Gerard Chimbganda v Judith Kundodyiwa & Anor

The claimant sought second-stage permission to continue a derivative claim under Part 11 of the Companies Act 2006 while also pursuing a section 994 petition against the same director. The court applied the statutory test in section 263 read with the duty in section 172, considering whether a hypothetical board acting in the company's best interests would continue the claim and whether the claimant acted in good faith. The judge found that a prima facie case had been established on the material before the court, that a mini-trial would be inappropriate, and that the withdrawal of the claimant's request for an indemnity removed a significant obstacle to permission. The court granted permission to continue the derivative action but required that the claimant personally bear costs as a condition of permission and directed the parties to cooperate on case management to minimise duplication with the section 994 petition.

Background and parties:

• The claimant and first defendant are equal shareholders and joint directors of Goodpeople Healthcare Limited. The company provides domiciliary care services and uses a Certificate of Sponsorship (CoS) licence to sponsor migrant care workers.
• The claimant issued a section 994 petition in December 2024 alleging unfairly prejudicial conduct and, separately, issued a derivative claim on behalf of the company alleging breaches of the first defendant's director's duties including failure to account for monies, unexplained expenditure, misuse of the CoS licence and diversion of opportunities.
• There are also related proceedings in the Republic of Ireland between the parties concerning a different company (Minana International Limited), which the first defendant contends render the UK proceedings retaliatory.

Nature of the application: This was a contested second-stage permission application under section 263 of the Companies Act 2006 to continue the derivative claim. The claimant sought to continue the derivative claim in parallel with his section 994 petition; he had earlier sought an indemnity for costs from the company but withdrew that claim shortly before the hearing.

Issues framed:

• Whether a director acting in accordance with section 172 would seek to continue the derivative claim (section 263(2)(a)).
• Whether the claimant was acting in good faith and whether the merits met the threshold required at the permission stage (section 263(3)(a) and (b)).
• Whether the derivative claim should be refused because there is substantial overlap with the section 994 petition or because it was brought for an ulterior purpose.
• How case management should minimise duplication between the two proceedings.

Court's reasoning and decision:

• The court reviewed the statutory scheme (sections 172, 263, 994 and 996) and authorities on the permission threshold, emphasizing that something more than a prima facie case may be required at the second stage but that a mini-trial is inappropriate.
• On the evidence filed—three witness statements from each party and documentary material—the judge found there was at least a prima facie case that the company had suffered loss through the alleged breaches and that the merits could not be resolved without a full trial. The existence of related Irish proceedings was relevant background but did not permit refusal of permission at this stage.
• The withdrawal of the claim to a company-funded indemnity materially reduced the concern that the company’s funds would be depleted; the claimant confirmed he would personally bear costs and any adverse cost orders. The court held that a hypothetical independent board could reasonably decide to continue the derivative claim to protect the company’s interests (employees, creditors, CoS arrangements and potential recovery of assets).
• Accordingly, permission to continue the derivative action was granted subject to case management directions and the requirement that the claimant meet costs personally and cooperate on directions to avoid duplication with the section 994 petition.

First instance: Permission to continue the derivative action is granted. The court concluded that the claimant had raised at least a prima facie case and was acting in good faith; a hypothetical board could reasonably decide to continue the claim in the company’s interests. Permission was conditioned on the claimant personally bearing costs and on cooperative case management to minimise duplication with the section 994 petition.