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Sports Direct granted permission to continue derivative claim against Rangers FC

SDI Retail Services, a company in the Sports Direct group, has been given permission to continue its derivative claim against Rangers Football Club. The claim relates to Rangers' purported termination of its contract with Rangers Retail Limited, a company owned by Rangers and SDI that produces and sells Rangers replica kit and other products featuring Rangers' brands.

SDI's claim, brought on behalf of RRL, seeks to uphold the validity of that contract. SDI is also claiming against David King and Paul Murray, directors of RRL whom (SDI says) were involved in TRFC's decision to purportedly terminate the contract and in so doing acted against the best interests of RRL.

Richard Millett QC, sitting as a Deputy Judge of the High Court, held that SDI had a strong prima facie case and that Rangers' response to SDI's concerns about RRL's continuing business had been "cynical and disingenuous". The judgment contains useful guidance on the issues that can arise when one shareholder in a two-shareholder company seeks to bring a derivative claim against the other shareholder and its nominated directors. More generally, the judgment provides (at paragraph 49) a helpful clarification of how the requirement in section 260(3) of the Companies Act 2006 that a derivative cause of action must arise from an act or omission involving a breach of duty by a director of the company applies to causes of action against defendants who are not directors of the company in question.

Joyce Arnold acted for SDI, led by Richard Hill QC and instructed by Reynolds Porter Chamberlain LLP.

Please find the judgment here.