BVI Court of Appeal Clarifies Derivative Actions, Director Indemnities and Shadow Director Status
On 22 September 2026, the Court of Appeal handed down judgment in the case of Zvi Dekel v Clerkenwell Lifestyle Limited dismissing the appeal against the decision of Mithani J to refuse leave to issue derivative proceedings on behalf of a BVI company.
Mr Dekel, a shareholder of Clerkenwell Lifestyle Limited (“CLL BVI”), a BVI company, sought permission under section 184C of the BVI Business Companies Act to bring derivative proceedings in England and Wales in the name of and on behalf of CLL BVI against several intended defendants arising out of the management and financing of a project to develop property (the “Project”) owned by CLL BVI’s UK subsidiary, Clerkenwell Lifestyle (UK) Limited. The proposed claims included allegations of breaches of fiduciary duties, negligence and improper conduct in the structuring, budgeting, financing and managing of the project. The intended defendants were the de jure directors of CLL BVI, two creditors, the property manager (“RE Capital”), and Mr Leech, the CEO and a co-founder of RE Capital who Mr Dekel alleged was liable as a shadow director of CLL BVI.
At first instance, the learned judge refused leave and dismissed a subsequent application by Mr Dekel to revoke or vary the first order on the basis that he was prepared to offer indemnify CLL BVI against any adverse costs made against it in the potential derivative proceedings. The offer of indemnity was made after the judge had circulated his draft judgment refusing leave.
The Court of Appeal held that Mr Dekel had failed to establish that he could not with reasonable diligence have offered the indemnity at an earlier stage before judgment, and that in any event, the offer of an indemnity was insufficient to cure the defects in Mr Dekel’s case. It upheld the learned judge’s decision that Mr Dekel’s proposed claims, as pleaded and based on the materials before the Court, failed to disclose any realistic prospects of success. Moreover, the indemnity granted to directors under the company’s articles of association operated as a complete defence to claims falling within scope, including claims brought by the company rather than a third party. Additionally, the Court of Appeal confirmed that the definition of director under the BVI Business Companies Act did not include a shadow director.
Ryan Turner of Maitland Chambers and Tamara Cameron of Appleby (BVI) Limited appeared on behalf of the successful Respondent, CLL BVI. A copy of the judgment can be found here.
