Introduction
1. Under CPR rule 19.19 the Court may order the company for the benefit of which a derivative claim is brought under section 261 of the Companies Act 2006 (the “Act”) to indemnify the claimant against its liability for costs incurred, either in the permission application, or in the derivative claim, or both.
2. The origin of the Court’s power in rule 19.19 is the Court of Appeal’s decision in the pre-CPR case of Wallersteiner v Moir (No. 2) [1975] QB 373 and there is a considerable volume of (both pre- and post-CPR) authority on the circumstances and terms in which such an indemnity might be granted. The applicable principles were considered by the Court in two recent decisions: Re Arnbrow Ltd; Leslie v. Bull [2023] EWHC 1771 (Ch) (13 July 2023) and in Re Milestar Ltd; Gandesha v. Gandesha [2023] EWHC 2153 (Ch) (8 September 2023).
CPR rule 19.19
3. In Wallersteiner the Court ordered that the minority shareholder bringing the action on behalf of the company was to be indemnified by the company for his costs because the action was being brought on the company’s behalf – even if it were to fail – because (by analogy with the position of a trustee litigating on behalf of the trust estate) the minority shareholder had reasonable grounds for bringing the action and had acted reasonably in bringing it, the Court having sanctioned the derivative action (see at p. 391-2 (Lord Denning MR), p. 403-405 (Buckley L.J.) and p. 407 (Scarman L.J.)).
Please click on this link to read the full article by Simon McLoughlin.
Our clerks’ room is open between 8.30am – 6.30pm
Outside of these hours and in cases of an urgency, please contact Paul Bunting on +44 (0) 7971 843023 or Darren Madle on +44 (0) 7769 714399.
