to the director’s then-wife and credit-card transactions). The cricket-sponsorship claim was too small to stand on its own but was considered in context of the wider allegations. The court rejected the submission that available alternative remedies (an unfair prejudice petition under section 994, or a just-and-equitable winding up with a liquidator pursuing claims) meant permission must be refused, concluding those alternatives were not an absolute bar in the circumstances. The judge granted permission to continue the derivative claim.

This was a first instance application for permission to continue a derivative action under the Companies Act 2006 and a related application for interim proprietary relief (the judgment deals only with the permission application). The applicant shareholder, Charles Nathan Saatchi, sought permission under section 261 to pursue causes of action vested in Triptych Logistics Limited against the company's sole director, Mr Rahul Gajjar. The alleged wrongs arose from transactions and payments said to have been made by the director for his own benefit or otherwise without adequate authority or justification.

Background and parties:

• The applicant is a 50% shareholder of Triptych and a principal client of the company; the first respondent, Mr Gajjar, was the sole director and the other 50% shareholder.
• The dispute concerns alleged misappropriation or improper use of company assets and resources during the period 2012–2019 in the form of director's loans, payroll payments after dismissal, purchase of two Tesla cars, payments to a marketing agency for a tutoring venture, payments to the director’s then-wife, credit-card transactions and a small sponsorship.

Procedural posture and relief sought: The primary relief sought was permission to continue a derivative claim under section 261(1) of the Companies Act 2006. The judgment records that a separate application for a proprietary injunction was before the court but this judgment determined only the permission application.

Issues framed by the court:

• Whether the shareholder established something more than a prima facie case so that permission under s.261 should be granted;
• At the second-stage inquiry under s.263, whether a director acting in accordance with the section 172 duty would continue the claim (s.263(2)(a) and s.263(3)(b));
• Whether alternative remedies (an unfair prejudice petition under s.994, or winding up and pursuit by a liquidator) meant permission should be refused;
• Whether particular statutory provisions (including section 197 on loans to directors and the scope of informal unanimous assent or "Duomatic" principles) affected the merits.

Reasoning and conclusions: The judge applied the two-stage statutory scheme for derivative claims (s.260–263). The court accepted that the claimant need not demonstrate a strong case at the permission stage but must do more than establish a mere prima facie case; the merits and strength of the allegations are relevant on a provisional basis. The judge analysed each pleaded head of claim:

• Director's loans: the judge found there was something more than a prima facie case that loans totalling sizeable sums had been taken without the necessary formal member approval under section 197; evidence of informal assent by the shareholder was insufficient to establish full knowledge for Duomatic purposes, and repayment tied to sale of a warehouse was uncertain.
• Payroll payments: although directors are entitled to remuneration under the model articles, the court found that the level and timing of payments (after the director's dismissal and in the company’s precarious financial context) raised a non‑speculative case that a director acting under s.172 would attach importance to pursuing recovery.
• Tesla purchases: the replacement of vehicles with expensive Teslas and lack of adequate explanation gave rise to a reasonable argument of failure to exercise care and loyalty and merited pursuit.
• Cognition payments and payments to the director’s then-wife: the payments raised potential conflicts of interest and a lack of evidence of benefit to the company, supporting continuation of claims.
• Cricket club sponsorship: small in amount and unlikely to be pursued alone, but considered within the wider pattern of conduct.
• Credit-card transactions: substantial sums required explanation; a director acting for the company would attach importance to recovery.

On alternatives, the court found that both an unfair-prejudice petition and a winding‑up/liquidation route were available but not decisive: they were not shown to be better or adequate remedies for the company on the facts, and they did not make continuation of a derivative claim inappropriate. The applicant agreed to fund the action and to seek company indemnity only if successful, reducing the risk to the company. For these reasons the court granted permission to continue the derivative claim and directed further case management with related proceedings.

This was a first instance permission application. The court granted permission to continue the derivative claim on behalf of Triptych Logistics Limited. The judge reached that conclusion after a provisional merits assessment under the two-stage statutory scheme (sections 260–263 Companies Act 2006): several pleaded heads (notably the director's loans, payroll payments, Tesla purchases, Cognition payments, payments to the director’s then-wife and credit‑card transactions) were more than merely prima facie and were matters a director acting under section 172 would attach importance to pursuing. Alternative remedies (section 994 unfair‑prejudice petition or winding up) did not render the derivative route inappropriate in the circumstances. The court therefore ordered that permission be given and that the case be case managed together with related proceedings.