The High Court has struck out two motions brought in Saggart Motors Limited’s name in a dispute over vehicles and the authority to sue, finding that the company’s 49% shareholder had not established grounds to continue the case as a derivative action.
Ms Justice Pilkington said the relevant facts were known when proceedings began, but no application for leave to bring a derivative action had been made before the company sought interim relief. She also found that none of the recognised exceptions to the rule in Foss v Harbottle had been established.
The dispute concerns Saggart Motors, a vehicle-selling business with two directors. Darius Gasperavicius held 49% of the company; the second defendant, Nikolai Fritsch, held 51%. Gasperavicius’s evidence was that vehicles acquired by Saggart Motors had been moved while the company was relocating from leased premises. He also alleged that NG Motors Limited was taking steps to sell some of Saggart Motors’ vehicles.
On 16 November 2018, MacGrath J. granted interim relief requiring the defendants to deliver up certain vehicles and prohibiting their sale or dissipation. The judge noted that the company’s lawyers had given an undertaking as to damages on behalf of Saggart Motors, rather than Gasperavicius personally.
Fritsch opposed the proceedings, saying they had not been authorised by the company’s board and that Gasperavicius could not sue for the company without the High Court’s leave to bring a derivative action. A later motion, issued in February 2019, sought to have Gasperavicius conduct the proceedings and have them continue as a derivative action.
Justice Pilkington held that the later motion was improperly brought because there was no valid reason for not seeking leave before or when the proceedings began, particularly before obtaining relief without notice. She also found that the evidence did not meet the threshold for a derivative action, including the exception concerning fraud against a minority by wrongdoers in control of a company.
The court struck out the original motion for interim relief, citing concerns about Gasperavicius’s standing and whether the High Court had been given full disclosure when the without-notice order was sought. It also struck out the February motion and the reliefs sought in it. The court did not decide the remaining issues in the dispute. It said the parties would be heard on any further orders, including costs.