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Directors' Duties 2 Cases

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This is an extract of our Directors' Duties 2 Cases document, which we sell as part of our Company law Notes collection written by the top tier of Oxford students.

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Company Law Supervision VI - Cases DIRECTORS' DUTIES 2 Section 175 Re Bhullar Brothers [2003]
Two brothers, along with their sons, were directors of a family company of grocery stores and investment property. Two halves of family fell out, and began to divide up assets of company. However sons of one of brothers became aware that land adjoining a bowling alley owned by company was for sale; this discovery was completely fortuitous (had seen a 'for sale' sign whilst bowling). Sons wanted to buy land; asked their solicitor whether there were any legal difficulties, and he said no. Bought land in their own names, and other half of family brought claim. Held: Parker LJ

1. No need to show that company would have made use of information:

1. here, information was relevant to company

1. i.e. purchase of land would have been commercially attractive

2. thus sons were under duty to communicate information to company

2. Thus is irrelevant that company would almost certainly not have taken the opportunity.

3. Thus was breach of fiduciary duty by sons.

1. As they had used information that was in interests of company to make personal profit Relevant Factors 1) At time sons purchased property, they were only carrying on business in their capacity as directors of company capacity alone
- And not in any personal capacity 2) At time of purchase, company was still trading (albeit with negotiations for its breakup) 3) Sons had asked solicitor whether there were any legal reasons they could not purchase land for their own benefit
- Thus is clear they felt there might be a conflict of interests
- This seems to be key factor in decision. Multiple Directorships Mashonaland [1891]

1. Is no automatic breach of fiduciary duty where a director is involved in business of another company which competes with company of which he is director. Bell v Lever Brothers [1932]

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