Kleanthous v Paphitis & Ors [2011] EWHC 2287 (Ch) (07 September 2011)

Kleanthous v Paphitis & Ors [2011] EWHC 2287 (Ch) (07 September 2011)

Permission to continue the derivative claim is refused against all Defendants except Mr Paphitis, Mr Cooke, and Mr Towner. The claim against Mr Childs is particularly weak and must be refused under s.263(2)(a) Companies Act 2006. Against the remaining Defendants, although there are arguable claims, the prospects of success are significantly less than even, and a hypothetical director acting in accordance with s.172 would attach little importance to continuing the claim given the risks, costs, and disruption to the company. The application for indemnity as to costs is also refused.

Citation
[2011] EWHC 2287 (Ch)
Parties
Claimant: Anthony Kleanthous; First Defendant: Theodoros Paphitis; Second Defendant: Malcolm Stanley Cooke; Third Defendant: Richard Edward Towner; Fourth Defendant: Ian Michael Childs; Fifth Defendant: Ryman Group Limited (formerly Chancerealm Limited); Sixth Defendant: Ryman Limited
Jurisdiction
England and Wales
Judgment Date
07 September 2011
Procedural Posture
Derivative Claim (companies Act 2006, S.261) / Application for Permission to Continue Derivative Claim
Outcome
Permission to continue derivative claim refused against all Defendants; application for indemnity as to costs refused.
Legal Topics
Derivative Actions, Directors' Fiduciary Duties, Limitation of Actions, Ratification and Authorisation of Director Conduct, Conflict of Interest, Account of Profits
Company Law Equity and Trusts Derivative Actions Directors' Fiduciary Duties Limitation of Actions Ratification and Authorisation of Director Conduct Conflict of Interest Account of Profits

Case Brief

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Parties

Anthony Kleanthous

Claimant

Theodoros Paphitis

First Defendant

Malcolm Stanley Cooke

Second Defendant

Richard Edward Towner

Third Defendant

Ian Michael Childs

Fourth Defendant

Ryman Group Limited (formerly Chancerealm Limited)

Fifth Defendant

Ryman Limited

Sixth Defendant

Procedural Posture

Derivative Claim (companies Act 2006, S.261) / Application for Permission to Continue Derivative Claim

Legal Issues

  1. 1 Whether permission should be granted to continue a derivative claim under s.261 Companies Act 2006
  2. 2 Whether directors breached fiduciary duties by diverting a corporate opportunity and misusing company assets
  3. 3 Whether claims are statute-barred under Limitation Act 1980

Ratio Decidendi

Permission to continue the derivative claim is refused against all Defendants except Mr Paphitis, Mr Cooke, and Mr Towner. The claim against Mr Childs is particularly weak and must be refused under s.263(2)(a) Companies Act 2006. Against the remaining Defendants, although there are arguable claims, the prospects of success are significantly less than even, and a hypothetical director acting in accordance with s.172 would attach little importance to continuing the claim given the risks, costs, and disruption to the company. The application for indemnity as to costs is also refused.

Court Disposition

Permission to continue derivative claim refused against all Defendants; application for indemnity as to costs refused.

Orders

  • Permission to continue derivative claim refused as against Mr Childs under s.263(2)(a) Companies Act 2006.
  • Permission to continue derivative claim refused as against Mr Paphitis, Mr Cooke, and Mr Towner under s.263(3)(b) Companies Act 2006.