Corporate law firm George Green successfully acted for the defendants in the case of Gill v Thind [2020] EWHC 2973 (Ch). The judgment is a landmark win for the defendants in this complex field of derivative claims.

Shareholders may use derivative actions to bring claims in a company’s name, often against its directors. A shareholder must obtain the court’s permission to bring the claim.

There are two types of derivative claim. The first is an “ordinary” derivative claim, brought by a shareholder in the company’s name against a director for breach of duty. There is a statutory procedure under the Companies Act 2006 for such derivative claims. The second is brought by a shareholder of the company’s parent company, otherwise known as a “double derivative claim”. These are governed by common law rules.

In the case, the claimant, Mr Gill, applied to continue seven derivative claims, comprising ordinary and double derivative claims.

The High Court considered each of the derivative claims in turn. The judge refused permission for six of the derivative claims due to the claimant’s failure to demonstrate at least a prima facie case in respect of each allegation. The judge considered that the alleged breaches of duty in each claim failed due to either a lack of evidence or because they are “hopelessly vague”. The court will not permit a shareholder to bring a derivative claim if a reasonable director would not prosecute it.

In respect of the seventh claim, however, there was at least a prima facie case. Nevertheless, the judge exercised his discretion to prevent the Claimant from continuing with his claim. The judge observed that the Claimant might have an alternative remedy: an unfair prejudice petition.

The court dismissed all of Mr Gill’s applications and ordered him to pay the Thinds’ costs. Mr Gill did not seek to appeal.

Morgan Rees, the corporate litigation partner at George Green who acted for the Thinds, said: “we are pleased to have achieved this resounding success for the Thinds, whose approach was vindicated at court. This excellent result in a complex and rare area of law further emphasises George Green’s reputation for litigation and corporate work”.

George Green briefed John Randall QC and Robert Mundy of St Philips Chambers.

The full judgment can be read here.

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