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United Kingdom

England and Wales: LLP derivative claims governed by common law, not CA 2006 s263; fraud and personal benefit required; new point allowed on appeal (Homes for England v Nick Sellman)

Published on: 24 April 2020

Published by a LexisNexis Dispute Resolution expert
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Homes for England v Nick Sellman (Holdings) Ltd and another [2020] EWHC 936 (Ch) What are the practical implications of this case?

This judgment underscores the contrast between the common law and the statutory regime governing permission to bring derivative claims. It emphasises that common law takes a tighter line than the CA 2006, s 263 test: a prospective claimant must allege fraud or a dishonest breach of duty to proceed at common law; mere negligence by the putative defendant will not do. In addition, for equitable fraud there must be proof that the alleged wrongdoer secured some personal advantage. That advantage need not be financial—pursuit of the wrongdoer’s own non-monetary interests at the claimant’s expense has been accepted as enough (see Estmanco (Kilner House) Ltd v Greater London Council [1982] 1 All ER 437 and Abouraya v Sigmund [2014] EWHC 277 (Ch) at [23]). By contrast, claims framed around negligence or failures to act are, in general, unlikely to clear the common law threshold for a derivative action. This point is liable to have significant consequences for dissatisfied...

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