Gill v Thind & Ors

The court considered an application for permission to continue seven derivative and double-derivative claims brought by the claimant under CPR 19.9/19.9A and the Companies Act 2006 (and at common law for double derivative claims). The judge applied the two-stage statutory test in Part 11 of the Companies Act 2006 (prima facie threshold under section 261 and the discretion under section 263) and analogous common law principles for double derivative claims.

The court found that six of the pleaded claims did not disclose even a prima facie case (failure to plead relevant breaches or matters shown to be lawful corporate payments, absence of particulars, or factual errors) and refused permission under the statutory/common law tests. One claim (alleged undistributed/diverted payments by Simicare into an account in the claimant's name) did disclose something more than a prima facie case, but permission was refused in the exercise of the court's discretion chiefly because an alternative remedy by way of an unfair prejudice petition under section 994 (Companies Act 2006) was available and it would be preferable for the company not to fund litigation between quasi-partners. The court declined to refuse permission on grounds of bad faith and left the claimant free to bring an unfair prejudice petition.

The claimant, Balwant Singh Gill, issued proceedings including seven derivative or double-derivative claims against family members and related companies. The application before the court was for permission to continue those derivative claims. The factual background involved family-run care-home investments and various corporate and pension vehicles (Jeeves Estates, Laurels, Simicare, Watts, Jeeves Investments, Avey etc.) and disputed beneficial ownership of certain shareholdings and alleged transfers and distributions.

Nature of the application: permission to continue derivative and double-derivative claims (CPR 19.9/19.9A; Part 11 CA 2006) and related procedural history including prior freezing order proceedings and interlocutory rulings.

Issues framed by the court:

• whether each pleaded derivative or double-derivative claim disclosed a prima facie case under section 261 (or common law equivalent for double derivative claims);
• whether a person acting in accordance with section 172 would seek to continue the claim (the statutory threshold and, if passed, the exercise of discretion under section 263(3));
• the relevance of alternative remedies (notably an unfair prejudice petition under section 994);
• procedural defects (failure to join Laurels or to seek permission in relation to certain pleaded claims) and allegations of bad faith or forgery.

Court’s reasoning and decision: The judge considered each of the seven pleaded matters in turn. For most claims the pleaded facts or documentary materials showed either no breach (payments authorised by articles or contractual rents), factual errors (misread accounts), inadequate particulars (vague allegations about diverted opportunities), or lack of necessary pleading to engage sections 171, 172, 175 or 177. Those six claims therefore failed to meet the prima facie threshold and permission was refused. One claim concerning payments by Simicare into an account in the claimant’s name raised contested factual issues (authenticity of minutes evidencing dividend declarations) and did meet the prima facie threshold; nevertheless permission was refused in the exercise of the court’s discretion because the claim was modest in size, an unfair prejudice petition was an available and preferable alternative, and it would be inappropriate for the company to underwrite such litigation. Procedural irregularities and allegations of forgery were noted but did not lead to refusal on grounds of bad faith. The claimant’s personal claims remain unaffected and he was not prevented from bringing an unfair prejudice petition.

Permission to continue was refused in respect of all seven pleaded derivative and double-derivative claims. Six claims were refused because they did not disclose even a prima facie case; one claim (Simicare distributions) disclosed more than a prima facie case but permission was refused in the exercise of the court’s discretion given the availability of an alternative remedy (unfair prejudice petition) and considerations of the company’s exposure to costs. The court did not find bad faith and left personal claims and the option to pursue an unfair prejudice petition open.