Multiple derivative action

Re Fort Gilkicker Ltd; Universal Project Management Services Ltd v Fort Gilkicker Ltd and others [2013] EWHC 348 (Ch), [2013] All ER (D) 313 (Feb); NLJ 8 March

Prior to the coming into force of the Companies Act 2006 (CA 2006), derivative actions, by which a member of a company was exceptionally permitted to litigate a cause of action vested in the company where the company was unable to do so, were governed by common law. The ordinary derivative action (by a member of the allegedly wronged company) was wholly replaced by the statutory derivative claim provided in CA 2006, which conferred locus standi only upon a member of the relevant company. The proceedings concerned an application by a company for permission to continue a derivative action concerning a claim for breach of fiduciary duty against the defendants in respect of a joint venture. The application raised related legal questions because the action was a “double derivative action”. The applicant was not a shareholder in the company in which the cause of action was alleged to be vested (the company). Rather, it was a member of a limited liability partnership (LLP), which owned all the shares in that company. The issues for consideration were: (i) whether a multiple derivative action was known to English common law before the coming into force of the Act and, if so, whether the multiple derivative action (of which the double derivative action was a sub-species) had survived the coming into force of the Act; and (ii) whether permission to continue the derivative action ought to be given.