Boston Trust Company Ltd v Szerelmey Ltd & Ors

The court has jurisdiction under CPR 19.9(4) to grant conditional permission to pursue a common-law derivative claim even where the claimant presently lacks standing, provided the proceedings remain on foot. Conditional permission may be appropriate where the claimant is pursuing a separate process capable of regularising its standing.

The claimant should show a good prospect of acquiring standing within a tolerable timeframe, together with a sufficient prospect of success in the relevant process. The court must also assess potential prejudice and may impose proportionate conditions. Retrospective rectification from the date proceedings were issued is not an essential prerequisite.

Boston had obtained first-stage permission to commence a common-law derivative claim, but the claim remained unserved and procedurally frozen pending second-stage permission under CPR 19.9(4). In an earlier judgment, the court found that Boston presently lacked standing, although it concluded that permission would otherwise have been granted.

Boston had separately commenced a claim under section 125 of the Companies Act 2006 seeking rectification of Tellisford’s register of members. The issue was whether the court could grant conditional permission, or stay the derivative proceedings, pending the outcome of that rectification claim and, if so, whether that discretion should be exercised.

1. Jurisdiction. The court had jurisdiction to grant conditional permission under CPR 19.9(4). The derivative proceedings had been issued and remained extant, notwithstanding that they had not been served and that Boston currently lacked standing. CPR 3.1(3) was not displaced by the standing requirement.
2. A temporary stay was not the appropriate procedural mechanism. A stay would presuppose unconditional permission, which could not presently be granted. Conditional permission could achieve the equivalent practical result while keeping the claim within the procedural control required by CPR 19.9(4).
3. Retrospective rectification from a date before commencement was unnecessary. It was sufficient that Boston had a sufficiently robust and proximate prospect of acquiring standing by the time conditional permission took effect or unconditional permission was granted. The court distinguished the different procedural contexts of Re Starlight Developers Ltd and Pickthall v Hill Dickinson LLP.
4. The relevant considerations included: a good prospect of establishing standing; acquisition of standing within a tolerable timeframe; and potential prejudice to the defendants. These matters formed part of the court’s broad discretion under CPR 19.9(4).
5. Boston had at least a good prospect of succeeding in the rectification claim. The register recorded ownership by a non-legal entity, there was no material dispute about title between the relevant trustees or transferor, and section 125 of the Companies Act 2006 conferred broad remedial powers, including a sufficient prospect of retrospective relief.
6. Boston’s earlier election not to seek an adjournment, stay or amendment did not prevent the court from exercising its jurisdiction. The balance of prejudice favoured conditional permission, which avoided the potential costs and procedural uncertainty of a second derivative claim.
7. Conditional permission was granted by reference to the outcome of the rectification claim. A further hearing was provisionally listed; the costs application and costs of the permission application were adjourned or reserved. Permission to appeal was granted on the existence and exercise of the jurisdiction.

• High Court (Chancery Division): In the earlier judgment, [2020] EWHC 1136 (Ch), the court found that Boston presently lacked standing but would otherwise have granted permission to pursue the derivative claim.
• High Court (Chancery Division): The present judgment granted conditional permission pending determination of the rectification claim and granted permission to appeal on the jurisdictional and discretionary issues.