Neutral citation number: [2013] EWHC 2138 (Ch)
IN THE HIGH COURT OF JUSTICE	Claim No. 3MA30080
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ

Thursday, 27th June 2013

Before: 

HIS HONOUR JUDGE HODGE QC
sitting as a Judge of the High Court

Re: Singh Brothers Contractors (North West) Limited
___________________
Between:

SUKHPAUL SINGH
Claimant
-v-

SATPAUL SINGH
	First Defendant
SINGH BROTHERS CONTRACTORS 
(NORTH WEST) LIMITED
Second Defendant
___________________
Transcribed from the Official Recording by
AVR Transcription Ltd
Turton Suite, Paragon Business Park, Chorley New Road, Horwich, Bolton, BL6 6HG
Telephone: 01204 693645 - Fax 01204 693669
___________________

Counsel for the Claimant: 	MR. WILSON HORNE

Counsel for the First Defendant:	 MISS ELISABETH TYTHCOTT

___________________
JUDGMENT
1.	JUDGE HODGE QC:  This is my extemporary judgment in the matter of Singh Brothers Contractors (North West) Limited – claim number 3MA30080.  On 12th February 2013, the claimant, Mr Sukhpaul Singh, issued a derivative claim form in the Manchester District Registry of the Chancery Division against his elder brother, Mr Satpaul Singh, and also the company of which they are both shareholders and directors, Singh Brothers Contractors (North West) Limited.  The claim was said to be a derivative claim on behalf of the company under section 261 of the Companies Act 2006 against the first defendant, a director of the second defendant, for breach of director’s duty, breach of fiduciary duty and breach of trust.  The claimant sought orders for damages, an account, further or other relief and costs.  The claimant also sought an order that he be indemnified out of the company’s assets in respect of the legal costs of the derivative claim.  It was said that the claimant expected to recover more than £800,000.
2.	Accompanying the claim form were detailed particulars of claim settled by Mr Wilson Horne (of counsel) and verified by a statement of truth dated 22nd January 2013 made by the claimant.  Details of the shareholding in the company and the nature of its business were given in paragraphs 2 to 4.  The company was said to have carried on business as specialist demolition contractors.  As at 1st September 1995, the claimant and his brother, the first defendant, were each said to have held 24 of the 100 shares in the company, with the balance being held by their mother, Mrs Harsharan Singh, holding 52 shares.  By 31st August 1998, however, the parties’ shareholdings had changed such that the claimant and defendant each held 33 of the 100 shares in the company, with their mother holding the balance of 34 shares.
3.	The mother died on 12th January 2010.  She was then 76 years of age.  She left two wills – the earlier dated 17th May 2007; the later, 5th July 2007.  The only material difference between the earlier and the later wills is that under the former, the mother’s house fell to be divided equally between the claimant, the defendant and their two sisters, whereas under the later will the house was left to the first defendant alone.  Neither will has been admitted to probate.  The claimant and his two sisters have alleged in correspondence that the later will was procured by the undue influence of the first defendant.  That will dispute is not before the court, but it is acknowledged by the claimant himself that it is the genesis of the present derivative claim.  In paragraph 16 of his second witness statement, the claimant says that the first defendant is right to make the point that the reading of their late mother’s will did change everything.  It was at that juncture that the claimant put in hand investigations which have ultimately resulted in the instant litigation.
4.	Paragraphs 5 to 10 of the particulars of claim deal with the direction of the company.  The company’s directors have always been the claimant, the first defendant and their mother; and she was the company secretary.  It is said that the claimant has always had an onsite managerial and operational role within the company whilst the first defendant has at all material times had a management role and, as such, it was he who managed the company’s accounts and other company formalities.  It is said that it is the first defendant who has had exclusive responsibility for the preparation of accounts and company documentation, and that the claimant, as indeed his mother, were used to reposing trust and confidence in the first defendant as regards their financial affairs in the company, including their interests as shareholders and directors.
5.	Paragraphs 11 through to 15 of the particulars of claim plead the duties owed by the first defendant to the company as one of its directors.  Paragraphs 16 through to 26 address one of the two substantive heads of claim.  That is the payment of what are said to have been unlawful and excessive dividends to the first defendant.  Those paragraphs make it clear that the claim for payment of excessive dividends to the first defendant extends over the financial years of the company, eight in total, from the year ending 31st August 2002 to the year ending 31st August 2009.  In that regard, it seems to me that paragraph 33(1) is in error in referring only to the accounting years ending 31st August 2003 to 31st August 2009, although the total claimed of £424,460 seems to me to be correct.  When one looks at paragraph 18 of the particulars of claim and paragraph 24 of the claimant’s first witness statement, it is clear that the complaint that is being made is not that the dividends themselves during those eight years were unlawful as such, but that dividend waivers, in reliance upon which they were paid, were ineffective.
6.	At paragraph 24 of his first witness statement, the claimant says this: 
“The conclusions of the accountants are that the company had profits available for the amount of dividends which were paid but only after I and our late mother had waived totally or partially our entitlement to dividends.  If we had not waived the entitlement to dividends, the profits would not have been sufficient and the dividends would have been illegal.  Further, the accountants state that, from the company records, it is clear that there were adequate available funds in the company’s bank to make payments of the dividends actually paid, but only after I and our late mother had waived our entitlements, and had these dividend waivers not been obtained, the distributions could not have been made out of available profits and the company could not have afforded to make the payments without substantial borrowings in excess of £1 million.”
	The complaint, therefore, goes to the efficacy of the dividend waivers which were signed by the claimant and his late mother.
7.	As to that, it is asserted in paragraph 17 of the particulars of claim that the dividend waivers were ineffective.  In the case of the mother, it is said that that results from the application of the doctrine of presumed undue influence; in the case of the claimant himself, it is said that his signatures on dividend waivers arose by reason of an express misrepresentation on the part of the defendant that these were simply company documents that required his signature and that are said to have induced the claimant to sign the same.  The claimant says that such representations were false in that the dividend waivers were in fact documents that potentially affected the claimant’s interests as a shareholder of the company, and that they were made by the defendant fraudulently, or by him not caring whether or not they were true.  
8.	Prior to the issue of the instant litigation, the company’s accountants had written to the solicitors acting for the claimant, Linder Myers, on 22nd May 2012 (at page 302 of the hearing bundle).  In that letter they said as follows:
“We do not understand your comments regarding the treatment of dividends in the accounts as being improper and illegal.  The company had sufficient profits during the years in question to pay dividends and, as such, these are legal.  On the other matter, we are somewhat perplexed as to how Sukhpaul Singh had no record of the dividends that were paid to his brother, as we have provided to him copies of dividend minutes and dividend waivers which have been declared over the years in question, and of which we enclose herewith a sample of the dividend waivers that were written and signed by Mr Sukhpaul Singh himself.  In addition, he authorised and approved the annual accounts each year, which clearly state the amount of dividend paid.”
	Issue is not taken with that.  Rather, what is said in Linder Myers’s letter to the first defendant’s solicitors, Slater Heelis, of 28th June 2012 (at page B206 of the hearing bundle) is this:
“So far as any issue as to signing of accounts is concerned, that obviously will be a matter of fact to be determined.  In that context, our client’s evidence will be clear that he trusted his brother to manage the financial affairs of the company in an equal way, to their joint and equal benefit.  His evidence will be that he was presented with documents and usually required to sign them immediately under the pretext of being taken to the accountants immediately.  He was given no opportunity to peruse or understand the documents that he was signing.  He trusted his brother to have acted truthfully and honestly throughout, and plainly that did not occur.  This would address not only your comments to the effect that our client signed the documentation, but also any issues which you seek to raise in respect of limitation.”
9.	The second head of the proposed derivative claim is allegedly excessive remuneration.  At paragraph 29 of the particulars of claim, it is said that, for the accounting years ending 31st August 1997 and 31st August 1998, the total amounts paid to the claimant and the defendant were £793,886 and, assuming that the remuneration had been paid equally between them, that the claimant and the defendant should have received £396,943 each.  However, the defendant in fact received £621,732 and the claimant only received £172,154.  Therefore the defendant has received an overpayment of £449,578.  In fact, it is quite clear from paragraph 27 of the claimant’s first witness statement, read in conjunction with the letter from Linder Myers dated 11th May 2012 (at C193), to which reference is there made, that the allegedly excessive remuneration extends to each of the three years ending 31st August 1997, 31st August 1998 and 31st August 1999.  To that extent, it seems to me, as Mr Horne accepted in the course of his submissions, that paragraph 29 is in error in referring only to the first two of those three accounting years.  
10.	What is said is that the overpayment of remuneration to the defendant either amounts to a fraud on the other shareholders of the company or alternatively an unlawful return of capital by the company, as there is said to be no basis for the defendant being paid any more than the claimant.  It is also said that by procuring the company to pay him excessive remuneration, the first defendant has acted in breach of trust, breach of fiduciary duty and/or breach of duty.  In so far as a limitation defence is sought to be raised by the first defendant, the claimant seeks to rely upon the provisions of section 21(1)(a) and/or (b) of the Limitation Act 1980 to assert that no limitation period applies to the claim.  It is said that the first defendant has either committed a fraudulent breach of trust or duty in that he was reckless as to whether or not he was entitled to procure the company to make the dividends paid to him and/or the remuneration it paid to him; alternatively, the defendant is either in receipt of trust property or its proceeds, or he has previously been in receipt of trust property and converted it to his own use.
11.	On that basis, the claimant says that the company has suffered loss and damage in two respects: first, £424,460 in respect of the benefit to the first defendant of the high dividends that he secured for the accounting year ends 31st August 2002 to 2009 when there were insufficient available profits to pay such dividends; and secondly £449,578 in respect of the overpayment of remuneration.  Those are the allegations in the particulars of claim.
12.	At the same time as the claim form was issued, an application notice was also issued, seeking, without a hearing, orders as follows: first, that the defendants should be made parties to the application; second, that the defendants should be served with the application and the claim; third, that the claimant should have permission, under section 261 of the Companies Act 2006, to continue his derivative action against the first defendant on behalf of the second defendant; fourth, that the claimant be indemnified out of the second defendant’s assets in respect of the legal costs of the derivative claim; and/or fifth, that costs be in the application.  The application notice asked for that order to be made without a hearing, and stated that an hour should be sufficient for that purpose.  The application notice was supported by the claimant’s first witness statement of 22nd January 2013.  That statement extended to some 28 paragraphs, but the exhibit to it, described as exhibit SS1, extended to no less than 186 pages.
13.	The papers were placed before me on 15th February.  Without a hearing, I ordered the defendants to be made respondents to the application and to be served with the claim form, particulars of claim, the application notice and supporting evidence.  I adjourned the application to allow the defendants to obtain and file evidence and to be heard on the application; and I gave directions as to such filing and service.  I listed the application for hearing before me, with an estimated length of hearing of two hours, plus 30 minutes’ pre-reading.  That application was originally listed for hearing before me on Thursday, 11th April, but, on representations from the parties that two hours, with 30 minutes’ pre-reading, would be insufficient, on 10th April I made an order vacating the hearing listed the following day and adjourning the application to 10.30 today, Wednesday, 27th June, before me, with an estimated length of hearing of one full day.  In addition, I indicated that the period from 2 o’clock yesterday afternoon should be set aside for prior judicial reading time.  I gave directions for the first defendant to file and serve any further evidence, and for the claimant to serve any evidence in response, by identified dates.  I ordered the costs to be costs in the case.
14.	The evidence now before the court comprises, in addition to the claimant’s first witness statement, two witness statements in response from the first defendant, Mr Satpaul Singh.  The first is a lengthy witness statement, extending to some 35 paragraphs, dated 27th March 2013.  It is accompanied by an exhibit also described, somewhat inconveniently, as exhibit SS1, which extends to some 84 pages.  As foreshadowed by my earlier order, the first defendant filed and served a second witness statement, dated 16th April 2013, together with a second exhibit, SS1, which comprises a further 64 pages.  The claimant filed and served evidence in response in the form of a witness statement dated 3rd May 2013, extending to some 36 pages.  Accompanying it was a further exhibit, helpfully described as exhibit SUK2, which was a fairly modest 15 pages or so.  
15.	I have had the opportunity, before coming into court this morning, to pre-read all of that evidence.  I have also had the benefit of being able to pre-read detailed written skeleton arguments from counsel.  The claimant is represented by Mr Wilson Horne (of counsel), who has produced a written skeleton argument dated 26th June 2013.  The first defendant is represented by Miss Elisabeth Tythcott (of counsel), who has produced a written skeleton argument dated 22nd June 2013.  Miss Tythcott’s written skeleton was accompanied by a bundle comprising the relevant legislation, together with no less than ten case law authorities.  Mr Horne has this morning added one further case law authority, the case of Kiani v Cooper [2010] EWHC 577 (Ch), reported at [2010] BCC 463, a decision of Mrs Justice Proudman.  Mr Horne has addressed me for just over an hour this morning.  In view of my extensive pre-reading, I have found it unnecessary to call upon Miss Tythcott to respond.  
16.	Mr Horne submits that this is an obvious case for the grant of permission to bring this derivative claim.  Like Miss Tythcott, he acknowledges that the leading authority in this area is the recent decision of his Honour Judge Keyser QC, sitting in the Leeds District Registry of the Chancery Division as a judge of the High Court, in the case of Hughes v Weiss [2012] EWHC 2363 (Ch).  I have looked at that authority, which I agree provides the most up to date and helpful guidance on the grant of permission to bring a derivative claim under section 260 and following of the Companies Act 2006.  
17.	Judge Keyser set out the statutory framework of sections 260, 261 and 263 of the 2006 Act at paragraphs 27 to 29 of his judgment.  At paragraph 30, he set out the relevant provisions of section 172(1), setting out the duties of a director of a company as from 1st October 2007.  It is at paragraphs 31 and 32 of his judgment that Judge Keyser addressed the transitional provisions in the relevant (third) Commencement Order – in particular, at paragraph 20(3) of Schedule 3.  At paragraph 33, Judge Keyser emphasised that section 263 does not require a derivative claim to satisfy any particular merits test before permission to continue it will be given – for example, that it shows a reasonably arguable case, or a case that is likely to succeed.  He acknowledged that an applicant under section 261 must, no doubt, establish a prima facie case that the company has a good cause of action which arises out of the defendant’s breach of duty.  The court must form the best view it can on the strength of the claim on the material before it.  However, that does not mean that any particular threshold must be crossed in all cases.  Judge Keyser expressed his respectful agreement with the approach of Mr Justice Roth in an earlier case, Stainer v Lee [2010] EWHC 1539 (Ch) at paragraph 29.
18.	I have also looked at paragraphs 44 and 45 of Judge Keyser’s judgment, addressing the question of whether there is a mandatory bar under section 263(2).  The question there is whether no director acting in accordance with section 172 would seek to continue the derivative claim in the instant case.  I have also looked at what Judge Keyser had to say about the matters which fall for consideration under section 263(3) at paragraphs 46 through to 57.  In particular, I have paid attention to what Judge Keyser had to say at paragraph 47 about the requirement of section 263(3)(a), concerning the need for the claimant to be acting in good faith.  I have also had regard to what Judge Keyser had to say at paragraph 55, as regards the instance of costs.  I have also borne very much in mind what Judge Keyser had to say at paragraphs 58 through to 71, about the availability of any alternative remedy.
19.	In addition to the case of Hughes v Weiss, Mr Horne has taken me to the previously cited decision of Mrs Justice Proudman in Kiani v Cooper, and has drawn my specific attention to paragraphs 10 and 11, and paragraphs 37 through to the concluding paragraph of the judgment at paragraph 51.  Mr Horne submits that neither of the mandatory grounds for refusing permission set out in section 263(2)(a) and (c) of the 2006 Act applies in the present case.  He submits that a person acting in accordance with the duty in section 172 of the Act to promote the success of the company for the benefit of its members as a whole would seek to continue the present derivative claim.  He submits that the court should find that it simply cannot be said that no director acting in accordance with section 172 would seek to continue the claim, particularly in the light of four factors which he specifically identifies.
20.	Those factors are said to be: first, the existence of a confidential relationship between the first defendant and his mother; second, the first defendant’s undoubted control over the financial affairs of the company and its documentation; third, the claimant and the first defendant’s sisters’ support for the claimant’s proposed claim – it is said to be highly likely that their evidence will be pivotal in establishing the confidential relationship between the first defendant and his late mother.  Reliance is placed upon the two witness statements, both dated 1st May 2013, from the parties’ sisters, Nurgus Singh and Indra McHale, which are exhibited within exhibit SUK2 and are to be found at E409 and E411 of the hearing bundle.  Fourthly and finally, Mr Horne refers to the fact that any proposed cross-claim that the company might have against the claimant is both disputed and, even if it were to be made out, of negligible value when compared to the substantial quantum of the claimant’s proposed claim.  Mr Horne refers me in particular to paragraphs 44 and 45 of Judge Keyser’s judgment in relation to the proper approach to this issue.  He invites the court to find that it cannot be said that no director, acting in accordance with section 172 of the Act, would seek to continue the claim.  He submits that, so far as the second limb of section 263(2) is concerned, in its application to the present case the acts complained of were not authorised before they occurred, nor have they been ratified by the company since.  Mr Horne submits that, in approaching this question, the court should assume that the claimant’s pleaded claim is arguably correct.  If it does so, he invites the court to find on this application that it is arguably correct that any dividend waivers are either invalid, or of no effect, and that the first defendant simply had no right to pay himself excessive remuneration.  Therefore it cannot be said that the cause of action arises from an act or omission that was authorised by the company before it occurred, or has been ratified by the company since then.
21.	Having dismissed the mandatory grounds for refusing permission under section 263(2), Mr Horne submits that the court must go on to consider whether or not permission should be granted to the claimant to continue with a derivative claim by reference to the specific criteria listed under section 263(3) of the Act.  He submits that when the court undertakes this exercise, it is inevitable that it will at least form a provisional view as to the merits of the proposed claim; but he submits, in reliance on paragraph 33 of the Hughes authority, that there is no particular threshold to be satisfied by the claimant.  The court must consider a range of factors to reach an overall view as to whether or not permission should be granted.  Grounds (c), (d) and (e) are not engaged on the facts of the present case.  
22.	So far as ground (a) is concerned, it is said that the claimant is acting in good faith in seeking to continue the claim.  The issue is said to turn upon whether the claim is brought by the claimant for the purposes of vindicating the company’s rights, or for some ulterior motive.  Mr Horne submits that the claimant is seeking to bring a substantial claim for the benefit of the company, and it is a perfectly proper claim to bring.  There is said to be no evidence that the claimant is acting for an ulterior motive.  The consideration of this factor is said not to involve a precise analysis of the merits of the claim.  
23.	So far as ground (b) is concerned, it is said that the claim would be of great importance to someone acting in accordance with the statutory duty laid down by section 172 of the Act, taking into account all of the factors listed under subsection (1) of section 172.  The most powerful factor in the present case, given that the company is no longer trading, is said to be the need for the director charged with the relevant duty to act fairly between the shareholders.  It is said that this would result in the claim being litigated.  
24.	Ground (f) is whether the act or omission in respect of which the claim is brought gives rise to a cause of action that the member could pursue in his own right, rather than on behalf of the company.  On the facts of the present case, this is said to concern the availability of remedies such as an unfair prejudice petition under section 994 of the Act, or a contributory’s petition to wind up the company.  Mr Horne submits that neither possible remedy militates against the grant of permission to the claimant to continue with the action.  
25.	First it is said that an unfair prejudice petition would probably result in the purchase of shares.  This is said not to be desirable to the claimant or to the first defendant.  Secondly, it is said that it is highly doubtful that a liquidator would bring the present claim against the first defendant.  Third, it is said that any monies recovered could, in part, be used by the company to repay the accrued rent arrears in respect of the premises which it leases from the estate of the parties’ deceased mother.  
26.	Mr Horne submits that the proposed claim is one where truly corporate relief, as opposed to personal relief, is being sought by the claimant.  He submits that the claim is for money for the benefit of the company and all its shareholders, including the mother’s estate.  He submits that, in those circumstances, the court should view the proposed claim as one where permission should be granted.
27.	Miss Tythcott opposes the grant of permission.  Having set out the relevant factual and statutory background, Miss Tythcott submits, in reliance upon observations of Mr David Donaldson QC, sitting as a deputy judge of the High Court in Langley Ward Limited v Trevor [2011] EWHC 1893 (Ch) at paragraph 62, that the claimant has not addressed certain key issues when he first sought the court’s permission to bring this claim at an ex parte stage.  She submits that the claimant has not explained why he has not paid back the dividends he has received, nor has he explained the basis upon which he came to sign the various company accounts, dividend waivers and other financial documents, and nor has he explained his mother’s role within the company.  Those are said to be relevant factors to weigh with the court when deciding whether or not to grant permission to continue the derivative claim.
28.	In my judgment, there is no real substance in those objections.  Although not fully addressed in his first witness statement, I accept Mr Horne’s submission that the mass of documentation exhibited did address those matters.  There may be some force in the objection that the one hour that was envisaged for the court to deal with the application on paper was wholly inadequate; but, in any event, matters have moved on since the initial stage of the exercise and one is now concerned with the second stage.  Miss Tythcott submits that that does not involve the court in simply rubber-stamping the permission given at the ex parte stage; she says that the court has to form a view on the strength of the claim in order properly to consider the requirements of section 263(2) and (3).  She acknowledges that any such view can only be provisional when the action has yet to be tried, but she says the court must do the best it can on the material before it.  
29.	Miss Tythcott accepts three matters.  The first is that section 263 does not require a derivative claim to satisfy any particular merits test before permission to continue it will be given.  In that regard, she accepts what is said at paragraph 33 of Hughes v Weiss.  Secondly, she acknowledges that it is not the function of the court at this permission stage to conduct a mini-trial of the action.  Thirdly, Miss Tythcott says that if the court is minded to give permission under the current statutory code, if permission would have been refused under the old law, then it must be refused now.  However, she says that it is not appropriate simply to accept the allegations made by the claimant as being true, as if this were an application to strike out on the grounds that there is no disclosed cause of action.  She submits that the court is required to test what the claimant alleges against the background of both agreed, and disputed, facts, and those documents that are before it.
30.	Miss Tythcott submits, first of all, that there is a mandatory bar to the claim on two bases: first, pursuant to section 263(2)(a); secondly, pursuant to section 263(2)(c)(i). As to the first ground of opposition, under section 263(2)(a), she accepts that the test is whether no director acting in accordance with section 172 would seek to continue the claim.  She therefore acknowledges that it is a bold submission that that test is not satisfied; but she says that when one considers the background to this case, it is nonsense to suggest that the first defendant exerted undue influence over either the claimant or their mother.  She submits that the court should be acutely aware that the claimant has sought to challenge the management decisions only after the death of the lady who, from almost a standing start in 1969, had run a business that had not only survived but had also prospered.  Miss Tythcott invites the court to infer that had the mother been alive today, these proceedings would never have been commenced.
31.	Miss Tythcott makes a number of points about the way in which the claimant is now seeking to recover back dividends paid to the first defendant whilst retaining the dividends that the claimant himself has received.  In my judgment, there is no real force in that submission given the way in which the claimant is actually seeking to quantify his claim by reference only to the excess dividends received by the first defendant over and above those which would have been received by each of the claimant and the first defendant had there been parity between them.  However, it seems to me that there is force in the point that the dividends paid were fully recorded in the company accounts.   I will come back to that aspect of the matter after I have completed my summary of Miss Tythcott’s written submissions.
32.	So far as the alternative mandatory bar under section 263(2)(c)(i) is concerned, Miss Tythcott submits that all of these payments were approved by the members before they were made.  It is said to be inconceivable that Mrs Singh would have allowed the first defendant to take his drawings if she did not know, and approve, of what he was doing.  She was a director and the company secretary and is said to have taken her role seriously.  Miss Tythcott refers to the observations in the correspondence from the company’s accountants, Edwards Veeder, to which I have already made reference.  From a consideration of the annual accounts, she submits that these clearly set out the remuneration package being paid to both the claimant and the first defendant, and also the level of dividends that were being paid.  She emphasises that it should not be forgotten that Edwards Veeder were the accountants who dealt with both the claimant’s and the late Mrs Singh’s personal accountancy affairs, including completing annual self-assessment returns for them for submission to HM Revenue and Customs.
33.	Miss Tythcott submits that, both separately and in tandem, these matters constitute a mandatory bar to the claim that the claimant seeks to bring and, for that reason, permission to continue it must be refused.  If the court does not agree with that submission, then she invites the court to go on to consider whether, pursuant to its discretion under section 263(3), the claim should be permitted to continue.  She submits that the discretion should be exercised sparingly.  She submits that there are likely to be substantial factual disputes in all applications to continue derivative claims, but that that does not automatically mean that the court will give permission for them to be continued.  The court should jealously guard such a right.  
34.	When one analyses what is being advanced on behalf of the company, it boils down to the fact that the first defendant is alleged to have dishonestly appropriated company funds for his own benefit.  Miss Tythcott emphasises that there has been no attempt to disguise that.  She submits that the reason why no complaint was made during the lifetime of the parties’ mother was because the matters were all discussed and agreed by all three directors and shareholders.
35.	Miss Tythcott submits, first, that this claim is not being advanced in good faith.  She accepts that if a member will gain a collateral advantage to that which the company will obtain if the derivative claim is successful, that is not of itself sufficient automatically to constitute grounds on which to allege bad faith.  However, she says that in this case it can be seen from the pre-action correspondence that a bitter feud has erupted over the terms of the two 2007 wills.  It has been conceded in correspondence by the claimant’s previous solicitors, Pannone LLP, that there are no grounds upon which the later will can be challenged.  Despite that, however, no proceedings to propound the will have been issued, and Mrs Singh’s estate remains unadministered.  The question which Miss Tythcott poses for the court is whether the proceedings are being brought to vindicate the company’s rights, or for some ulterior purpose, unconnected to the subject matter of the litigation.  She invites the court to find that the existence of a dispute between the members of the family is driving this litigation, rather than a desire to seek amends on behalf of the company.  She submits that the reality is that, upon realising that the will was properly executed, without undue influence, the claimant has sought any means possible to seek redress against his brother.
36.	Turning to the second of the relevant discretionary bars, Miss Tythcott submits that continuing this claim would have little importance to a reasonable company director, apprised of all material facts and matters.  She acknowledges that, given that the company is no longer trading, the only relevant consideration under section 172(1) is that in paragraph (f) – namely the need to act fairly as between the members of the company.  She submits that to act fairly, the reasonable company director would consider that the claimant has had remedies of his own to pursue, and would also bear in mind the financial risk to the company of continuing the claim.  She submits that these would be considered to be too great to justify the continuation of this litigation.  
37.	Miss Tythcott also submits that the court should refuse to give permission for the claim to continue because of the availability of an alternative personal remedy.  She does not submit that the law before 1st October 2007 debarred the bringing of a derivative claim if there were an alternative remedy available, relying, in that regard, upon paragraphs 58 to 62 of the Hughes decision.  However, she submits that under both the post- and, indeed, the pre-1st October 2007 codes, the availability of an alternative remedy is a powerful factor in the exercise of the court’s discretion.  She submits that the claimant has at least two alternative personal remedies in the present case: a petition pursuant to section 994 and/or a just and equitable winding up.  It is said that the claimant could pursue either of these, and obtain the remedy he seeks at his own expense.
38.	Taken cumulatively, these factors are all said to militate against the grant of permission for the continuation of this claim.  If, notwithstanding her submissions, permission were to be granted, Miss Tythcott submits that the court should keep a close supervisory eye on the progress of the claim, and that any such permission should be reviewed periodically in order to preserve the integrity of the derivative claim procedure.  Those were the submissions.  
39.	In my judgment, this is a clear case where permission to bring a derivative claim should be refused.  In my judgment, the principal reason for that is that the conduct on the part of the first defendant of which complaint is made is conduct that was either authorised by the company before it occurred, or has effectively been ratified by the company since then.  So far as the payment of excessive dividends is concerned, these were all clearly recorded in the company’s accounts.  We do not have in evidence the accounts for the year ending 31st August 2002.  However, the fact that a dividend of £90,000 was paid is apparent from the accounts for the year ending 31st August 2003.  Those accounts are to be found at B29.  They make it clear that, in the 2002 year, £90,000 was paid by way of dividend, and, in 2003, £130,000 was paid.  Of the £130,000, the claimant is said to have received £110,000 and the defendant £20,000.  
40.	True it is that the accounts do not break down the dividends paid to individual shareholders; but the claimant would have known how much he himself was paid, namely £20,000.  He would have known that that was a small part of the total dividend paid of £110,000.  In other words, he would have known that dividends were not being paid on a basis commensurate with the respective shareholdings of the then three shareholders.  That is a pattern that was followed in the following years’ accounts: see B42, B55, B74, B87, B97 and B111.  It seems to me clear that when the directors approved the accounts for each year, they were approving the payment of those dividends.  The three directors were also the only three shareholders in the company.  They were therefore approving the dividends both as directors and as shareholders.  In my judgment, the mandatory bar in section 263(2)(c) therefore applies.  
41.	Likewise with the remuneration:  We do not have in evidence the accounts for the year ending 31st August 1999.   In the light of the plea in paragraph 29 of the particulars of claim – that the claim for excessive remuneration only related to the years ending 31st August 1997 and 31st August 1998 – I can understand why the first defendant did not seek to exhibit the accounts for the following year.  Nevertheless there is no reason to think that any different practice was applied in the accounts for the year ending 31st August 1999 to that which had applied in previous years.  It is quite clear that the accounts for the two previous years were both approved by the directors, and that they recorded the remuneration that the directors were receiving.  
42.	For the year ending 31st August 1997 the accounts were approved on 22nd January 1998: see C266.  At C271 the position as regards remuneration is clearly stated.  For the previous year ending 31st August 1996, total emoluments amounted to £95,530 of which £35,800 had been paid to the highest paid director.  For the year ending 31st August 1997, the total emoluments amounted to £263,540, of which £190,800 had been paid to the highest paid director.  A similar position was made clear in the following year’s accounts: see the directors’ approval on 12th February 1999, recorded at C283, and the details of the emoluments at C288.  Again, it seems to me quite clear that the three directors, who were also the three shareholders in the company, have approved those payments.  
43.	Against that background, as recorded in the company’s accounts, it seems to me that no director, acting in accordance with section 172 (the duty to promote the success of the company) would seek to continue the present challenge to either the allegedly excessive dividend payments or the allegedly excessive remuneration.  In the case of the latter, the remuneration, the position is particularly strong because of the substantial period of time that has elapsed since the remuneration was paid, and the potential effect of the Limitation Act.  If I am wrong in that, it seems to me that the importance that a person acting in accordance with section 172 would attach to continuing with the present claim should lead the court, in the exercise of its discretion under section 263(3)(b), to refuse to allow the claimant to continue.  
44.	If I am wrong in that, I am entirely satisfied on the evidence that the real motivation acting upon the claimant in seeking to continue this derivative claim is the feeling of animosity that he entertains towards his brother as a result of the change in the gift of the late mother’s house that was effected between the May and July 2007 wills.  I am satisfied that that is the real motivation of the claimant; he is seeking to strike at his brother rather than genuinely seeking to promote the best interests of the company.  I would therefore refuse permission to continue the claim by reference to the discretionary ground in subsection 263(3)(a).  
45.	Even if I were wrong in all of that, I am entirely satisfied that, rather than giving permission to continue a derivative claim on behalf of the company, the appropriate remedy available to the claimant here is a claim either to wind up the company on the just and equitable ground, or alternatively - and more likely - an unfair prejudice petition, directed to his brother, under section 994 of the Companies Act 2006.  It is quite clear that here the claimant is not seeking to say that the payment of these dividends was unlawful, because of the existence of the dividend waivers.  Equally, in relation to the remuneration, he cannot say that the directors and shareholders were unaware of the level of remuneration which the claimant had been receiving in each of the three years, more than a decade before his late mother’s death.  
46.	The thrust of the complaint is, in relation to the mother, that undue influence was exercised over her, and, in relation to the claimant himself, that alleged misrepresentations were made to him, as a result of which he signed the dividend waivers and approved the company accounts.  It seems to me that those are complaints that are more naturally to be pursued by the claimant personally, or in a claim by the late mother’s estate, rather than through the medium of a derivative claim being advanced by the company.  
47.	As Mr Horne made clear in the course of his oral submissions, this is a case in which the claimant says that undue influence has been exercised.  In addition, the claimant says that misrepresentations have been made to him.  In those circumstances, it seems to me that the appropriate remedy is not one by the company against the first defendant, but one by the claimant himself, or, if appropriate, by the estate of the parties’ late mother.
48.	  For those reasons, I will refuse permission to continue the derivative claim.  Had I taken a different view, I would have given permission only up to a limited stage in the first instance; that of disclosure and inspection.  I would, in any event, have refused any indemnity out of the company’s assets in advance of the final disposal of the derivative claim.  This is essentially a dispute between two equal shareholders in the company, and it would be quite wrong for any indemnity to be given out of the company’s assets in respect of the costs of what is, essentially, a personal dispute between two individual shareholders and directors.  
49.	However, in the light of my decision on the grant of permission, it is unnecessary to pursue that aspect of the matter any further.  My conclusion would have been the same on costs as that at which Judge Keyser arrived in the Hughes v Weiss case.  Therefore that is my decision: I refuse permission to continue the derivative claim.  
(End of judgment)
(Discussions as to costs follow)
_____________________