31 May 2022
Disputes Quick Read – 38 of 87 Insights
Disputes Quick Read: Climate change litigation update – McGaughey v Universities Superannuation Scheme Limited
The High Court recently refused permission for members of a pension fund to bring a so-called "multiple derivative claim" which alleged (among other things) that directors of the fund's trustee were in breach of their duty to promote the success of the trustee company due to failure to implement an immediate plan for divestment from fossil fuel-related investments.
In McGaughey v Universities Superannuation Scheme Limited (USSL) the claimants, a university reader and senior research fellow, sought permission to bring a multiple derivative claim against the directors of USSL, the corporate trustee of their pension scheme.
The case is interesting because it applies the common law principles for multiple derivative claims, ie where the claimant is not a shareholder of the company on whose behalf the claim is brought. However, we find it particularly interesting due to the climate change angle.
The claim
The claimants said that while USSL took the view that climate change was a financial risk, the directors had failed to form any (adequate) plan of how to address that financial risk. Their continued investment in fossil fuels without a plan for divestment was, therefore, said to be in breach of their duties to act for proper purposes and to promote the success of the company (sections 171 and 172 of the Companies Act 2006).
They also argued that due to various other considerations (not necessarily relating to financial risk) such as the Paris Agreement and the results of a members' ethical investment survey, the directors were in breach of their s171 and 172 duties by failing to have an immediate plan to divest.
The primary argument was that the company had suffered (or would suffer) financial loss by its ongoing investment in fossil fuels, rather than that the company should divest for ethical reasons. The claimants relied on articles from the Financial Times and a study from Imperial College London as evidence that renewable energy portfolios have consistently performed better than fossil fuels. However, the claimants did not further particularise the loss said to have been suffered by the ongoing investment in fossil fuels.
The outcome
USSL's response set out in detail how it had exercised its investment powers over the last 20 years, including the consideration given to climate change. It explained its view that immediate divestment was not necessarily the best way to achieve net zero. Instead, USSL said it had used its position as an investor to put pressure on companies such as Shell to take further action on climate change.
Leech J refused permission for the claim to continue. He was not satisfied that USSL had suffered any immediate financial loss because of the directors' failure to divest from fossil fuels. He also considered the directors' investment decisions were well within USSL's discretion.
He was not satisfied that the Court would be prepared to grant the declaratory relief sought, which was in somewhat vague terms, or that any useful purpose would be served by doing so.
Comment
This claim bears some similarities with the widely reported claim that ClientEarth has threatened to bring against the directors of Shell. If the ClientEarth case proceeds, we expect to see a much greater degree of particularisation of the loss ClientEarth says Shell will suffer by virtue of the board's current climate strategy.
Leech J's comments in this case will be of use to parties on both sides of similar claims in the future. Directors should note the weight that Leech J put on USSL's detailed evidence about how the directors had exercised their discretion, in particular the evidence that USSL had:
- taken legal advice
- conducted a survey of members
- adopted an ambition of net zero by 2050
- adopted policies for working with the companies in which it invests in the meantime.
Reach out to a member of our Disputes & Investigations team if you want to know more about what this might mean for you.
In this series
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Witness familiarisation - does it affect the court's assessment of witness credibility?
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The use of AI in Trial Witness Statements post-PD 57AC
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The Law Commission's Consultation Process on the Arbitration Act 1996 – taking stock
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What does the latest decision of the CAT in the Mastercard/Visa proceedings mean for class actions?
10 July 2023
Disputes Quick Read: ClientEarth refused permission to pursue directors of Shell
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Disputes Quick Read – developments in the fixed costs regime
3 May 2023
by James Bryden
Disputes Quick Read: Service by email – are the rules any clearer?
20 April 2023
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Disputes Quick Read - What do practitioners think about making alternative dispute resolution (ADR) compulsory?
8 March 2023
Disputes Quick Read: What are the litigation trends for 2023?
2 March 2023
Disputes Quick Read: further guidance on witness statement preparation rules
14 February 2023
Disputes Quick Read: A cautionary tale – settlement agreement (un)wittingly releases all claims for fraud
13 February 2023
Disputes Quick Read: Why the UK should join the Hague Judgments Convention 2019
8 February 2023
Disputes Quick Read: extensive information orders granted against crypto exchanges following hack
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Disputes Quick Read: A new approach to giving evidence? WhatsApp with that?
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Disputes Quick Read: Ethereum Merge - what legal issues arise?
22 September 2022
by Ben Jones, Emma Allen
Disputes Quick Read: New obligations on cryptobusinesses to report under the UK sanctions regime
9 August 2022
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Disputes Quick Read: Disclosure - What information can be redacted?
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Disputes Quick Read: what claims exist when a smart contract is breached?
6 July 2022
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Disputes Quick Read: New gateway for serving Norwich Pharmacal Orders and Bankers Trust orders out of the jurisdiction
Welcome news for those pursuing fraud claims in the English Courts
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Disputes Quick Read: Defining the duty - the limits of the responsibility assumed by professionals
27 July 2022
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Disputes Quick Read: Climate change litigation – successful challenge to government's Net Zero Strategy
29 July 2022
Disputes Quick Read: Judicial Review and Courts Act 2022 – now in force
17 June 2022
Disputes Quick Read: an important reminder of the duty to disclose electronic documents in native format
13 June 2022
Disputes Quick Read: ENRC prevails in claim against former solicitor
26 May 2022
Disputes Quick Read: Climate change litigation update – McGaughey v Universities Superannuation Scheme Limited
31 May 2022
by Multiple authors
Don't lose your keys: Bitcoin developers do not have a duty to assist owners in recovering lost cryptocurrency
4 April 2022
Disputes Quick Read: The new witness statement preparation rules – a year on
5 April 2022
Disputes Quick Read: ClientEarth v Shell – climate change litigation shifts focus to UK companies
31 March 2022
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Disputes Quick Read: High Court rules that failure to provide adequate data security is not a positive act
21 September 2021
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Disputes Quick Read: Key changes to the Disclosure Pilot Scheme
13 September 2021
Disputes Quick Read: Judicial Review and Courts Bill – unpacking the UK government's proposed amendments
6 September 2021
Disputes Quick Read: Will litigants be compelled to participate in alternative dispute resolution?
2 August 2021
Disputes Quick Read: Freezing injunctions – maximum custodial sentence imposed for breach
21 July 2021
Disputes Quick Read: The online future of civil justice – the end of the legal profession or the end of legal drudgery?
15 July 2021
Disputes Quick Read: Will the courts change forever post-COVID?
26 May 2021
Disputes Quick Read: One Blackfriars administrators cleared of misfeasance
5 May 2021
Disputes Quick Read: Not your prerogative – the Independent Review of Administrative Law reports its recommendations on judicial review
21 April 2021
Disputes Quick Read: Amendments to the Disclosure Pilot Scheme – a step in the right direction
31 March 2021
Disputes Quick Read: UK Supreme Court rules on the territorial extent of the SFO's powers
26 February 2021
Disputes Quick Read: No dropping anchor – parent company liability for environmental claims
24 February 2021
Disputes Quick Read: What lawyers need to know about new witness statement preparation rules
20 January 2021
Disputes Quick Read: Should you still choose the English courts to have jurisdiction in your international contracts after Brexit?
12 January 2021
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Disputes Quick Read: Privilege lost in the EU post-Brexit (with exceptions)
23 November 2020
Disputes Quick Read: Law on interest applicable to US dollar awards reaffirmed
16 October 2020
Disputes Quick Read: Care required when drafting SPA claim notices
23 September 2020
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Disputes Quick Read: Why the modernised LCIA rules are a welcome update
7 October 2020
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Disputes Quick Read: COVID-19 and supply chain disruption – key issues
9 April 2020
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Disputes Quick Read: High Court orders parties to explore options for 5-week remote trial
15 April 2020
Disputes Quick Read: Tomlin Orders – ensuring the confidentiality of settlement terms
27 April 2020
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Disputes Quick Read: UK's OFSI fines Standard Chartered Bank £20 million for sanctions breaches
21 April 2020
Disputes Quick Read: A different approach to witness evidence
11 March 2020
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Disputes Quick Read: Coronavirus - a growth in virtual courts?
17 March 2020
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Disputes Quick Read: Embracing remote hearings – the experience to date
26 March 2020
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Disputes quick read: climate change activism by litigation
26 February 2020
Disputes Quick Read: Commercial Court's arbitral power shift
21 February 2020
Disputes Quick Read: Court stays evictions during COVID-19 – is this lawful?
2 June 2020
Disputes Quick Read: Will the civil justice system change forever post COVID-19?
16 June 2020
Disputes Quick Read: Retailers reign supreme in Visa and Mastercard proceedings
9 July 2020
Disputes Quick Read: The contra proferentem rule reconsidered?
21 July 2020
Disputes Quick Read: Scope of duty and the SAAMCo counterfactual following Manchester Building Society
3 December 2021
Disputes Quick Read: Facilitating transactions in cryptoassets - Lord Leggatt and the point of commercial law
24 November 2021
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Disputes Quick Read: Privy Council clarifies the law on freezing injunctions in aid of foreign proceedings
8 October 2021
Disputes Quick Read: Climate change litigation – what's the latest?
10 January 2022
Disputes Quick Read: Court decisions on the Disclosure Pilot Scheme – the 2021 roundup
20 January 2022
Disputes Quick Read: Assumption of responsibility - tax schemes and investors
22 March 2022
Disputes Quick Read: Dealing in crypto? Be careful what you call it
7 April 2022
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