Ireland: the derivative action

Several Irish company law cases have recently been placed on BAILII and one has caught my eye: Fanning v Murtagh & Ors [2008] IEHC 277. This case is of interest because it concerned a derivative action brought in respect of a company listed on the London Stock Exchange's Alternative Investment Market. Shareholder litigation of this kind, brought in respect of a listed company, is unusual. Indeed, derivative actions against public companies in the UK are rare (see, e.g., A. Reisberg, Derivative Actions and Corporate Governance, OUP, 2007, p. 204). 

The trial judge, Ms. Justice Irvine, held that it would not be prudent or in the interests of the company for the derivative action to proceed. Her decision is nevertheless noteworthy because it considers many important issues concerning the operation of the derivative action in Ireland. It was argued that there was a fifth exception to the rule in Foss v Harbottle (1843) 2 Hare 461 [about which see here] where the "justice of the case so requires it".  This was rejected. 

With regard to procedural matters, the trial judge observed that the Rules of the Superior Courts do not provide any mandatory procedure in respect of the derivative action.  Her decision begins to fill this lacuna. With regard to the appropriate burden of proof, she observed:

[it] is for the plaintiff to establish to the Court that he has a realistic prospect of success, not based upon any assumption that he has an arguable case in support of the conduct alleged [as suggested in Keane's Company Law, 4th ed., Dublin, 2007], but based upon the extent of the evidence laid before the Court on the leave application and preferably supported by counsel’s opinion ..."