Key Facts
- •Members of the Universities Superannuation Scheme (USS) appealed a High Court decision dismissing their common law derivative claim against USS's directors.
- •The claimants, Dr McGaughey and Prof. Davies, sought permission to continue proceedings on behalf of the trustee company (USSL) against current and former directors for breach of directors' duties.
- •USSL is a company limited by guarantee, its directors are its members, and its sole purpose is to act as trustee of the USS.
- •The claims included allegations of improper valuation, discrimination, excessive costs, and inadequate fossil fuel divestment plans.
- •The High Court dismissed the application, finding the claims unsuitable for a derivative action and lacking sufficient standing.
Legal Principles
Rule in Foss v Harbottle: A corporation is the proper plaintiff for wrongs done to it, unless exceptions apply (e.g., fraud on the minority where wrongdoers control the company).
Foss v Harbottle (1843) 2 Hare 461; Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204
Derivative Claim Requirements: Sufficient interest/standing; prima facie case of wrongdoing; prima facie case on merits; appropriateness of pursuing the claim.
Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204; Boston Trust Co Ltd v Szerelmy Ltd [2021] EWCA 1176
Standing in Derivative Actions: The claimant must demonstrate both that the company suffered a loss and that this loss is reflective of their own loss.
Waddington Ltd v Chan Chun Hoo Thomas [2009] 2 BCLC 82
Fraud on the Minority: A derivative claimant must establish a prima facie case that the defendants committed a deliberate or dishonest breach of duty or improperly benefited themselves at the company's expense.
Harris v Microfusion 2003-2 LLP [2017] 1 BCLC 305
Directors' Duties under Companies Act 2006: To act within powers (s.171); to promote the success of the company (s.172); to exercise independent judgment (s.173); to avoid conflicts of interest (s.175).
Companies Act 2006, sections 171, 172, 173, 175
Beneficiary Derivative Claims: Beneficiaries can sue on behalf of a trust if exceptional circumstances exist and the cause of action is trust property.
Roberts v Gill [2011] 1 AC 240
Outcomes
Appeal dismissed.
The claims were not suitable for a common law derivative action because USSL (the trustee company) did not suffer a loss reflective of the claimants' loss. The claimants lacked standing, and there was no prima facie case of equitable fraud or improper benefit to the directors.