Evgeny Korchevtsev v Martin Severa & Ors.

A double derivative claim is governed by common-law principles, applied by analogy with Companies Act 2006 and CPR Part 19.9A. Permission requires a prima facie case that the company is entitled to relief and that the claim falls within the exception to Foss v Harbottle. The court may assess disputed evidence without deciding credibility finally.

Permission must be refused under section 263(2)(a) only where no director acting under section 172 would continue the claim. An alternative unfair-prejudice remedy is not an absolute bar. A freezing injunction requires a good arguable case, assets, a real risk of unjustified dissipation, and justice and convenience. Proprietary freezing relief applies the less onerous serious-issue-to-be-tried test.

The claimant and first defendant were equal shareholders and directors of a holding company with subsidiary companies. The claimant alleged that the first defendant had dishonestly misappropriated or misapplied more than £1.1 million from the subsidiaries.

The claimant sought permission to continue a double derivative claim, continuation of worldwide and director-specific freezing relief, proprietary freezing relief over allegedly traceable assets, further disclosure, and a costs indemnity. The first defendant resisted the applications and sought increased fortification of the claimant’s undertaking.

1. Double derivative claim. Permission was granted. The common-law jurisdiction was applicable, with the Companies Act 2006 and CPR Part 19.9A applied by analogy. The claimant established a prima facie case that the subsidiaries were entitled to relief and that the claim fell within the exception to Foss v Harbottle. Equal shareholding and deadlock could prevent the companies from using their organs to sue.
2. The prima facie threshold was not materially different from a good arguable case on the evidence in this case. The court should not resolve disputed facts, credibility issues or difficult legal questions at an interlocutory permission hearing. It could nevertheless find a prima facie case where the defendant’s explanations might fail at trial.
3. Section 263(2)(a) required refusal only if the court was satisfied that no director acting in accordance with section 172 would continue the claim. That condition was not met. Under section 263(3), the claimant acted in good faith, the claim was substantial and comparatively strong, and its continuation was important to the companies. An unfair-prejudice petition under section 994 was not an absolute alternative remedy or bar.
4. The worldwide freezing injunction was continued. There was a good arguable case, assets within its reach, solid evidence of a real risk of unjustified dissipation, and it was just and convenient to continue the order. The director-specific restraint was also continued because there was a serious issue to be tried concerning future breaches and damages would not adequately protect the companies.
5. Proprietary freezing relief was granted over identified vehicles, accounts and traceable proceeds. The applicable test was the American Cyanamid test: a serious issue to be tried, inadequacy of damages and a favourable balance of convenience or justice.
6. Further disclosure was ordered. Transaction histories were necessary for the proprietary accounts to trace and preserve assets. For non-proprietary accounts, only current balances and verification were required. Disclosure orders were not to be used for collateral purposes or general tracing.
7. A pre-emptive indemnity for the claimant’s own costs was granted, capped at £100,000. The application to increase fortification was dismissed. Costs were reserved.

First-instance decision. The judgment records earlier interlocutory orders by Bacon J and Fancourt J, including the original and continued freezing injunctions, but no appeal from a lower-court decision.