Margaret Anne Ryan & Anor v HSBC UK Bank Plc & Anor

Permission for a derivative claim requires more than the absence of downside. The court must assess whether continuing the claim could promote the company’s success and, where appropriate, how important continuation would be to that success. The assessment includes a provisional evaluation of the claim’s merits, commercial prospects, costs and risks.

A lender may protect its own interests and impose conditions on continued support without thereby becoming a shadow director. A speculative allegation that a lender controlled and deliberately ran down a company will not justify permission where the available documents provide a coherent alternative account and the claim lacks essential factual foundations.

The claimants, members of MCPLC, sought permission under the Companies Act 2006 to bring derivative proceedings against HSBC. They alleged that HSBC became a shadow director, pursued its own interests, and caused MCPLC’s business to fail. The proposed claim was accompanied by personal claims concerning alleged misrepresentations, negligence, conspiracy and an unfair relationship arising from a personal loan.

MCPLC had nominal assets and owed HSBC more than £20 million. The central issues were whether the proposed claim disclosed sufficient merits and whether a person acting in accordance with the duty to promote the success of the company would continue it.

1. Application dismissed. The court held that the claimants’ argument that MCPLC had nothing to lose was insufficient. Sections 263(2)(a) and 263(3)(b) required positive reasons connected with the company’s success, not merely the existence of possible recovery.
2. The statutory assessment required the court to place itself, provisionally, in the position of a rational director. Relevant considerations included the strength and size of the claim, costs, funding, recoverability, adverse costs exposure and disruption. The court was ill-equipped to make the underlying commercial decision except in a clear case. This was the approach explained in Iesini v Westrip Holdings Ltd [2011] 1 BCLC 498.
3. The claim was weak and speculative. The allegations that HSBC had formed a purpose of taking control of MCPLC and running it down for its own benefit lacked essential factual building blocks. Contemporary documents instead supported an alternative account in which HSBC funded and monitored a struggling customer while protecting its own position.
4. The fact-sensitive boundary between a lender and a shadow director did not make ordinary protection of a creditor’s interests unlawful. A lender could monitor the use of its money and impose conditions on continued support without becoming a shadow director, following the discussion in Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638. The proposed case did not identify sufficiently particular instructions by HSBC which the board followed and which caused loss.
5. The reliance on MacPherson v European Strategic Bureau [2000] 2 BCLC 683 did not assist. That case concerned directors or members preferring themselves over creditors. HSBC was itself the principal creditor and was entitled, as creditor, to consider its own interests.
6. Even if the claim survived the mandatory refusal ground, the same merits deficiencies and the absence of a realistic prospect of a beneficial outcome would justify refusal under the wider statutory factors. The claim was not an obvious vehicle for early alternative dispute resolution, and the application was dismissed.