In Gamett v Hughes [2026] EWHC 2004 (Ch) (handed down on 30 July 2026) Jeremy Richmond KC, leading Sam Mitchell, successfully represented the first defendant / respondent in the dismissal on mandatory grounds of the Claimant’s “Stage 2” application for permission to continue a complex derivative action against the first defendant / respondent.
The court was faced with an application for permission to continue a derivative claim under s.260 of the E&W Companies Act 2006 (“CA 2006”) by one of two equal shareholders against the other. The case concerned questions of directors’ duties in the context of an E&W company and its associated German entity. Unusually, the derivative action was primarily founded on an alleged oral agreement between the two shareholders concerning the operation of the associated German entity, to which the E&W company was not a party.
The court refused permission both on the mandatory ground in s.263(2)(a) CA 2006 (no director acting in accordance with s.172 CA 2006 would have pursued the claim) and as a matter of the court’s discretion under s.263(3) CA 2006.
In reaching those conclusions, two particularly important factors were: (i) the poor merits of the claim and (ii) the apparent availability of a parallel personal claim by the applicant against the first defendant / respondent. While recognising the need to avoid a “mini-trial”, the court was prepared to undertake a preliminary assessment of the claim’s merits to assess how a director would view its prospects. The availability of a personal claim by the applicant against the first defendant / respondent weighed against the grant of permission, as pursuing those claims would not expose the company to the risk of adverse costs orders (unlike the proposed derivative action). Future applicants should bear these factors in mind before electing to pursue derivative actions rather than personal claims (or unfair prejudice petitions) against respondents.
Additionally, the court took the opportunity to confirm the duty suggested in Re Seven Holdings Ltd [2011] EWHC 1893 (Ch), namely that applicants have a duty to “present the case fairly and transparently, and to identify the legal and evidential difficulties” at the first permission stage. The court clarified that it was incumbent on an applicant at the first stage to (i) explain the respondent’s case and (ii) provide materials which undermined the applicant’s case. Ultimately, the court did not need to decide what consequences might follow non-disclosure, but left open the possibility that it could result in discharge of first-stage permission and automatic refusal at the second stage. Applicants should pay close attention to their first-stage duty to avoid such a severe outcome.
