Case Law For Directors

Front 1

Name the cases for Shadow directors

Back 1

Secretary ofState for Trade and Industry v Deverell [2000] 2BCLC 133.

Re Hydrodam(Corby) Ltd [1994] 2 BCLC 180.

Front 2

Secretary of State for Trade and Industry v Deverell [2000] 2 BCLC 133.

Back 2

The company were tour operators and went intoliquidation owing £4.6m. The Secretaryof State sought to disqualify 2 shadow directors under S6 CDDA 1986, as well asexecutive directors. The case hinged on whether or not the two who were allegedto be shadow directors, fitted that definition. At first instance the case was dismissed. Buton appeal it was held that giving non-professional advice rather than‘directions or instructions’ would be sufficient. It was also held that it wasnot necessary for a shadow director to lurk in the shadows, or that thedirections or instructions cover everything. Deverell had not been able to be adirector, because the company needed a tour operator’s licence, which would berefused where a director had been a director of a failed company, and as he hadbeen a director of failed tour companies before.

Front 3

Re Hydrodam(Corby) Ltd [1994] 2 BCLC 180.

Back 3

A subsidiary company had goneinto insolvent liquidation. Proceedings were taken against 2 directors of theparent company under S213 Insolvency Act 1986 to make them personally liable asshadow directors for wrongful trading. The appeal by these directors wasallowed. The Court of Appeal held that where a company is a director of anothercompany, it does not follow that its own directors must be shadowdirectors. Millett, J distinguished ashadow director from a de facto director:

Front 4

Name the case law for Managing Directors

Back 4

Freeman& Lockyer v Buckhurt Park Properties (Mangal) Ltd [1964]2 QB 480.

Anderson vJames Sutherland (Peterhead) Ltd 1941 SC 203

Front 5

Freeman & Lockyer v Buckhurt Park Properties (Mangal) Ltd [1964] 2 QB 480.

Back 5

The company was formed to buy and resell an estate. Ithad 4 directors, 2 of whom were nominees of the other two, K and H. H spentmuch of his time abroad, and K decided to develop the estate. He instructed afirm of architects to do drawings. The company later refused to pay for them,arguing that K had no authority to commission them. The court at first instanceand on appeal held that the company was bound, on the grounds that K had beenheld out to be a managing director with sufficient apparent authority toauthorise the architects to do the work.

Front 6

Anderson v James Sutherland (Peterhead) Ltd 1941 SC 203

Back 6

The articles gave power to appoint and remove amanaging director, and stated that whenever a member was dismissed fromemployment for misconduct, the directors might resolve that the employee shouldcease to be a member.The managing director was convicted of assault forfiring a revolver at a board meeting. The other directors resolved that ehshould be dismissed as managing director, and as a member. The issue in thecase was whether a managing director is an employee. It was held that for thepurposes of the articles, the managing director was employed, and therefore hecould be dismissed as a member.

Front 7

Aredirectors agents of the company? Name the case law

Back 7

Ferguson vWilson (18660 LR 2 Ch Ap 77.

RoyalBritish Bank v Turquand (1856) 6 El & Bl 327

Front 8

Ferguson vWilson (18660 LR 2 Ch Ap 77.

Back 8

‘The company itself cannot act in its own person…Itcan only act through directors’ Cairns LJ pp89-90.He also stated ‘[the directors] are merely agents ofthe company.’ The court held that the company was the proper defendant in acase based on breach of contract

Front 9

Royal British Bank v Turquand (1856) 6 El & Bl 327

Back 9

The articles of association provided that bonds forborrowing by the company had to be authorised by a resolution. The companyissued a bond for a loan which was signed by two directors and the secretary,but it had not been authorised by resolution. The issue of the validity of thebond was raised in court. The court held that where there was a defect ininternal procedure which the other party had no means of checking, a companycould not seek to reduce its act on the grounds of want of proper procedure.

Front 10

Name the case law for Qualificationand Disqualification of Directors

Back 10

Re SevenoaksStationers (Retail) Ltd [1991] BCLC 325.

Ticketus v Whyte [2013] EWHC 4069

Front 11

Re Sevenoaks Stationers (Retail) Ltd [1991] BCLC 325.

Back 11

A chartered accountant had been a director of fivecompanies which had become insolvent. Some of the companies had been allowed totrade when insolvent; Crown debts had not been paid; there were inadequate accounting records. TheCourt of Appeal suggested three bands of disqualification: 2-5 years for minorcases; 6-10 years for more serious cases; and 11-15 years for the most seriouscases. Here a disqualification order of 5 years was imposed.

Front 12

Ticketus v Whyte [2013] EWHC 4069

Back 12

Rangers FCcontracted with Ticketus for a ticketing agreement involving the pre-purchaseof tickets. The then CEO Craig Whyte lied to Ticketus and asserted that he hadnot previously been disqualified, whereas he had been disqualified for 7 yearsand had settled claims for breach of duty. Whyte gave guarantees for thetransaction to Ticketus. When Rangers went into administration, Ticketusclaimed on the guarantees. On appeal from a previous finding of liability, thecourt held that there had been fraudulent misrepresentation by Whyte , the appeal was dismissed and Whyte was heldliable to Ticketus for £17,683,338.

Front 13

Name the leading case for Remuneration

Back 13

Guinness plcv Saunders and Ward [1990] 1 All ER 652.

Front 14

Guinness plc v Saunders and Ward [1990] 1 All ER 652.

Back 14

The articles allowed the board to fix the remunerationof the directors. Guinness plc made a successful take-over bid for the sharesof Distillers plc, which involved an illegal share support scheme. Some of thedirectors were later convicted for this. One of the directors Ward had beenawarded a success fee if the bid went ahead, of £5.2m. The remuneration wasawarded him by a committee of the board, comprising Saunders, Ward and anotherdirector. The House of Lords decided that this committee did not have powerunder this article to decide extraordinary remuneration, and such questionsshould have been decided by the full board. Ward was held to be a constructivetrustee, and had to repay the money.