ON APPEAL FROM THE HIGH COURT OF JUSTICE
NEWCASTLE DISTRICT REGISTRY
HHJ ROGER KAYE QC (sitting as a Judge of the High Court)
Case No: 9NE30012
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WILSON
LORD JUSTICE ETHERTON
| PHILIP TOWERS
|- and -
|PREMIER WASTE MANAGEMENT LIMITED
WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
MR ALASTAIR WALTON (instructed by Dickinson Dees LLP) for the Respondent
Hearing dates: 18th & 19th May 2011
Crown Copyright ©
Lord Justice Mummery:
"…have effect in place of those rules and principles as regards the duties owed to a company by a director."
"The general duties shall be interpreted and applied in the same way as common law rules or equitable principles, and regard shall be had to the corresponding common law rules and equitable principles in interpreting and applying the general duties."
Duty to promote the success of the company
"172. (1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters).." to [various matters are specified].
Duty to avoid conflicts of interest
175. (1) A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the interests of the company.
(2) This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity).
(4) This duty is not infringed –
(a) if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest; or
(b) if the matter has been authorised by the directors.
Duty not to accept benefits from third parties
176. A director of a company must not accept a benefit from a third party conferred by reason of-
(a) being a director; or
(b) his doing (or not doing) anything as a director."
" And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interest of those whom he is bound to protect. So strictly is this principle adhered to, that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into."
" …in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged of benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made. The profiteer, however honest and well intentioned, cannot escape the risk of being called upon to account."
Proceedings in outline
Some salient details
" 44. … A secret profit may be large or small; it matters not which. The vice is the fact that it is secret, undisclosed. If it was so innocent or insignificant it ought to have been and could have been disclosed, especially (if not before) when the invoice for the tracks came to light in 2005."
"46. …I find nothing in any of these points on the facts of this case. Loans of equipment and favours may be commercial reality but that does not say they need not be disclosed: quite the contrary. As to flexibility and fairness, I see nothing unfair in the circumstances of this case: Mr Towers was a director; as such he owed duties of loyalty to the company of which he was a director. He borrowed equipment for personal use over an extended period from a corporate customer. He should have disclosed it, if it was a commonplace and innocent he had nothing to fear from so doing. In my judgment, I see no reasons for not applying the rule and I accordingly find him liable to account or compensate the company for the benefit he received in connection with the loan."
"If in any proceedings for negligence, default, breach of duty or breach of trust against an officer of a company or a person employed by a company as auditor (whether he is or is not an officer of the company) it appears to the court hearing the case that that officer or person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from his liability on such terms as it thinks fit."
"50. …He acted unreasonably in failing to make disclosure…"
Submissions of Mr Towers
Submissions of the Company
Discussion and conclusions
Scope of duty
Breach of duty
Relief from breach
Lord Justice Etherton:
Lord Justice Wilson: