Giles v Rhind [2003] 2 WLR 237

• Defendant, a director, diverted company’s most lucrative contract away from company in breach of duty.

• As result of loss of this contract, company went into receivership and did not have enough money to launch proceedings against Defendant.

• Claimant, fellow shareholder in company, was in shareholders agreement with Defendant; thus brought action against director for breach of duty.

Held

• Shareholders agreement was designed to protect Claimant’s investment and remuneration, and Defendant’s breach of duty harmed both of these

  • Therefore Claimant has right of action.

• Reflective loss principle does not prevent shareholder recovering damages where director’s breach of duty has made it impossible for company to pursue its own cause of action against him

  • Even where loss suffered by shareholder reflects that of shareholder.

• Thus Claimant could recover his losses.