The claimants were 50% shareholders in a property investment company and sought relief alleging prejudicial conduct of the company’s affairs. After a falling out, two directors purchased property adjacent to a company property but in their own company name.
Held: The company had not been looking to acquire further property, and the purchase could not be described as a developing business opportunity in the standard sense. Where a fiduciary has exploited a commercial opportunity for his own benefit, the relevant question is not whether the party to whom the duty is owed had some kind of beneficial interest in the opportunity: that would be too formalistic and restrictive an approach. Rather, it is simply whether the fiduciary’s exploitation of the opportunity is such as to attract the application of the rule. Each case must be viewed on its own facts. In this case there was a conflict, and the director had acted in breach of his duty to the company. The directors were liable for profits resulting from the acquisition of a property neighbouring that of their company even though they had obtained this information not as directors but as passers-by: ‘the existence of the opportunity was information which it was relevant for the company to know, and it follows that [the directors] were under a duty to communicate it to the company.’
Judges:
Lord Justice Brooke Lord Justice Schiemann Lord Justice Jonathon Parker
Citations:
[2003] EWCA Civ 424, [2003] 2 BCLC 241
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Cited – Regal (Hastings) Ltd v Gulliver HL 20-Feb-1942
Directors Liability for Actions Ouside the Company
Regal negotiated for the purchase of two cinemas in Hastings. There were five directors on the board, including Mr Gulliver, the chairman. Regal incorporated a subsidiary, Hastings Amalgamated Cinemas Ltd, with a share capital of 5,000 pounds. There . .
Cited – Phipps v Boardman HL 3-Nov-1966
A trustee has a duty to exploit any available opportunity for the trust. ‘Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to . .
Cited – Aberdeen Railway Co v Blaikie Brothers HL 1854
The plaintiff needed a large quantity of iron chairs (rail sockets) and contracted for their supply over an 18-month period with Blaikie Bros a partnership. Thomas Blaikie was the managing partner of Blaikie Bros and a director and the chairman of . .
Cited – New Zealand Netherlands Society ‘Oranje’ Inc v Laurentuis Cornelis Kuys PC 1963
(New Zealand) The scope of a fiduciary duty may be modified by a course of dealing by the person to whom the duty is owed. ‘The obligation not to profit from a position of trust, or, as it sometimes relevant to put it, not to allow a conflict to . .
Cited – Parker v McKenna CA 1874
The directors of a bank acquired for themselves, and made a profit on, certain shares the subject of a new issue that were not taken up by the bank’s shareholders.
Held: James LJ said: ‘I do not think it is necessary, but it appears to me very . .
See Also – Bhullar and others v Bhullar and others CA 26-Sep-2002
Renewed application for leave to appeal . .
Cited by:
Cited – Fassihim, Liddiardrams, International Ltd, Isograph Ltd v Item Software (UK) Ltd CA 30-Sep-2004
The first defendant (F) had been employed by a company involved in a distribution agreement. He had sought to set up a competing arrangement whilst a director of the claimant, and diverted a contract to his new company.
Held: A company . .
Cited – Ultraframe (UK) Ltd v Fielding and others ChD 27-Jul-2005
The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
Cited – O’Donnell v Shanahan and Another CA 22-Jul-2009
The claimant appealed against dismissal of her petition for an order for the defendants to purchase her shares at a fair value, saying that they had acted unfairly toward her. Her co-directors had acquired, for another company of which they were . .
Cited – FHR European Ventures Llp and Others v Cedar Capital Partners Llc SC 16-Jul-2014
Approprietary remedy against Fraudulent Agent
The Court was asked whether a bribe or secret commission received by an agent is held by the agent on trust for his principal, or whether the principal merely has a claim for equitable compensation in a sum equal to the value of the bribe or . .
Lists of cited by and citing cases may be incomplete.
Company, Equity
Updated: 07 June 2022; Ref: scu.180322
