Boston Trust Company Ltd v Szerelmey Ltd & Ors

Permission for a common-law multiple derivative claim requires sufficient interest, a prima facie case, an established exception to Foss v Harbottle, and overall appropriateness. At the interlocutory stage, the claimant must show a good or strong arguable case, assessed by the totality of the evidence without conducting a mini-trial.

Standing ordinarily requires ownership of the relevant shares. A lesser equitable interest will not suffice absent exceptional circumstances compelling that result. Good faith is assessed by the predominant purpose of benefiting the company; a collateral personal or commercial benefit is not, by itself, disqualifying. An alternative remedy, including an unfair prejudice petition, is relevant but is not an automatic bar. The court must also consider whether an independent board could reasonably conclude that pursuing the claim is appropriate.

The claimants, trustees of the Erutuf Trust, sought second-stage permission to continue four common-law multiple derivative claims on behalf of three operating companies. The claims alleged that the fifth defendant, Gordon Verhoef, dishonestly procured transactions benefiting companies under his control.

The claimants relied on indirect interests in the operating companies through Tellisford. Their shareholding position was disputed, and a separate rectification claim concerning Tellisford’s register was pending. The central issues were standing, threshold merits, fraud on the minority, reflective loss, board independence, ulterior purpose, alternative remedies and the court’s overall discretion.

1. Standing. Boston were validly appointed trustees of Erutuf, but that capacity did not establish common-law standing. Trustees could not acquire a beneficial interest in trust shares transferred to them, and any lesser equitable interest, such as a right to rectification or specific performance, was insufficient on the current authorities. The circumstances were not exceptional enough to extend standing. The non-voting B shares did not materially assist, and other persons could have been joined as claimants.
2. Threshold merits. On the assumed premise that Boston had sufficient interest, all four claims comfortably satisfied the interlocutory burden. The evidence supported an inference that Mr Verhoef acted as a shadow or de facto director and dishonestly procured value-extracting transactions for companies under his control. The claims were to be assessed claim by claim, without resolving disputed facts or quantum finally.
3. Fraud, loss and independence. The evidence established a prima facie case of actual fraud or personal benefit within the fourth exception to Foss v Harbottle. Reflective loss was sufficiently shown despite the defendants’ “swings and roundabouts” argument. The operating companies’ boards could not presently be regarded as independent of Mr Verhoef.
4. Appropriateness. The proceedings were pursued predominantly to restore value to the companies and were not shown to have an ulterior purpose. A personal claim and an unfair prejudice petition under the Companies Act 2006 were not adequate or materially more appropriate remedies for serious allegations of dishonesty and company-directed restorative relief.
5. Discretion and disposition. Applying the factors identified in Iesini v Westrip Holdings Ltd and Bhullar v Bhullar, an independent board could conclude that the claims should be pursued. Permission would have been granted for all four claims, subject to the standing defect. The court reserved the appropriate order, including costs, and invited submissions on whether the proceedings should be stayed or conditional permission given pending the rectification claim.