The claimants sought damages for the failure of the defendants, former directors of the RAC, to warn them of the impending re-organisation and demutualisation of the RAC. By resigning in ignorance they had lost the chance to participate in the de-mutualisation.
Held: The claim was struck out. The rules of the club did not form a contract with its members. A director does not owe a general fiduciary duty to shareholders of the company. A director of a company could owe a fiduciary duty to shareholders if he had, in relation to the sale of shares, special knowledge not possessed by the shareholders. There was no fiduciary duty in the circumstances of this case. Eight factors led to that conclusion: the absence of any special facts in the relationship of the directors and the members of RACL, which would make the existence of a fiduciary duty more likely; the claimants had resigned membership of their own motion, uninfluenced by any information provided by, or views expressed by, the directors; no specific transaction was in contemplation at the time of the resignations; the defendants did not, in their capacity as directors of RACL, benefit from the claimants ceasing to be members, either directly ( e.g. they did not acquire shares from the members or encourage them to part with their shares) or indirectly ( e.g. by minimising the number of members, so as to increase their share of the proceeds of sale) ; the alleged interest of the directors in profits from the sale in the form of ‘golden hellos and employment contracts’ did not impinge on the issue whether they were under a duty to disclose at an early stage the possibility of selling off the RACMS business; the investigation and promotion of proposals for the de-mutualisation of RACL (including the incurring of costs in relation to the amendments of the Memoranda of RACL and RACMS sanctioned by the court) did not involve the directors in the pursuit of an unauthorised and improper object; it was unreasonable for directors to be put in the sort of position which the claimants’ contentions would necessarily involve with regard to the disclosure of contemplated arrangements or transactions best kept confidential; and the claimants’ arguments would place directors in the unfortunate position of being ‘damned if they do and damned if they don’t’, if they were put under a duty to disclose to the members a contemplated sale which might, or might not, happen.
Judges:
Neuberger J
Citations:
[2000] 2 BCLC 1
Jurisdiction:
England and Wales
Cited by:
Appeal from – Bruce Peskin; Kevin Milner v John Anderson and Others CA 14-Dec-2000
The Royal Automobile Club (RAC) had been demutualised. The claimants were former members who sought damages from former directors because they had received no benefit. They had ceased to be members before the re-organisation and claimed they should . .
Lists of cited by and citing cases may be incomplete.
Company, Contract
Updated: 06 May 2022; Ref: scu.185791