Roger Laville wins an appeal establishing the law applying to LLP derivative claims

1st May 2020

Roger Laville has successfully represented Nick Sellman (Holdings) Limited in Homes of England Limited v (1) Nick Sellman (Holdings) Limited and (2) Bromham Road Development LLP [2020] EWHC 936 (Ch), a Chancery appeal before Mr Justice Zacaroli.

This was a dispute between the members of a limited liability partnership in which the Claimant sought to bring a derivative claim against the First Defendant in respect of losses allegedly suffered by the Second Defendant LLP. In overturning the decision of the first instance Judge to grant permission to continue the claim, Zacaroli J determined conclusively that the correct test in relation to a derivative claim on behalf of an LLP remains that under the common law, and not the test at s263 Companies Act 2006.

The Judge held that the common law test was not satisfied in this case because there was no allegation of fraud or ultra vires acts, and no relevant benefit obtained by the First Defendant. In particular, the alleged benefit to the First Defendant, which was said to consist of negotiation leverage in the course of settlement discussions, was not a benefit of the type envisaged by that test. In doing so, he confined Estmanco (Kilner House) Ltd v GLC [1982] 1 WLR 2, in which it was held that benefit need not be financial, and could include for example political benefit, to its very special facts.

Roger was instructed in this matter only after the first instance hearing had taken place, and the decision is also notable because Zacaroli J permitted the winning argument to be taken for the first time on appeal.

The full text of the judgment can be found here.