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Gwembe Valley Development Company Ltd v Koshy

[2004] EWCA Civ 1048

Case summary last updated at 22/01/2020 19:01 by the Oxbridge Notes in-house law team.

Judgement for the case Gwembe Valley Development Company Ltd v Koshy

Director did not disclose his interest in a loan transaction to other directors. Company entered into loan transaction, and director made a personal profit. Company found out and sued. D argued that he was not liable for account of profits, as the liability of any director for an account of profits for self-dealing transactions was exempted by one of Articles of company. Held:
 
Equitable Compensation
·       Where director dishonestly fails to disclose his interest in a transaction, equitable compensation is available as a remedy.
·       Liability of directors for loss caused by non-disclosure of an interest in proposed transaction is strict
Ø  As soon as director conceals his interest, is breach of duty
·       However where company would still have entered transaction even if director had disclosed interest, can be no claim for equitable compensation.
Ø  i.e. as company has suffered no loss
 
Exemption
·       The self-dealing rule itself cannot be excluded.
·       Thus D was only exempted from liability if he actually disclosed his interest to the directors.
 
Facts
·       Is probable that company would have entered transaction nonetheless had they known of D’s interest.
·       Therefore equitable compensation is not appropriate remedy.
·       Better remedy is account of profitsreceived by D.

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