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    Company law: breach of duty

    [2011] EWCA Civ 923

    CA (Civ Div) (Mummery LJ, Wilson LJ, Etherton LJ) 28/7/2011


    A company director had breached his fiduciary duty to the company when accepting a free loan of equipment from a customer without disclosing the transaction or seeking approval for it.

    The appellant former director (T) appealed against a decision that he had breached his fiduciary duty to the respondent waste management company (P). T had acquired equipment for his personal use by way of a free, undisclosed and unapproved loan of equipment from a customer (F). F supplied plant and machinery and P’s operations manager (R) had arranged for T to borrow the equipment for use in renovation of a property. T was not directly involved in the dealings with F. F later invoiced P for use of the equipment and, following an investigation, P issued proceedings against T for breach of duty. The judge concluded that T should account to P for the six-month period he had used the equipment, at the rate F had invoiced P. T submitted that the judge had erred in (1) adopting an overly strict and technical approach when finding that he had been placed in a position of conflict; (2) failing to take all the relevant circumstances into account when exercising his discretion to grant relief.

    HELD: (1) The applicable duties were of a director’s loyalty to the company and the duty to observe the no conflict principle, which embraced a duty not to make a secret profit. The no conflict duty extended to preventing T from disloyally depriving P of the ability to consider whether it objected to the diversion of an opportunity offered by one of its customers away from itself to the director personally. The strict loyalty and no conflict duties had been breached by T. The absence of evidence that P would have taken the opportunity or had suffered any loss; that T and F had any corrupt motive; or the fact that R was the prime mover and the benefit T had received was very small, did not support the contention that there had been no breach of the duties by T, Regal (Hastings) Ltd v Gulliver (1967) 2 AC 134 HL followed and Foster Bryant Surveying Ltd v Bryant (2007) EWCA Civ 200, (2007) Bus LR 1565  applied (see paras 47-48, 51 of judgment). (2) The brevity of the judgment in relation to the exercise of discretion to grant relief was not a defect. The judge was to be complimented as there was very little that could sensibly have been added to what had already been said about the case and T’s conduct. A judge should not feel obliged to repeat himself at length just for the sake of it. Reasons for a decision did not have to be long-winded or repetitive in order to pass muster as sufficient and satisfactory in value. T had owed fiduciary duties to P and had acted in breach of those duties in circumstances where there was no mitigating factor and no evidence of injustice or hardship which might be relevant to granting relief in his favour. The absence of any finding of bad faith or actual conflict; the reasonableness of T’s reliance on R and the lack of direct contact between T and F; and the absence of quantifiable loss by P or the negligible profit to T, did not justify relieving him from the consequences of his breach of duty. T had not demonstrated that the judge’s decision was wrong on liability for breach of fiduciary duty (paras 53-56).

    Appeal dismissed

    Lawtel: 01.08.2011