D – Directors
5/11/24
CHESHIRE ESTATE & LEGAL LTD v BLANCHFIELD [2024] EWCA Civ 1317
Considers directors’ statutory/fiduciary duties when taking preparatory steps towards setting up a competing business prior to resigning [18]. On the facts, the judge had been entitled to find that directors had not breached their duties: (i) the steps taken were entirely preparatory to trading which would not start until six months after they resigned, (ii) the venture might not have proceeded; (iii) the directors resigned 4 days after it became clear the venture would proceed; (iv) in the meantime they were able to and did serve the company faithfully.
15/5/24
LIFESTYLE EQUITIES CV v AHMED [2024] UKSC 17
Considers when company directors can be liable for torts committed by the company (here trade mark infringement). The directors had not committed any tort in their own right as they only acted on behalf of the company, but there is no special principle that directors acting as such cannot be liable in tort [33]. The rule in Said v Butt (1920) (agent not liable for procuring breach of contract with principal) applies if an agent acting with authority procures a breach pf contract by the principal [54]. This does not prevent an agent being jointly liable with the principal for procuring or assisting the principal to commit a tort [61]. A person who knowingly procures another to commit an actionable wrong is jointly liable in tort with that other for the wrong [135]. A person who assists another to commit a tort is jointly liable for the tort if the assistance is more than trivial and is given pursuant to a common design between the parties [136]. The person procuring or assisting must know (or have blind eye knowledge of) the essential facts which make the act wrongful. The defendants did not have that knowledge [143]. Had they done so, an account of profits could have been ordered for the profits they (rather than the company) had made from the wrongful conduct [169] but on the facts, they had not made any such profits.
26/4/24
MITCHELL v SHEIKH MOHAMED BIN ISSA AL JABER [2024] EWCA Civ 423
The defendant was a company director who had caused legal title to shares owned by the company to be transferred to a third party recipient, at a time when he had no power to act as a director. The defendant was held to be subject to fiduciary duties as if he had been a director [36] and liable for breach of trust for intermeddling in the company’s affairs by causing title to the shares to be registered in the name of the recipient. It made no difference that the defendant did not receive the shares personally [47]. Although he had no power to transfer the shares, the transfer had been made to appear to have taken place at a time when he had power to act as a director of the company [48] and the practical effect had been to cause the transfer to be registered and so confer legal title on the recipient [49]. On the facts, however, it had not been proved that the shares would have been sold but for the transfer [78] and since they had later lost any value, no loss was established [80]. Unless a party objects at trial that a point was not properly pleaded, it cannot be challenged on that basis on appeal [91]. The court also considered principles on which an unpaid vendor of shares can claim a lien [92]. On the facts, the parties had intended to exclude any lien arising [100]. The recipient of the shares was, however, liable for knowing receipt [103].
28/3/24
KENDALL v BALL [2024] EWHC 746 (Ch)
A joint declaration of trust of land in the names of the respondents was not conclusive in a claim by administrators of the applicant company for a declaration that the land was held by the respondents on resulting or constructive trust for the company. The court considered principles for establishing a resulting trust [37] but rejected the claim made on that basis. The court also considered principles on which directors are liable as constructive trustees if they acquire property in breach of duty [53]. On the facts, the claim that the land was held on constructive trust succeeded.
19/5/20
STUBBINS MARKETING LTD v STUBBINS FOOD PARTNERSHIPS LTD [2020] EWHC 1266 (Ch)
Contains a useful summary of directors’ duties to act for proper purposes, promote the success of the company, skill and care, and to avoid conflicts of interest [349]. Considers the Duomatic principle by which shareholders may ratify a transaction [364] and when directors may be excused from liability under s 1157 Companies Act 2006. On the facts, various breaches of duty had been committed, including by directors who participated by authorising or receiving certain payments [563], by procuring the grant of a debenture [589], and by allowing work to be done to the directors’ homes [594].
21/2/20
WALLIS TRADING INC v AIR TANZANIA COMPANY LTD [2020] EWHC 339 (Comm)
The defendant company was contractually estopped from contesting the validity of an aircraft lease [79]. In any event an allegation that a director entered into the lease otherwise than in good faith was not made out [95]. The director had ostensible authority to enter into the lease [102]. The lease was within the company’s powers and the claimant had no notice of any abuse of power by the company’s board so the lease was enforceable (applying Rolled Steel Products, 1986) [107].
21/1/20
RE SYSTEMS BUILDING SERVICES GROUP LTD; HUNT v MICHIE [2020] EWHC 54 (Ch)
Contains a useful summary of directors’ duties [31]. The duties survive a company’s administration or voluntary liquidation [60]. A director had acted in breach of duty by purchasing a property from the company off-market knowing it was being sold at a substantial undervalue for his own personal benefit [117]. The director had acted unreasonably so relief was not available under s 1157 Companies Act 2006. The property was therefore held on constructive trust for the company, but an allowance was to be made for the benefit of improvements to the property made by the director. The director had also acted in breach of duty by causing certain payments to a third party after the company went into administration [163] and was liable to account for certain payments made to himself.
13/9/17
GLOBAL CORPORATE LTD v HALE [2017] EWHC 2277 (Ch)
A claim was made to recover payments from a director on grounds that the payments had been unlawful dividends, a preference/undervalue and paid in breach of fiduciary duty. The claim failed. The payments had not been dividends because at the time of making them the director had not made a decision to pay them as dividends. He had intended to leave that decision until the accounts were prepared and indicated that there were sufficient distributable reserves. There had been no undervalue or breach of fiduciary duty because the respondent had a claim to the monies for his services. The claimant had no title to sue to recover a preferential payment, as that claim had not been assigned to the claimant and remained with the liquidator who was not a party to the application.
5/7/17
CULLEN INVESTMENTS LTD v BROWN [2017] EWHC 1586 (Ch)
Directors acted in breach of the no conflict and no profits rules in ss 175-177 Companies Act 2006 by acquiring an interest in a competing undertaking. Also considers principles of unlawful means conspiracy [268].
12/11/15
SHARP v BLANK [2015] EWHC 3219 (Ch)
The defendant applied for summary judgment to dismiss a claim by shareholders for breach of fiduciary and tortious duties by directors of Lloyds Bank in the acquisition of HBOS by failing to disclose that HBOS had been manipulating LIBOR submissions. As disclosure had not yet taken place, the court could not say with confidence that the claimant's case was without substance.
22/9/15
RE: PROSPORT [2015] EWHC 2540 (Ch)
Shortly before a company liquidation a director/majority shareholder transferred practically all of the company's assets to an associated company for deferred consideration on ROT terms but with no other security. An application by the liquidator to recover the company’s loss from the director under s 212 Insolvency Act 1986 was dismissed. The director had not acted in breach of duty. He had believed the contract to be in the best interests of creditors by avoiding the costs of sale. He had obtained valuations and taken independent advice. He could not be said to have failed to exercise reasonable skill and care.
22/5/14
GOLDTRAIL TRAVEL LTD v AYDIN [2014] EWHC 1587 (Ch), [2015] 1 BCLC 89
The court found that a sole director/shareholder had misapplied assets of the company in breach of fiduciary duty. They director’s acts could not be regarded as ratified by the company because of the company’s insolvency at the time the wrongful transactions had taken place. The director’s fraud could not be attributed to the company which was the victim. Third parties involved in the transaction were liable for dishonest assistance even if they had not dealt with trust property. The third parties could not set-off against their liability sums owed to them by the company.
20/2/15
BREITENFIELD UK LTD v HARRISON [2015] EWHC 399 (Ch)
Between them, a company director and others were liable for breach of contract, breach of fiduciary duty, unlawful means conspiracy and dishonest assistance in setting up a rival company.
10/7/14
SMITHTON LTD v NAGGAR [2014] EWCA Civ 939
Considers when an individual may be a de facto or shadow company director [16]. On the facts the trial judge had been entitled to hold that the evidence did not establish that the defendant had been involved in the company’s management. Nor was the defendant liable under s 190 Companies Act 2006 for entering into a substantial property transaction with the company without members’ approval, because the defendant had not acquired any asset from the company.
10/4/14
MCTEAR v ENGLEHARD [2014] EWHC 1056 (Ch)
A debt was owed by a holding company to its subsidiary. Adjustments made to the inter-company account had been made by the directors in breach of their duties to the company.
10/4/14
MORAN YACHT & SHIP INC v PISAREV [2014] EWHC 1098 (Comm)
Considers principles applicable when an agent or broker claims commission on the basis that he was the effective cause of a transaction [93]. On the facts a broker had not been the effective cause of the sale of a yacht and the claim failed. Suggests it is unlikely that a director may be liable for inducing a breach of contract by a company as this would undermine the concept of limited liability [115].
ELSWORTH ETHANOL CO LTD v HARTLEY [2014] EWHC 99 (IPEC)
Contains a useful summary of the law as to whether an individual has become a de facto director [51-4]. On the facts the individual concerned had not been a de facto director and had not in any event breached any fiduciary duty to the company.
10/1/14
KEY HOMES BRADFORD LTD v PATEL [2014] EWHC B1 (Ch)
Section 1140 Companies Act 2006 provides a method for serving a company director with any document, including a claim form.
25/10/13
SHARMA v SHARMA [2013] EWCA Civ 1287
Reviews principles on which directors may be in breach of fiduciary duty in diverting business for personal gain. On the facts the shareholders had consented to and acquiesced in the director personally exploiting the opportunity so the claim failed.
18/10/13
MADOFF SECURITIES INTERNATIONAL LTD (IN LIQUIDATION) v RAVEN [2013] EWHC 3147 (Comm)
Considers directors’ duties to act with care and skill and for proper purposes, liability for unlawful capital distribution, the defence to claims of breach based on the Duomatic principle, statutory relief from liability, and the elements for liability for dishonest assistance of a breach of trust or unjust enrichment.
11/10/13
INVIDEOUS LTD v THOROGOOD [2013] EWHC 3015 (Ch)
A director/shareholder was in breach of duty in setting up and working for another company and pursuing business opportunities through that company. The director’s duties of fidelity as an employee are summarised at [45], his duties as a director at [76] and the principles applicable to misuse of business opportunities at [77].
25/9/13
HELLARD v CARVALHO [2013] EWHC 2876 (Ch)
Contains a useful summary of directors’ duties especially when company insolvency is looming [87]-[99].
31/7/13
BILTA (UK) LTD v NAZIR [2013] EWCA Civ 968, [2014] Ch 52
In proceedings by a company against a director for breach of duty, the company is to be regarded as the victim so the director cannot rely on his own breach as creating liability on the part of the company as a defence.
15/7/13
Published by the Department for Business, Innovation & Skills. Considers proposals to improve corporate transparency and strengthen director disqualification laws, including changes to bank directors’ duties as recommended by the Parliamentary Commission on Banking Standards.
11/7/13
SMITHTON LTD v NAGGAR [2013] EWHC 1961 (Ch)
Considers when an individual may be a de facto or shadow company director [48]. On the facts the evidence did not establish that the defendant had been involved in the company’s management. Nor was the defendant liable under s 190 Companies Act 2006 for entering into a substantial property transaction with the company without members’ approval, because the defendant had not acquired any asset from the company.
2/5/13
HAMID v FRANCIS BRADSHAW PARTNERSHIP [2013] EWCA Civ 470
Summarises principles to be applied cases where the identity of a contracting party is in issue [57]. A contract signed by an individual below a trading name used by a company of which he was a director, bound that individual personally where the other party did not know the trading name was used by the company and the individual had not made it plain that the contract did not bind him personally.
14/3/13
BRUMDER v MOTORNET SERVICE & REPAIRS LTD [2013] EWCA Civ 195
The sole director/shareholder could not bring a claim against the company for personal injury suffered as a result of the company failing to exercise reasonable care to maintain equipment in working order. The claimant was himself in breach of his duty as a director of the company to exercise skill and care, so the claim was precluded by the principle that a wrongdoer cannot benefit from his own wrong.
15/2/13
WEAVERING CAPITAL (UK) LTD v DABHIA [2013] EWCA Civ 71
A director and senior employee of a hedge fund company were liable for breach of the duty of skill and care. Although the director had not been a dishonest participant in the wrongdoing of the employee, the judge had been entitled to conclude that if he had probed the information that he had been given, as he should have done, he would have been able to see that the employee’s explanations were deficient. It was implicit in the judge’s judgment that if he had complied with his duties the business of the company would have ground to a halt. On that basis the conduct of the director and employee in negligently enabling the business to continue, caused the loss claimed.
18/1/13
ICSA (Institute of Chartered Secretaries & Administrators) Guidance on liabilities of non-executive directors: care, skill and diligence published.
2/10/12
NEWCASTLE INTERNATIONAL AIRPORT v EVERSHEDS LLP [2012] EWHC 2648 (Ch)
An executive director had apparent authority to instruct solicitors to draft a service contract which awarded him a very significant bonus.
6/8/12
GEOLABS LTD v GEO LABORATORIES – PCC
A managing director who was a company’s controlling mind was personally liable for the company's trade mark infringement.
30/5/12
WEAVERING CAPITAL (UK) LTD v PETERSON [2012] EWHC 1480 (Ch)
Directors, including a director with a limited management role, were liable in negligence for failing to prevent another director’s fraud.
25/4/12
E-CLEAR (UK) PLC v ELIA [2012] EWHC 1256 (Ch)
The claimant company was entitled to summary judgment on its claim against the defendant director for breach of fiduciary duty in misusing the company’s funds to purchase a property. It was unlikely that the defendant had a cross-claim against the company for repayment of an alleged loan, but in any event a personal claim for repayment could not be set-off against the company’s claim. A claim by the defendant’s mother to have an interest in a property acquired with the misused funds could not take priority because the company’s claim arose first in time.
15/3/12
SMITH v BUTLER [2012] EWCA Civ 314
A managing director had no implied authority to dismiss the chairman.
27/2/12
KILLEN v HORSEWOOD LTD [2012] EWHC 363 (QBD)
By diverting a business opportunity to another company which she controlled, a former director acted in breach of the duty to avoid conflicts of interest and not to make secret profits in CA 2006 s 175.
21/2/12
GRIMALDI v CHAMELEON MINING NL (NO. 2) [2012] FCAFC 6 (Fed Ct (Aus)
Considered claims against de facto director for breach of fiduciary duty and accepting secret commissions, and against third parties dealing with the company for knowing receipt and assistance.
23/1/12
GHLM TRADING LTD v MAROO [2012] EWHC 61 (Ch)
If a director causes a company to make a contract for his own interests, not those of the company, and the other contracting party had notice of that fact, the contract is void not voidable [171]. Once it is shown that a director has received company money, it is for him to show that the payment was proper. Where debit entries have correctly been made to a director's loan account, it is for the director to justify credit entries on the account [149]. A director's duty of good faith can potentially require him to disclose his own misconduct [193].
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