Company Law

Can permission to continue a derivative action be obtained retrospectively? Wilton UK Limited v John Shuttleworth & Ors [2017] EWHC 2195 (Ch)

Derivative claims

Under the common law, the proper claimant for a wrong against a company is the company itself. The courts will not interfere with the internal management of a company acting within its power: Foss v Harbottle [1843] 2 Hare 461, and the power to decide whether or not to litigate lies with the directors.

The advent of the Companies Act 2006 (“the Act”) widened the circumstances in which a member could bring a claim in respect of a cause of action vested in the company. Under Part 11, such a claim may be brought against a director or third party where the cause of action arose from an actual or proposed act or omission involving negligence, default, breach of duty and/or breach of trust (s.260(3)). This includes the directors’ duties prescribed under Part 10.

The requirement for permission

There is no requirement to obtain permission to issue a derivative claim but there is such a requirement under s.261(1) to continue it (also CPR 19.9A). The court’s permission must be obtained before any other step is taken in the proceedings.

Wilton UK Limited v John Shuttleworth & Ors

The High Court was faced with a claim where permission to continue the proceedings had not been obtained prior to service, the 4-month expiry period for service of the claim form had long expired and a new claim was statute-barred by the Limitation Act 1980. Was the claim beyond hope?

The Court held that:

  • Any steps taken in the absence of permission were not valid until set aside by the court; that gave insufficient weight to the statutory regime requiring permission and insufficient protection to the company or other defendants concerned;
  • The court did however have jurisdiction to retrospectively validate steps taken in the absence of permission; that was consistent with the principles underlying derivative actions, and the court’s “filtering” role whereby it retained control over such actions.

Whilst the decision does not offer guidance on when the jurisdiction will be exercised (the court is still due to decide whether to grant retrospective permission), the fact it has been held to exist at all offers defaulting parties a glimmer of hope, opening the door to some interesting further argument on the relevant factors pertaining to the exercise of that jurisdiction.


The information and any commentary on the law contained on this web site is provided free of charge for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by any member of Chambers. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site. No responsibility is accepted for the content or accuracy of linked sites.

Our Expertise