Rechtsprechung

Decision of the Supreme Court
First Petit Bench, January 30, 2001

Hiroshi Oda

The Supreme Court ruled for the first time on the matter of whether a company could intervene in the procedure as an auxiliary participant. The Code of Civil Procedure allows an interested party to intervene in the procedure in order to assist the party. The auxiliary participant is not a party, but is a person whose right or legal status is dependent on the outcome of the ongoing litigation between the parties. An auxiliary participant is entitled to effect all procedural acts available to the parties.

There is no explicit provision as to whether auxiliary participation by the company in a shareholder’s action should be allowed or not. The problem is that the company benefits by the defendants/directors losing. Why should the company side with the defendants? Lower court decisions were divided. Views of the academics were diverse as well. There is an influential view that in cases where the lawfulness of the decision of a corporate body is at issue, the company should be given an opportunity to defend the legitimacy of the decision.

In the present case, a shareholder of a company initiated a shareholder’s action vis-à-vis directors for breach of fiduciary duty. Directors had allegedly been either involved in, or overlooked, window dressing. The company applied for auxiliary participation, but the plaintiff objected, and the first instance court dismissed this application on the ground that auxiliary participation was allowed only when the outcome of the decision of the court on the object of litigation (Prozessgegenstand) affects the participant, and not the finding of the facts merely referred to in the reasons of the judgment (In a share­holder’s action, the object of litigation is the claim for damages vis-à-vis directors; law­fulness of the decision of the board is part of the reasons which justify the decision). The court also pointed out that since the purpose of shareholder’s litigation is to supervise and if necessary, rectify the enforcement of duties by directors, auxiliary participation by the company on the side of the defendant/directors may lead to the erosion of the effect of this system and may be against the purpose of this institution.

On appeal, the second instance court also dismissed the application on the following grounds. The system of auxiliary participation is available only when the auxiliary participant benefits by the party with whom the auxiliary participant is to side, winning the case. However, in the present case, if the party with whom the auxiliary participant