Summary

Where a master heard an application in 2017 for permission to continue a claim as a derivative action, CPR PD 19C had not required him to refer the application to a judge. The application to continue the claim as a derivative action had originally been made in 2006, before the Practice Direction's introduction; the Practice Direction's transitional provisions provided that the old rules, which had not required transfer to a judge, would continue to apply to pre-existing derivative claims.

Facts

The appellant appealed against a master's decision to give the respondents permission to continue a claim against him as a derivative action for the benefit of a company.

The company was incorporated in St Vincent and the Grenadines. Its shares were owned 30% by a trust whose beneficiaries were the first respondent's family and 70% by a trust for the benefit of the appellant's family. A winding-up order was made against the company in the UK in 2000. The first respondent brought the claim in 2001 making allegations regarding the appellant's management of the company. He went bankrupt in 2005; the trustee of his trust took over the claim, intending to discontinue it. The first respondent's children, including the second respondent, applied in 2006 to be joined as parties and to continue the claim as a derivative action. In 2007, a master joined the children to the proceedings but deferred the derivative claim issue and stayed the proceedings. Related proceedings in St Vincent were compromised in 2015 and the respondents successfully applied to another master to lift the stay and continue the claim as a derivative action.

Held

Requirement under CPR PD 19C for master to refer application to a judge - No complaint had been made to the master that he could not proceed. The 2007 master's judgment had been clear that the application could be heard by a master. CPR PD 19C had entered into force in October 2007; its transitional provisions provided that the rules of court in force immediately before that continued to apply to derivative claims begun by then. The 2006 application had been for permission to continue the claim as a derivative action. The instant application was not a new derivative claim, but a request to pursue the earlier claim. The old rules applied, so the master was not excluded from hearing the application. Nor was the matter too complex for a master to have dealt with (see paras 58-61 of judgment). Had it been necessary, the court would have upheld the master's judgment under the doctrine of de facto office, Baldock v Webster [2004] EWCA Civ 1869 applied. The master had had title to sit where he sat and had not been asked to refer the case to a judge (para.62).

Availability of alternative remedy of claim by Official Receiver - The point had not been raised before the master and was not a pure point of law. The appellant could not raise it on appeal (para.66). In any event, the court would have rejected the point in substance. The company had been represented, through the appellant, before the master. That fact was inconsistent with the appellant's argument that the company was in the Official Receiver's hands (para.77).

Principles on derivative actions relating to foreign companies - The appellant argued that the master had failed to have regard to Novatrust Ltd v Kea Investments Ltd [2014] EWHC 4061 (Ch), which he said stood for the proposition that the person seeking to bring a derivative claim had to produce evidence that the law of the company's country of incorporation permitted them to bring a derivative action and that the conditions for bringing an action had been complied with. The case had not been brought to the master's attention; he could not be criticised for failing to consider it. The master had not, as the appellant suggested, sought to distinguish Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 W.L.R. 1269, which held that the law governing a right to bring a derivative claim in England was the law of the country of incorporation. He had applied that test, but the parties had adduced no evidence of St Vincent law; in its absence he was required to assume it to be the same as English law, Konamaneni considered, Law Debenture Trust Corp Plc v Elektrim SA [2010] EWCA Civ 1142 and US Mortgage Finance II LLC v Dew [2017] EWCA Civ 299 followed. In any event, there was nothing in Novatrust to support the proposition that there was an onus on the shareholder to prove the foreign law and that the foreign law's steps had been complied with, Novatrust considered (paras 88-93).

Principles on derivative actions relating to trusts - The respondents were not immediate members of the company. The claim was therefore a double derivative claim on behalf of the trust and the company. The master had applied the correct test: he had been mindful of the need to find a prima facie case that the company was entitled to relief, that the action fell within the exception to the rule in Foss v Harbottle 67 E.R. 189 that a shareholder should not claim on a company's behalf, and that there were special circumstances justifying the grant of permission to the trust's beneficiaries, in that the trustee was not willing to bring its own derivative claim, Roberts v Gill & Co [2010] UKSC 22 and Abouraya v Sigmund [2014] EWHC 277 (Ch) followed, Foss referred to (para.107).

Exercise of court's discretion - The matters the appellant considered the master should have taken into account all related to issues that had been before the 2007 master. The master had referred to the 2007 judgment; he must have taken into account the issues discussed in 2007 (para.113).

Appeal dismissed