is a
UK company law
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...
case concerning the strict prohibition on any possibility of a
conflict of interest
A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates to situations i ...
between a
company director
A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...
's duty to promote her company's success and her own gain.
Facts
Allied Business & Financial Consultants Ltd was a small company, with its office above the Charles Dickens pub at 160 Union Street in
Southwark
Southwark ( ) is a district of Central London situated on the south bank of the River Thames, forming the north-western part of the wider modern London Borough of Southwark. The district, which is the oldest part of South London, developed ...
. The directors were former
Bank of Ireland
Bank of Ireland Group plc ( ga, Banc na hÉireann) is a commercial bank operation in Ireland and one of the traditional Big Four Irish banks. Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Iris ...
employees, who had set up the company in 1988, and included Ms O'Donnell and Mr Shanahan who were both directors. Ms O'Donnell had fallen out with the other members allegedly after (among other things) Mr Shanahan had diverted a property investment opportunity - to buy an interest in the fifth floor of Aria House, above the
Playhouse Theatre
The Playhouse Theatre is a West End theatre in the City of Westminster, located in Northumberland Avenue, near Trafalgar Square, central London. The Theatre was built by F. H. Fowler and Hill with a seating capacity of 1,200. It was rebuilt i ...
, 23 Craven Street, near
Embankment
Embankment may refer to:
Geology and geography
* A levee, an artificial bank raised above the immediately surrounding land to redirect or prevent flooding by a river, lake or sea
* Embankment (earthworks), a raised bank to carry a road, railwa ...
- to one of his own companies. Ms O'Donnell contended that this diversion was a breach of Mr Shanahan's duty as a director to act without any possibility of a conflict of interest, and because Allied Business Ltd could possibly have taken the opportunity, she was in her interests as a member
unfairly prejudiced (under
Companies Act 1985
The Companies Act 1985 (c. 6) is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their d ...
, section 459, now
Companies Act 2006
The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law.
The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...
, s 994). She requested that her shares be bought out at a fair value.
Judgment
High Court
Richard Sheldon QC held, based on the old case of ''
Aas v Benham''
891
Year 891 ( DCCCXCI) was a common year starting on Friday (link will display the full calendar) of the Julian calendar.
Events
By place
Europe
* February 21 – Guy III, duke of Spoleto, is crowned Holy Roman Emperor by Pope Ste ...
2 Ch 244 that the particular opportunity taken up by Mr Shanahan's company fell outside the scope of Allied's business. Therefore, there was no conflict of interest, and no breach of the no profit rule.
Court of Appeal
Waller LJ
Sir George Mark Waller PC (born 13 October 1940) is a former Lord Justice of Appeal who served as the Vice-President of the Civil Division of the Court of Appeal of England and Wales.
The son of the Rt Hon Sir George Waller, he was educated at ...
,
Rimer LJ
Sir Colin Percy Farquharson Rimer (born 30 January 1944) is a former judge of the English Court of Appeal; he retired in 2014.
Education
He was educated at Dulwich College from 1954 to 1962 and at Trinity Hall, Cambridge.
Legal career
Rimer was ...
and
Aikens LJ reversed the High Court and allowed the unfair prejudice petition to proceed. In this particular case it was clear that Mr Shanahan had acted without the company's fully informed consent. The opportunity had come to Mr Shanahan in his capacity as a director of Allied Business Ltd, and so must in principle be accountable for any profit. ''Aas'' was distinguishable as a case of partnership, where the business relationship had been circumscribed by contract.
See also
*''
Keech v Sandford
is a foundational case, deriving from English trusts law, on the fiduciary duty of loyalty. It concerns the law of trusts and has affected much of the thinking on directors' duties in company law. It holds that a trustee owes a strict duty of ...
''
*''
Parker v McKenna
''Parker v McKenna'' (1874–75) LR 10 Ch App 96 is a UK company law case, concerning the rule against having any conflict of interest.
Facts
Mr McKenna was one of four directors of the National Bank of Ireland, a joint stock bank. In 1864 reso ...
''
*''
Bhullar v Bhullar
is a leading UK company law case on the principle that directors must avoid any possibility of a conflict of interest, particular relating to corporate opportunities. It was not decided under, but is relevant to, section 175 of the Companies ...
''
References
{{reflist
United Kingdom company case law
Court of Appeal (England and Wales) cases
2009 in case law
2009 in British law