Multiple Derivative Actions are available in English law (26th February 2013)


8th March 2013

It has long been recognised in English law that as an exception to the rule in Foss v Harbottle (1843) 2 Hare 461 a member of a company may bring an action on its behalf against wrongdoers who exert control over the company and who are preventing it from enforcing its rights, i.e. the single derivative action. A multiple derivative action potentially arises where the proposed claimant is not a member of the wronged company but is a member of the ultimate holding company. Since the coming into force of the Companies Act 2006 there has been considerable debate as to whether that legislation removed the common law double derivative action or even, in some quarters, whether such a common law action ever existed.

 

Until the recent decision in Universal Project Management Services Limited v Fort Gilkicker Limited & ors [2013] EWHC 348 (Ch)  there was no English authority determining the  issue one way or the other. Following the decision of Mr Justice Briggs in UPMS it is now settled beyond doubt, at least at first instance, that multiple derivative actions had always been available at common law prior to the enactment of the 2006 Act and that they continue to be so available today.

 

The learned judge held that section 260 of the 2006 Act provides a codified statutory regime applicable only to single derivative claims, and that multiple derivative claims sit outside it. The wording of the statute does not have the clarity required to remove the common law multiple derivative action which therefore subsists.


James Bailey appeared on behalf of UPMS.


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