Stainer v Lee & Ors

Stainer v Lee & Ors

There is a well arguable case that the directors breached their duties by making interest-free and unauthorised loans to Eldington. The subsequent payments and new loan agreement do not constitute effective ratification or remedy, as shareholder approval was not sufficiently informed. The applicant acts in good faith and with support of other minority shareholders. It cannot be said that no director acting in accordance with section 172 would continue the claim. Permission to continue the derivative claim is granted, limited to the conclusion of disclosure, with an indemnity for costs subject to a cap.

Parties
Applicant: Robin Stainer; Respondent: Gerard Alan Lee; Respondent: Enrique Elliott; Respondent: Eldington Holdings Limited
Jurisdiction
England and Wales
Judgment Date
29 June 2010
Procedural Posture
Derivative Claim Under Companies Act 2006 / Application for Permission to Continue Derivative Claim (substantive Hearing Under Section 261/263)
Outcome
Permission to continue derivative claim granted, limited to conclusion of disclosure; indemnity for applicant's costs capped at £40,000 (exclusive of VAT); liberty to apply for extension of indemnity.
Legal Topics
Derivative Actions, Directors' Duties, Minority Shareholder Protection, Ratification of Director Conduct, Constructive Trusts
Company Law Derivative Actions Directors' Duties Minority Shareholder Protection Ratification of Director Conduct Constructive Trusts

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Parties

Robin Stainer

Applicant

Gerard Alan Lee

Respondent

Enrique Elliott

Respondent

Eldington Holdings Limited

Respondent

Procedural Posture

Derivative Claim Under Companies Act 2006 / Application for Permission to Continue Derivative Claim (substantive Hearing Under Section 261/263)

Legal Issues

  1. 1 Whether directors breached fiduciary duties by lending company funds to Eldington Holdings Limited on interest-free terms and by making additional unauthorised loans
  2. 2 Whether the company suffered loss as a result of the interest-free lending and additional loans
  3. 3 Whether subsequent payments and a new loan agreement ratified or remedied the breaches

Ratio Decidendi

There is a well arguable case that the directors breached their duties by making interest-free and unauthorised loans to Eldington. The subsequent payments and new loan agreement do not constitute effective ratification or remedy, as shareholder approval was not sufficiently informed. The applicant acts in good faith and with support of other minority shareholders. It cannot be said that no director acting in accordance with section 172 would continue the claim. Permission to continue the derivative claim is granted, limited to the conclusion of disclosure, with an indemnity for costs subject to a cap.

Court Disposition

Permission to continue derivative claim granted, limited to conclusion of disclosure; indemnity for applicant's costs capped at £40,000 (exclusive of VAT); liberty to apply for extension of indemnity.

Orders

  • Permission to continue derivative claim to conclusion of disclosure
  • Applicant to apply for further permission after disclosure if so advised