The Court of Appeal has dismissed an appeal by three Permanent TSB Group Holdings plc shareholders who sought to prevent former directors from receiving support in defending a separate oppression petition.
The appeal, decided on 31 January 2022, concerned an interlocutory application within proceedings under section 205 of the Companies Act 1963. The shareholders had asked the High Court to bar the directors from using company resources or receiving representation paid for by the group, the bank or their subsidiaries, and to require repayment of any money already paid. The High Court refused those requests in 2013. The Court of Appeal upheld that refusal. It did not determine the underlying oppression petition or the allegations made in it.
The appellants argued that the directors were using company staff and other resources for their personal benefit, and that the directors’ liability insurance did not answer the concern. They disputed the insurer’s commitment to cover defence costs and challenged the use of letters from the insurer as evidence. They also argued that the Bank’s board lacked authority to approve the arrangements.
The directors said their defence costs were covered by a directors’ and officers’ liability policy. The insurer had confirmed it would pay those costs as they arose. The Court of Appeal held that the High Court could take that commitment into account and was not required, on this application, to interpret the policy in the insurer’s absence. It also said that even if the insurer’s letters were hearsay, hearsay evidence could be received on an interlocutory application.
The court also accepted that the companies had a vital interest in the case because some of the petition’s requested reliefs appeared to challenge the 2011 and 2012 direction orders, which were being contested in related proceedings. It concluded that the High Court was entitled to find that the companies could make their legal team available to the directors in the circumstances.
The court said the first two requested orders were framed as prohibitory injunctions and could properly be assessed under principles governing interlocutory relief. It held that an order requiring repayment would be inappropriate at this stage: such an order would require a full hearing and findings that company money had been paid for the directors and that the payment was unlawful. The court left open whether the appellants might rely on their challenge to the Bank board’s authority at the substantive hearing.
The appeal was dismissed. The court’s provisional view was that the appellants should pay the respondents’ appeal costs, subject to a request for an oral hearing on costs within 14 days.