Citation

[2008] All ER (D) 72 (Aug)

Alternative Citations

[2008] EWHC 1973 (ch)

Hearing Date

7 August 2008

Court

Chancery Division, Companies Court

Judge

Richard Sheldon QC sitting as a deputy judge of the High Court

Representation

Andrew Clutterbuck (instructed by Cripps Harries Hall LLP) for the petitioner.Max Mallin (instructed by Butcher Burns) for the first and second respondents.

Abstract

Company – Member. The petitioner's application under s 459 of the Companies Act 1985, for the respondents to purchase her shares in the fourth respondent company, was dismissed as she had failed to make out, on the evidence, that the first and second defendants had breached their fiduciary duties as directors, or had acted in a manner that had had a prejudicial affect on her interests as a minority shareholder.

Catchwords

Company – Member – Unfair prejudice to member's interests – Relief – Purchase of shares of prejudiced member – Whether conduct of company's affairs 'unfairly prejudicial' to petitioner's interests – Whether respondents in breach of fiduciary duties – Companies Act 1985, ss 459.

Summary

 In the late 1980s the parties were all employees at the same bank. The fourth respondent company was incorporated in October 1988, with the objective of providing clients financial advice and assistance. By the beginning of October 1989, the petitioner and the first to third respondents were equal shareholders in the company. The petitioner applied for an order under s 459 of the Companies Act 1985, that the first and second respondents, her fellow shareholders and directors of the company, buy her shares in the company at a price calculated on the basis that certain alleged wrongdoing had not occurred and/or that the company should be treated as having had the benefit thereof. The basis for her claim was that the company's affairs had been conducted in a manner that had been unfairly prejudicial to her interests as a member of the company, including the first and second respondents acting in breach of their fiduciary duties they owed to the company as directors, specifically in respect of several transactions whereby properties were purchased for investment purposes.

The claim would be dismissed.

It was well established that the fundamental rule that obliged fiduciaries to account for personal benefit or gain had two separate themes: the first was to preclude the fiduciary from being swayed by considerations of personal interest, the second was to preclude the fiduciary from actually misusing his position for his personal advantage, ie, the 'no conflict rule' and the 'no profit rule'.

On the evidence, the first and second respondents had not breached the no conflicts rule. The acquisition of properties for investment had not been within the scope of the company's business and, accordingly, there had been no 'real sensible possibility' of a conflict. Moreover, it could not be said that the first and second respondents' conduct had breached the 'no profit' rule.

Wilkinson v West Coast Capital [2005] All ER (D) 346 (Dec) applied; Ultraframe (UK) Ltd v Fielding; Northstar Systems Ltd v Fielding [2005] All ER (D) 397 (Jul) applied.

Gareth Williams

Barrister.

Published Date

08/08/2008

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