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 director has additional, fiduciary duties over and above those of an employee. The duties are set and imposed by law. Whilst a director was under a fiduciary duty to disclose his wrongdoing to the company, this was not a separate and independent duty but was part of the more general obligation to act in what he in good faith considers to be in the best interests of the company. F was under a duty to disclose that he had a personal interest in the decision before the board. That duty could only be fulfilled by informing the board of his setting up of an independent and competing company. The director was entitled to an apportioned part of his salary until the date of the breach. The 1870 Act should be treated as a remedial Act and there is no justification for striving to restrict its operation, and it does indeed extend to apportionment of salaries when the employment ceased during a pay period.
Mr Justice Holman, Lord Justice Mummery, Lady Justice Arden
 EWCA Civ 1244, Times 21-Oct-2004,  BCC 994,  Lloyd’s Rep PN 17,  ICR 450,  2 BCLC 91,  IRLR 928
Apportionment Act 1870, Companies Act 1985 310 317
England and Wales
Appeal from – Item Software (UK) Ltd v Fassihi and Others ChD 5-Dec-2002
Enforcement of confidentiality clause in contract of employment on termination. . .
Cited – Bell v Lever Brothers Ltd HL 15-Dec-1931
Contract – Mutual Mistake Test
Bell was director and chairman of Niger, a subsidiary of Lever Brothers Ltd who dismissed him, offering and paying pounds 30,000 compensation. Lever then discovered that Mr Bell had made secret profits at the expense of Niger for which he could have . .
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 – Horcal Ltd v Gatland CA 1984
The court considered the arguments presented as to the duty of a director of a company to disclose his own breach of fiduciary duty: ‘Counsel . . submitted, as a general proposition, that, putting fraud on one side, there is no general duty on . .
Cited – Boston Deep Sea Fishing and Ice Co v Ansell CA 1888
An employer having dismissed an employee (its managing director) later learnt of the employee’s fraud.
Held: The employer was allowed to rely upon that fraud to justify the dismissal. Where an agent is in wrongful repudiation of his contract . .
Cited – Sybron Corporation v Rochem CA 1983
There was an allegation that the employee had failed to disclose breaches of contract by fellow employees. This had taken place at a time when a decision was being taken as to the payment to be made to him under the terms of a pension scheme. The . .
Cited – Re Hampshire Land Company 9-Jul-1896
A company had borrowed from a building society. The borrowing was not properly authorised by resolution of the shareholders in general meeting The court was asked whether whether the knowledge of the company secretary common to both the company and . .
Cited – Industrial Development Consultants Ltd v Cooley 1972
Mr Cooley was the managing director of the claimant. His duties included procuring business in the field of developing gas depots. The company had unsuccessful negotiations with the Eastern Gas Board for the development of four depots. However, the . .
Cited – Moriarty v Regent’s Garage and Engineering Co Ltd KBD 1921
A company director sought payment of his directors fees of andpound;150 per annum where during the course of the year he had ceased to be a director. There was no allegation of impropriety on his part. The company’s articles provided that the . .
Cited – JC Houghton and Co v Northard, Lowe and Wills HL 1927
The court was asked whether the knowledge of the directors of the latter company should be attributed to it, with the effect that the latter company could and should be treated as estopped from denying that it had consented to a particular . .
Cited – Capron v Capron 1874
By a will made before the 1870 Act, but amended by a codicil after the Act commenced to the use of his wife with remainders over. After her death having inherited the property, the parties disputed the apportionment of the rents.
Held: The . .
Cited – Inman v Ackroyd 1901
In the absence of some custom as to the method of payment a Director’s salary would not be payable until the years service was completed, which necessarily would require that it be paid outside the period of the year in which it was earned . .
Cited – Bhullar and others v Bhullar and Another CA 31-Mar-2003
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 . .
Cited – Miles v Wakefield Metropolitan District Council HL 1987
The claimant was a superintendent registrar of Births Deaths and Marriages. His union instructed him not to conduct weddings on Saturdays. He had been told that if he failed to perform his full range of duties on a Saturday (including marriages), he . .
Cited – Crown Dilmun, Dilmun Investments Limited v Nicholas Sutton, Fulham River Projects Limited ChD 23-Jan-2004
There was a contract for the sale of Craven Cottage football stadium, conditional upon the grant of non-onerous planning permissions. It was claimed that the contract had been obtained by the defendant employee in breach of his fiduciary duties to . .
Cited – Tesco Stores Limited v Pook, Pook, Universal Projects (UK) Limited ChD 14-Apr-2003
A trustee in breach of his duty has a duty to disclose that breach. It was alleged that the defendants, including a director of the claimant, had submitted false invoices to the claimants, and purchased property with the resulting profits.
Cited – Sim v Rotherham Metropolitan Borough Council 1981
The 1870 Act applied where an employee’s contract was terminated in the course of a period at the end of which payment would be made. Scott J said: ‘Mr Goudie submitted that the real question was whether a teacher was entitled to be paid for the . .
Cited – El Ajou v Dollar Land Holdings Ltd CA 2-Dec-1993
The court was asked whether, for the purposes of establishing a company’s liability under the knowing receipt head of constructive trust, the knowledge of one of its directors can be treated as having been the knowledge of the company.
Held: . .
Cited – Healey v Societe Anonyme Francais Rubastic 1917
A director of the company claimed arrears of salary for work done notwithstanding that he had been summarily dismissed for misconduct. There was no question of a claim for damages for breach of duty. . .
Cited – Winkworth v Edward Baron Development Co Ltd HL 1986
A company director has duties to the company’s creditors as well as the shareholders. ‘Equity is not a computer. Equity operates on conscience . .’ . .
Cited – Meinhard v Salmon 1928
(New York Court of Appeals) Cardozo J said: ‘Equity refuses to confine within the bounds of classified transactions its precept of a loyalty that is undivided and unselfish’ and ‘[a] constructive trust is, then, the remedial device through which . .
Cited – Mutual Life Insurance Co of New York v Rank Organisation Ltd 1985
The duty of loyalty of a director to his company is the ‘time-honoured’ rule. The directors are under a duty to act fairly as between different shareholders. This applies not just where there were different classes of shareholder but also where . .
Cited – In Re Barings Plc, Secretary of State for Trade and Industry v Baker (No 5) ChD 25-Nov-1998
A person disqualified from acting as a company director might exceptionally be given permission to act as non-executive director in named companies where this appeared necessary and the cause of the original disqualification was unrelated.
As . .
Cited – Powdrill and Another v Watson and Another HL 23-Mar-1995
A receiver of a companies assets, who employed former staff of the company, beyond an initial period of 14 days, becomes personally responsible for their employment contracts, and consequently becomes liable for making redundancy payments. The 1870 . .
Cited – Moriarty v Regent’s Garage and Engineering Co Ltd CA 2-Jan-1921
Whilst the point was obiter in this case: ‘ . . it seems to me that there is no decision binding on the Court of Appeal as to whether directors’ fees are salary within the Apportionment Act in the case where the agreement . . is simply for payment . .
Cited – Re William Porter and Co Ltd 1937
Cited – Treacy v Corcoran 1874
(Irish Court of Common Pleas) The holder of a public office as Clerk of the Crown was entitled to be paid half yearly. During the course of a half year the plaintiff, Treacy, had resigned from that office. At the end of the half year the salary for . .
Cited – Fulham Football Club (1987) Ltd v Tigana CA 19-Jul-2005
The defendant had acted as manager of the claimant. The claimant appealed dismissal of its claim for breach of contract and of fiduciary duty, and his claim for payment of sums due under share options granted to him.
Held: The appeal failed. . .
Cited – Helmet Integrated Systems Ltd v Tunnard and others CA 15-Dec-2006
Whilst employed by the claimants as a salesman, the defendant came to want to develop his idea for a modular helmet suitable for fire-fighters and others. He took certain steps including showing the proposal confidentially to a competitor, and then . .
Cited – Hartley and Others v King Edward VI College SC 24-May-2017
The teacher appellants challenged the quantification of deductions from their salaries after engaging in lawful strike days.
Held: The appeal as allowed. The correct approach under section 2 to a case like this, where the contract is an annual . .
Lists of cited by and citing cases may be incomplete.
Updated: 29 November 2021; Ref: scu.215858