Eurohome UK Mortgages 2007-1 Plc & Ors v Intertrust Management Limited & Ors

A person or entity cannot become a company director merely by declaring itself to be a de facto director. Appointment must occur through the company’s constitutional and legally recognised procedures. Proceedings commenced or authorised by persons lacking status and authority to act for the company may be struck out as disclosing no reasonable grounds and as an abuse of process. Claims founded on the legally impossible assertion of self-appointed directorship are liable to collapse in their entirety. The court may additionally certify such claims as totally without merit where they are legally hopeless and were commenced without authority.

Two related claims concerned special purpose companies used in residential mortgage securitisations. The claimants sought declarations that the Intertrust parties lacked status within the companies and that actions taken by them were invalid.

In each claim, the asserted basis for bringing proceedings was that Marshall Islands entities or individuals had appointed themselves as de facto directors and could therefore act for the claimant companies, including by issuing capital calls and commencing proceedings. The defendants applied under CPR rule 3.4(2) to strike out the claims for lack of a realistic cause of action and abuse of process. The court also considered whether the claims should be certified as totally without merit.

1. Eurohome claim. The claim depended on the assertion that four individuals or entities were de facto directors despite not having been appointed under the companies’ articles. That assertion was legally untenable. The court adopted the reasoning in BMF Assets (No. 1) Limited v Sanne Group Plc and others, including that a stranger cannot make itself a company director by unilateral declaration. The claim therefore disclosed no reasonable grounds and was struck out under CPR rule 3.4(2)(a), referred to in the ruling as rule 3.4(a).
2. The Eurohome claim was independently abusive. The claim form had been signed by Mr Kumar, who had no status as a director or attorney and therefore no authority to issue proceedings in the companies’ names. The court considered it unnecessary to determine other alleged failures, including non-compliance with an earlier order.
3. Stratton claim. The same reasoning applied. The articles provided procedures for appointing directors, and none was alleged to have been followed. The claimants’ case rested solely on self-appointed de facto directorship. The proceedings were struck out both for lacking reasonable grounds and as an abuse of process under CPR rule 3.4(2)(b), because the persons who signed or authorised the pleadings lacked authority.
4. Each claim was certified as totally without merit. The court regarded both claims as utterly hopeless in law and as having been commenced by persons manifestly lacking authority.