Jurisdiction(s):
United Kingdom

Saatchi v Gajjar: permission for derivative claim over alleged misappropriation; CA 2006 ss 263 and 172 applied; Duomatic not proved; unfair prejudice/winding up not preferable (England and Wales)

Published on: 24 December 2019

Published by a LexisNexis Dispute Resolution expert

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Article summary

Saatchi v Gajjar & Anor [2019] EWHC 3472 (Ch) (12 December 2019)

What are the practical implications of this case?

Where a shareholder seeks permission to pursue a derivative claim alleging a director’s diversion of company assets, the court applies the criteria in section 263 of the Companies Act 2006 (CA 2006). It will scrutinise any contention that members sanctioned or ratified the alleged misuse of assets, requiring clear and unequivocal proof on that point (which was absent here). Significant emphasis is placed on whether a person complying with CA 2006, s 172 (the duty to promote the company’s success) would prosecute the claim. That entails evaluating the merits of the case, but without conducting a mini-trial. Accordingly, the court undertook a careful review of the specific instances of alleged misappropriation and the director’s explanations for them. Another highly material consideration relates to the existence of including the matters set out in section 263, and the s 172 perspective, weighed against any claimed member ratification, within the court’s structured analysis and balanced, careful judgment of...

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