Cost Recovery in UK Shareholder Activism (2015–2025)
As a supplement to my 'True Price of Shareholder Activism' video analysing the cost of the Saba vs UK investment trusts 'saga' I offer this report of UK cost recovery cases.
Introduction
Shareholder activism in the UK has surged in recent years, led often by activist hedge funds but also by individuals and advocacy groups. While most campaigns play out through shareholder votes and negotiations, a few escalated into legal battles where companies sought to recoup costs from the activists. This report examines cases from 2015–2025 in which UK-listed companies successfully recovered expenses from activist shareholders. These cases fall into two main categories: (1) those enabled by the company’s constitutional documents (e.g. articles of association provisions shifting costs to activists), and (2) those where the activist’s conduct was deemed improper, in bad faith, or unlawful, prompting courts or regulators to order cost reimbursement. Each case summary below details the company, activist, year, dispute, legal basis for cost recovery, outcome, and implications for shareholder activism and corporate governance. A comparison table follows to highlight key aspects.
Cases of Cost Recovery from Activist Shareholders
Shell plc vs. ClientEarth (2023) – Climate Activist Litigation Costs Recovered
Shell plc (the FTSE-listed oil major) faced an unprecedented climate-focused activist lawsuit in 2023 by ClientEarth, an environmental NGO holding a token number of shares (Blow for activists as UK court dismisses Shell climate case | Reuters).
ClientEarth’s Activism: The group launched a derivative action on behalf of Shell against its directors, alleging that Shell’s climate transition strategy breached directors’ duties by failing to prepare for net-zero targets. This was a novel use of shareholder rights to press for ESG (environmental, social, governance) changes.
Dispute Summary: Shell’s board rejected the claims, and the matter went to the High Court for permission to continue the derivative suit. Shell intervened to oppose ClientEarth’s application, arguing the case was misconceived and not brought in good faith. Shell emphasised the ‘unfounded and very serious’ nature of the allegations and the disruptive impact of the suit, claiming it had to incur legal costs to respond (Raising the stakes in activist shareholder claims | BCLP - Bryan Cave Leighton Paisner).
Legal Basis Invoked: Although Shell’s articles of association did not directly address cost recovery in this context, the company relied on the UK’s legal cost-shifting rules. Under Companies Act 2006 derivative claim procedure and Civil Procedure Rules, a company normally would not recover costs at the permission stage if it volunteers to participate. However, Shell argued this case was exceptional and sought a departure from the default rule to make ClientEarth pay. Shell contended the activist’s conduct “had not been pursued in good faith and was devoid of any merit,” taking the case “out of the norm” and warranting a cost order.
Outcome: The High Court refused permission for the derivative claim (finding no prima facie case) and, in a landmark decision, ordered ClientEarth to pay Shell’s legal costs. This was a significant departure from the usual practice of not awarding a company its costs at the preliminary stage of a derivative action. The judge agreed that the case’s unusual nature – a single small shareholder suing all directors over broad climate strategy – justified making ClientEarth bear Shell’s costs (Raising the stakes in activist shareholder claims | BCLP - Bryan Cave Leighton Paisner) (changed the MaxPageS). On appeal, the Court of Appeal upheld the dismissal and the costs order, noting the lower court had given “cogent reasons” for penalising ClientEarth with costs (UK: ClientEarth fail to appeal ruling in Shell climate-related derivative action, Wilma Rix, Sara Feijao). Thus, Shell successfully recouped what is reported to be a six-figure sum in legal expenses from the activist.
Precedents & Implications: Shell vs. ClientEarth is the first UK case of a company clawing back costs from a shareholder activist on an ESG issue (changed the MaxPageS). It underscores the high bar for activist litigation in the UK and serves as a warning that pursuing a claim deemed spurious or in bad faith can result in substantial personal liability for costs. Legal commentators noted this outcome “raises the prospect that activists may have to pay substantial costs should they lose” such cases.
The case may deter frivolous or overly ambitious derivative claims by hedge funds or NGOs, and encourages boards to vigorously contest activist lawsuits, knowing that courts can shift costs to activists in egregious circumstances. It also highlights that a company’s constitutional documents need not explicitly address cost recovery – general cost rules and judicial discretion can suffice when an activist’s conduct is “far from the norm” (Raising the stakes in activist shareholder claims | BCLP - Bryan Cave Leighton Paisner).
Stobart Group Ltd (now Esken) vs. Andrew Tinkler (2018–2019) – Boardroom Battle and Breach of Duty
Stobart Group, an LSE-listed infrastructure and transport company, engaged in a high-profile boardroom fight with its former CEO Andrew Tinkler, who remained a significant shareholder after his ouster.
Activist Involved: Tinkler (an individual activist investor in this context) launched a campaign in 2018 to unseat the Stobart chairman and install his own nominee on the board (High Court rules ex-Stobart CEO must pay 55% of November trial costs | TheBusinessDesk.com). This proxy fight escalated dramatically: after Tinkler publicly disparaged the company’s leadership and rallied other shareholders (including a prominent fund manager) to his cause, Stobart’s board fired him from his remaining directorships and sued him.
Dispute Summary: The company alleged Tinkler had breached his fiduciary duties and contract by orchestrating a destabilizing campaign “to destabilise the company” and leaking sensitive information (High Court rules ex-Stobart CEO must pay 55% of November trial costs | TheBusinessDesk.com). Stobart also claimed Tinkler’s conduct (including alleged conspiracy with an outside investor and defamatory statements against board members) was in bad faith and harmful to the company’s interests. Tinkler counter-sued for defamation, making the feud a multi-faceted legal battle.
Legal/Constitutional Basis: Stobart’s articles of association did not explicitly provide for cost recovery from shareholders, but the company’s legal action for breach of duty laid the groundwork for recovering costs. By suing Tinkler in the High Court (a classic company vs. director/shareholder lawsuit), Stobart put itself in the position of a prevailing party eligible for costs if it won. Essentially, the improper conduct of the activist (a former insider breaching duties) was the basis – this falls under the category of activist acting in bad faith or unlawfully. The UK court’s costs rules (loser pays) meant that if Stobart succeeded on its claims, it could ask the court to order Tinkler to reimburse the company’s legal expenses.
Outcome: In February 2019, the High Court ruled in Stobart’s favour on the main issues, vindicating the board’s position in the feud (High Court rules ex-Stobart CEO must pay 55% of November trial costs | TheBusinessDesk.com). At a subsequent hearing on 16 May 2019, the court addressed costs and damages. The judge ordered Andrew Tinkler to pay 55% of Stobart’s legal costs from the trial. This partial costs order reflected that Stobart prevailed on most, though not all, of its claims (some of Stobart’s monetary claims were withdrawn or not fully successful during the proceedings) (Eleventh hour win for Woodford in Stobart case | Portfolio Adviser) (Eleventh hour win for Woodford in Stobart case | Portfolio Adviser).
Even so, the cost reimbursement was substantial: one report indicated a £2.5 million costs bill was initially sought (Ousted Stobart Founder Can Dispute £2.5M Costs Bill - Law360). Tinkler was held liable for the majority of that, and the company thereby recouped a significant portion of the expenses incurred in defending itself and prosecuting its claims. (Ultimately, Stobart and Tinkler settled remaining issues, but only after the court had firmly established Tinkler’s costs liability.)
Precedents & Implications: The Stobart vs. Tinkler saga shows that UK boards can fight back against activist shareholders who cross the line, using litigation to both halt improper activism and recover expenses. It set a precedent that a shareholder (even a high-profile, significant one) acting in bad faith – for example, breaching fiduciary duties as a director, or waging a campaign in violation of law or contracts – may personally bear costs if the company prevails in court (High Court rules ex-Stobart CEO must pay 55% of November trial costs | TheBusinessDesk.com) (High Court rules ex-Stobart CEO must pay 55% of November trial costs | TheBusinessDesk.com).
This outcome has a cautionary effect on activist hedge funds and individuals: while most hedge funds don’t engage in the overt misconduct seen in Tinkler’s case, the principles from this case reinforce that activist campaigns must stay within legal bounds. If an activist’s tactics involve unlawful steps (e.g. misuse of confidential information, defamation, or breach of agreements), the company not only can seek injunctive relief but also monetary redress and costs.
From a corporate governance perspective, the case underlines the importance of clear articles of association, employment contracts, and board policies that define and prohibit certain behaviors – giving companies a stronger position if they need to pursue an activist for damages. Boards in the UK took note that courts are willing to hold rogue shareholders accountable, which may influence how future activism disputes are handled (encouraging negotiated settlements or cooling-off periods to avoid costly court fights).
Cost Recovery via Company Articles – Shareholder Meeting Requisitions
Not all cost recoupment scenarios reach the courts. UK company law and some articles of association provide mechanisms to shift costs to activist shareholders in certain situations, particularly around requisitioned meetings and proposed resolutions. Under the Companies Act 2006, if shareholders request the company to circulate a resolution or statement outside the normal annual report cycle, the company can require the requisitionists to cover the costs (usually via an up-front deposit) unless the request is received by a specified early deadline (Filing a shareholder proposal in the UK | Article | PRI).
Many UK-listed companies have embedded such provisions in their articles to protect against late-stage activist demands. For example, GlaxoSmithKline (GSK) amended its articles to require that any shareholder proposal for the AGM received after 31 January must be accompanied by a deposit to pay the company’s costs of circulating that proposal. This change was driven by GSK’s estimate that complying with a shareholder requisition could cost up to £200,000. The effect is that activists meeting the minimum shareholding threshold can still force a vote, but the expense of printing and mailing materials to all shareholders can be charged to the activist if they missed the early deadline. (Activists can ask the meeting itself to approve reimbursing those costs, but that requires a separate resolution (GSK - 2007 - Requisitioning a resolution at a GSK Annual General Meeting).)
Relevant Cases/Examples: While such provisions are typically preventative (few disputes make it to court since activists either pay the deposit or file on time), there have been instances indicating their use. In 2016, Unite the Union and ShareAction filed a shareholder resolution at Sports Direct’s AGM addressing worker treatment. Because the proposal came after the financial year end, Sports Direct was entitled to demand the proponents pay for circulating it. Indeed, UK governance guidelines note that proposals after 31 December “must be accompanied by funds” to cover costs estimated in the £100,000–£200,000 range (Filing a shareholder proposal in the UK | Article | PRI) (Filing a shareholder proposal in the UK | Article | PRI).
In practice, activist investors often plan filings before the deadline to avoid this, or they pool resources to pay the deposit. The key point is that the company’s constitution and statute empowered companies to recoup mailing and meeting costs directly, without needing a lawsuit. For example, if a hedge fund requisitions an EGM to shake up the board, the cost of convening that meeting (venue, notices, etc.) is generally borne by the company (Shareholder Activism & Engagement in the United Kingdom) unless the company’s articles say otherwise. Some firms have introduced clauses requiring the activist to reimburse the company’s EGM expenses if the activist’s resolutions do not pass – essentially a deterrent to frivolous requisitions. These article-based cost recovery tools haven’t been frequently tested in court (likely because activists comply), but they form an important part of the UK corporate governance landscape. They create a financial disincentive for activism that lacks broad support, since an activist that fails to carry shareholder approval might end up footing a large bill for the endeavor.
Implications: The use of articles and statutory provisions for cost recovery reflects a balancing of shareholder democracy with protection against abuse. Companies prioritizing this have set a precedent in their governance documents that activists must have conviction (and resources) behind their campaigns. For hedge funds, it means campaigns must be well-timed and likely to succeed, or they risk eating the costs of things like circulars and meetings. For individual or NGO activists with fewer resources, these requirements can be a significant hurdle, channeling activism into either collaborating with institutional investors (to file early and avoid costs) or focusing on non-resolution tactics (like public pressure).
Overall, while there have been no high-profile court battles solely over such article provisions in 2015–2025, the routine enforcement of these rules in activism situations has effectively allowed companies to avoid incurring costs or to recoup them directly from activists as a condition of proceeding. This contributes to the UK’s reputation as having strong safeguards (via the Companies Act and company articles) to ensure that shareholder activism is conducted in good faith and at the activists’ expense if it falls outside normal governance processes (Filing a shareholder proposal in the UK | Article | PRI).
Sources: Company announcements, court judgments, and legal analyses (Raising the stakes in activist shareholder claims | BCLP - Bryan Cave Leighton Paisner) (High Court rules ex-Stobart CEO must pay 55% of November trial costs | TheBusinessDesk.com) (Filing a shareholder proposal in the UK | Article | PRI) (see referenced links) have been used to compile the above cases and outcomes. These cases illustrate how UK companies have leveraged both legal avenues and constitutional tools to recover costs from activists in the past decade. The trend shows a clear message: activists in the UK must proceed with care – if their actions fall outside proper bounds or company timelines, they may end up footing the bill.
Disclaimer: This report is for informational purposes only and does not constitute financial, legal, or investment advice. The views expressed are those of the author, based on online research and available data. Readers should not rely on this content as a substitute for professional advice. We make no representations regarding the accuracy or completeness of the information. Independent legal or financial advice should be sought before acting on any of the report's content.