The Civil Procedure Rules 1998

Derivative claims

Rule 12A—(1) This rule applies to every claim by one or more shareholders of a company where the cause of action is vested in the company and relief is accordingly sought on its behalf (referred to in this rule as a “ derivative claim”).

(2) Where a defendant in a derivative claim has responded to the particulars of claim, the claimant must apply to the Court for permission to continue the claim.

(3) The application must be supported by a witness statement or affidavit verifying the facts on which the claim and the entitlement to sue on behalf of the company are based.

(4) Unless the Court otherwise orders, the application must be issued within 21 days after the relevant date, and must be served, together with the witness statement or affidavit in support and any exhibits to the witness statement or affidavit, not less than 10 clear days before the return day on all defendants who have responded to the particulars of claim; any defendant so served may show cause against the application by witness statement or affidavit or otherwise.

(5) In paragraph (4), “the relevant date” means the later of—

(a) the date of service of the particulars of claim; or

(b) the date when the defendant responded to the particulars of claim (provided that, where there is more than one defendant, that date shall be the earliest date when any of them respond).

(6) Nothing in this rule shall prevent the claimant from applying for interim relief pending the determination of an application for permission to continue the claim.

(7) In a derivative claim, CPR rule 15.4 (period for filing a defence) shall not have effect unless the Court grants permission to continue the claim and, in that case, shall have effect as if it required the defendant to serve a defence within 14 days after the order giving permission to continue, or within such other period as the Court may specify.

(8) On the hearing of the application under paragraph (2), the Court may—

(a) grant permission to continue the claim, for such period and upon such terms as the Court may think fit;

(b) subject to paragraph (11), dismiss the claim; or

(c) adjourn the application and give such directions as to joinder of parties, the filing of further evidence, disclosure, cross examination of witnesses and otherwise as it may consider expedient.

(9) If the claimant does not apply for permission to continue the claim as required by paragraph (2) within the time laid down in paragraph (4), any defendant who has responded to the particulars of claim may apply for an order to dismiss the proceedings or any claim made in them by way of derivative claim.

(10) On the hearing of such an application for dismissal, the Court may—

(a) subject to paragraph (11), dismiss the claim;

(b) if the claimant so requests, grant the claimant (on such terms as to costs or otherwise as the Court may think fit) an extension of time to apply for permission to continue the claim; or

(c) make such other order as may in the circumstances be appropriate.

(11) Where only part of the relief claimed is sought on behalf of the company, the Court may dismiss the claim for that part of the relief under paragraphs (8) and (10), without prejudice to the claimant right to continue the claim as to the remainder of the relief and CPR rule 15.4 (period for filing a defence) shall apply as modified by paragraph (7).

(12) If there is a material change in circumstances after the Court has given permission to the claimant to continue the claim in pursuance of an application under paragraph (2), any defendant who has responded to the particulars of claim may make an application supported by witness statement or affidavit requiring the claimant to show cause why the Court should not dismiss the proceedings or any claim made in them by way of derivative claim. On such application the Court shall have the same powers as it would have had upon an application under paragraph (2).

(13) The claimant may include in an application under paragraph (2) an application for an indemnity out of the assets of the company in respect of costs incurred or to be incurred in the claim and the Court may grant such indemnity upon such terms as may in the circumstances be appropriate.

(14) So far as possible, any application under paragraph (13) and any application by the claimant under CPR Part 24 shall be made so as to be heard at the same time as the application under paragraph (2).