The often uncomfortable relationship between unfair prejudice
and derivative claims was considered by the British Virgin Islands
("BVI") Court of Appeal in Andriy
Malitiskiy et al v Oledo Petroleum Ltd1. The
appellants wanted to bring both a derivative claim (in which they
sought corporate remedies) and an unfair prejudice claim (in which
they sought personal remedies as shareholders).
The facts, in outline, were that the appellants each owned half
of Oledo Petroleum Ltd ("Oledo"), a BVI
company at the top of a chain of filling stations in the
Ukraine. A Mr Adamovsky owned the other half, and was the
sole director of Oledo. In 2009 the parties agreed to
separate, and to sell Oledo's business. This they did,
for US$71.5m, but Adamovsky transferred the entire sum to an
account in the name of his own company, leaving Oledo an empty
shell. In their unfair prejudice case, the appellants sought
compensation for the diminution in value of their shares. In
their derivative claim, they sought to claim against Adamovsky and
his company in the name of Oledo, to recover the US$71.5m. At
first instance, provisional permission to bring the derivative
proceedings was refused (see the postscript below for comment on
the manner in which the derivative claim was launched) on the
bases, among others, that the unfair prejudice action was capable
of giving the appellants everything they could obtain
The Court of Appeal's starting point was that an aggrieved
shareholder may well have a choice of remedy available to him, and
that whilst the availability of an unfair prejudice claim was a
highly relevant factor, it was not an automatic bar to a derivative
action. Accordingly, the court would not refuse permission to
bring a derivative action simply because an unfair prejudice claim
was also available. The court would, however, refuse
permission2 where all that could be achieved in the
derivative claim could be achieved in an existing unfair prejudice
action. The better course was to allow only one to proceed,
and not to consolidate the two. As to the appellants'
contention that they were seeking different remedies, each of which
could only be sought either derivatively or via the unfair
prejudice route, the court was not persuaded: it agreed that both
remedies were available, but found that they were inconsistent
because if the company recovered its loss (via the derivative
claim) there would be no diminution in value which the appellants
could recover qua shareholders.
What do you do if the derivative claim you want to bring
requires an ex parte application for a freezing
injunction? How does the court deal with all the matters it
must take into account before granting permission, for example the
views of the company's directors, when investigating those
matters will render the ex parte relief nugatory?
The statute is silent, but the first instance court adopted
the sensible and practical approach of granting preliminary leave,
enabling the injunction to be obtained, then having the matter
return for an inter partes hearing.
1 BVIHCMAP 2013/0006
2 Following Franbar Holdings Ltd v Keran Patel et
al  EWHC 1534
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The claim followed the conclusion of two years of litigation (ORD 12/0035 & ORD 12/0034) between the parties in respect of the Bank's contractual claim for amounts owed by TSEL to the Bank pursuant to certain business loans.
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