Fiduciary Duty CASES

A railway company's director, Thomas Blaikie, contracted on behalf of the company with his own firm for iron chairs. The House of Lords held that directors cannot enter contracts with companies they serve, as fiduciary duties prohibit conflicts between personal interest and duty to the company.

Mr Reid, a Hong Kong prosecutor, accepted bribes and invested them in New Zealand properties. The Privy Council held that a fiduciary who accepts bribes holds them on constructive trust for the principal, overruling Lister v Stubbs. The principal can claim any increase in value of the bribe property.

Former directors of Queens Moat Houses plc appealed against orders making them liable for unlawful dividends paid based on accounts that did not give a true and fair view. The Court of Appeal dismissed their appeal and allowed the company's cross-appeal, holding directors accountable for dividends paid on dishonestly prepared accounts regardless of company solvency.

Mr Berezovsky claimed he was intimidated by Mr Abramovich into selling his interests in Russian oil company Sibneft at an undervalue through threats linked to the Putin regime. He also claimed Mr Abramovich breached fiduciary duties regarding aluminium company Rusal. The Court of Appeal largely upheld permission to amend pleadings and rejected strike-out applications.

Directors of a family company purchased property adjacent to company premises for their personal benefit without disclosing the opportunity to their co-directors. The Court of Appeal held they breached their fiduciary duty as there was a real sensible possibility of conflict between their personal interests and their duty to the company.

BTI claimed directors of AWA breached their duty to creditors by paying a dividend to parent company Sequana, reducing assets available to meet contingent indemnity liabilities. The Court of Appeal upheld the section 423 claim against Sequana for defrauding creditors but dismissed the breach of duty claim, finding the creditors' interests duty was not triggered as AWA was not insolvent or likely to become so.

Mr Simonet, managing director of CMS Dolphin Ltd, resigned and diverted clients Argos, Reebok and DFB to his new venture with Mr Patterson. The court held he breached fiduciary duties by appropriating maturing business opportunities and was accountable for profits, even though profits were made through a corporate vehicle.

Directors of JKX Oil & Gas issued restriction notices under company articles to suspend voting rights of shareholders who allegedly failed to comply with disclosure notices. The Supreme Court held the restrictions were issued for an improper purpose - to influence AGM voting outcomes rather than to obtain information - and applied the proper purpose rule to set aside the notices.

A company director was alleged to have failed to declare his interest in a management agreement between his company and a firm he partnered. The Court of Appeal held that sufficient disclosure had been made at board meetings where the conflict of interest was expressly acknowledged, and the appeal was allowed.

Mr Bryant resigned as director after being effectively forced out by his co-director Mr Foster. During his notice period, a major client offered Mr Bryant future work through his own company. The Court of Appeal held there was no breach of fiduciary duty as his resignation was innocent, he did not solicit business, and merely accepted a customer-led proposal.

Franbar Holdings Ltd, a 25% shareholder in Medicentres, sought permission to continue a derivative claim against directors Patel and du Plessis for alleged breaches of duty including diversion of business opportunities. The court refused permission, finding Franbar had adequate alternative remedies through its existing unfair prejudice petition and shareholders' action.

Liquidators of HLC Environmental Projects Ltd sought relief against its principal director, Mr Carvalho, for misfeasance under s.212 Insolvency Act 1986. The director had caused the insolvent company to make substantial payments to a Portuguese parent company, to himself personally, to a bank, and to a third party, without proper consideration of creditors' interests. The court found multiple breaches of directors' duties.

Three customers claimed that commissions paid by finance lenders to motor dealers for arranging hire purchase agreements constituted bribes or breaches of fiduciary duty. The Supreme Court held that dealers in typical tripartite car finance transactions do not owe fiduciary duties to customers, dismissing the bribery and equity claims, but upheld one customer's claim under section 140A of the Consumer Credit Act for an unfair relationship due to undisclosed commission.

Shareholders sought permission to continue a derivative claim against directors alleging breach of duty in accepting rescission of share sale agreements and failing to assert beneficial ownership of mining licences. The court refused permission for most claims but adjourned consideration of the trust claim, directing the board to reconsider its position.

Mr Pyke, a director excluded from company management after suffering a stroke, set up a competing business with his former company's main customer. The Court of Appeal held he did not breach fiduciary duty because his exclusion from all company affairs meant his directorship was nominal, eliminating any conflict of interest.

A minority shareholder sought permission to continue a derivative claim against directors for allegedly diverting a business opportunity (La Senza acquisition) to a company owned by the majority shareholder. Permission was refused as the court found the claim lacked sufficient merit, independent committees opposed it, and alternative unfair prejudice remedies were available.

Lexi Holdings, a bridging finance company, had £59.6 million misappropriated by its managing director Shaid Luqman. The Court of Appeal held that his sisters Monuza and Zaurian, as directors, were liable for losses caused by their total inactivity, as they failed to inform fellow directors of Shaid's criminal convictions and a fictitious directors' loan account.

The first compensation order case under sections 15A and 15B of the Company Directors Disqualification Act 1986. Mr Eagling, sole director of Noble Vintners Ltd, misappropriated £559,484 to his own company. He was disqualified for 15 years and ordered to pay compensation to creditors who suffered direct losses from his misconduct.