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Proposed action by shareholders to disqualify directors was for collateral and improper purpose

By: Mark Tottenham BL

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Supreme Court dismisses appeal from High Court, and affirms order restraining shareholders from bringing disqualification proceedings against directors of a bank, on the grounds that: (a) such injunctive relief did not of itself amount to a prohibition on the shareholders' constitutional right of access to the courts; (b) there had been defects in the statutory notices issues in advance of such disqualification proceedings in that they failed to set out the grounds upon which the shareholders intended to rely; (c) the bank and its directors had established an arguable case to be tried; (d) there was evidence that the application to disqualify the directors was intended for a collateral and impermissible purpose which would amount to an abuse of process; and (e) the balance of convenience favoured the grant of the relief in that they would place a considerable burden on the directors but confer no individual benefit to the shareholders seeking them.

O'Donnell J (nem diss): Claim by bank against shareholders in holding company - conversion of building society to bank - depositors became shareholders - 'bailout' of bank - orders made by Minister for Finance - s. 9 of the Credit Institutions (Stabilisation) Act 2010 - allotment of shares to Minister, making him owner of 99.2% of the capital in the company - direction that bank sell its shareholding in insurance group to the Minister - challenges by shareholders to orders - s. 205 of the Companies Act 1963 - alleged oppressive behaviour - many court actions by shareholders - injunctive relief sought by bank to restrain shareholders from issuing proceedings - s. 160 of the 1990 Act - application to disqualify directors - whether proceedings deprived shareholders of constitutional right of access to the court - whether injunctive relief amounted to total prohibition on access to the court - whether notices issued by shareholders were invalid - defects in notices - whether defects would render any consequential proceedings invalid - abuse of process - whether shareholders had decided whether or not to issue disqualification proceedings at the time of issue of the notices - balance of convenience - fresh evidence.

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