Marcos De Menezes v Eduardo Machado Dos Santos Alves & Ors

A member may continue a statutory derivative claim where the company faces a prima facie case of breach and a sufficient threat of future harm; actual financial loss is not required. The permission test remains a prima facie case at both stages, without a mini-trial or a separate heightened standard. Good faith is not negatived merely because proceedings may encourage a buy-out or resignation if the claim genuinely protects the company. A derivative claim remains appropriate where the company is the proper claimant and shareholder loss is reflective. A knowing-receipt claim requires receipt of trust property or traceable proceeds; general trading receipts are insufficient. Interim protection may be achieved through targeted undertakings.

The claimant and first defendant were equal shareholders and directors of Oficina Inglesa Limited, a luxury furniture business. After their relationship broke down, the first defendant established Cobogo Gallery Limited, which the claimant alleged competed with Oficina Inglesa while the first defendant remained its director.

The claimant sought permission under the statutory derivative-claim regime in Part 11 of the Companies Act 2006, alleging breaches of duties under sections 172, 173, 175 and 176. He also alleged that Cobogo was liable in knowing receipt and sought interim injunctive relief. Permission had initially been granted without notice, and the court heard the inter partes permission application together with the injunction application.

The issues included whether there was a prima facie case, whether actual loss was necessary, whether Cobogo had been authorised, whether the claim was brought in good faith, whether an unfair-prejudice petition was a more appropriate remedy, whether the knowing-receipt claim was properly pleaded, and whether interim relief and a costs indemnity should be granted.

Permission to continue. Permission was granted in part. The claimant established a prima facie case under sections 175 and 172 of the Companies Act 2006 against the first defendant. Permission was refused for the sections 173 and 176 claims and for the pleaded knowing-receipt claim against Cobogo, although Cobogo remained a necessary or proper party and an amendment application could be made.

1. The statutory regime covers proposed acts and omissions. The court therefore rejected the argument that a derivative claim required identifiable financial loss already suffered by the company. A sufficient threat of future harm could support the claim. The discussion in McGaughey v Universities Superannuation Scheme Ltd [2023] EWCA Civ 873 concerned the distinction between loss suffered by the company and loss suffered by members in their own right.
2. The applicable threshold remained a prima facie case. The court could consider the defendants’ evidence and form a provisional view of the claim’s strength, but could not resolve disputed credibility issues or conduct a mini-trial. The suggestion in Iesini v Westrip Holdings Ltd [2009] EWHC 2526 (Ch) that something more than a prima facie case might be required at the second stage was not adopted.
3. There was a prima facie conflict under section 175. The businesses competed for customers and furnishing opportunities in the same market and price range, notwithstanding their different styles. The first defendant’s access to confidential information, customers, suppliers and commercial opportunities created a sufficient risk of substantial harm. No clear agreement or informal company authorisation had been established. Under the Re Duomatic principle, authorisation required a clear understanding that the conduct was being authorised and of its scope.
4. The claim was not shown to be brought in bad faith merely because a buy-out or resignation might result. A section 994 petition was possible, but did not displace the derivative claim where the company was the proper claimant and the shareholder’s loss was reflective. The section 173 and 176 claims lacked a prima facie factual basis.
5. Following Byers v Saudi National Bank [2023] UKSC 51, [2024] AC 1191, knowing receipt required trust property or traceable proceeds to have been transferred in breach of trust and received by Cobogo. Cobogo’s general trading assets did not satisfy that requirement. No costs indemnity was ordered at this stage; the question was reserved to trial.
6. An interim injunction was not granted against Cobogo separately from the claim against the first defendant. The balance of convenience favoured refusing relief against the first defendant if targeted undertakings were given concerning competing classic or bespoke furniture and misuse of confidential information. Without those undertakings, a non-proprietary injunction would be granted. The injunction would cease if the first defendant resigned as an OIL director. The proprietary injunction was refused.

The judge also criticised the inadequate estimate for the combined hearing and warned that manifestly insufficient hearing time could lead to adjournments and costs consequences.