Re D'Jan of London Ltd
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''Re D’Jan of London Ltd''
994 Year 994 ( CMXCIV) was a common year starting on Monday (link will display the full calendar) of the Julian calendar. Events By place Byzantine Empire * September 15 – Battle of the Orontes: Fatimid forces, under Turkish gener ...
1 BCLC 561 is a leading English company law case, concerning a director's duty of care and skill, whose main precedent is now codified under s 174 of the
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 ...
. The case was decided under the older
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 ...
.


Facts

Without reading it, Mr D'Jan signed a change to an insurance policy which was erroneously filled out by his insurance broker, a Mr Tarik Shenyuz. He did not read it before he signed, and it contained a mistake, which was that the answer 'no' was given to the question of whether in the past he had 'been director of any company which went into liquidation'. This meant the insurance company, Guardian Royal Exchange Assurance plc, could refuse to pay up when a fire at the company’s Cornwall premises destroyed £174,000 of stock. The company had gone into insolvent liquidation by the time Mr D'Jan realised that the form had been incorrectly completed. The liquidators sued Mr D'Jan to recoup the lost funds on behalf of the company's creditors (who together were owed £500,000). They alleged both negligence and misfeasance under s 212 of the
Insolvency Act 1986 The Insolvency Act 1986c 45 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK. History The Insolvency Act 1986 followed the publication and ...
.


Judgment

Hoffmann LJ, sitting as a judge of first instance, held that failing even to read the form was negligent, even though it may be common practice, but that Mr D'Jan's liability should be reduced because as majority shareholder and debtor it was primarily his own money that he risked, rather than other people's. The duty of care owed by directors in section 214
Insolvency Act 1986 The Insolvency Act 1986c 45 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK. History The Insolvency Act 1986 followed the publication and ...
was an accurate statement of the
common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipres ...
duty also (now codified in
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 ...
section 174). Because Mr D’Jan held 99 and his wife 1 out of the 100, Mr D'Jan pleaded that in accordance with the principle of the ''
Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd ''Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd'' 983Ch 258 is a leading United Kingdom company law case relating to directors' liability. The case is the principal authority for the proposition that ...
'',
983 Year 983 ( CMLXXXIII) was a common year starting on Monday (link will display the full calendar) of the Julian calendar. Events By place Europe * Summer – Diet of Verona: Emperor Otto II (the Red) declares war against the Byza ...
Ch 258
that shareholders all acting by consensus bind the company's actions, his actions were ratified by the company and he should not be liable. Hoffmann LJ held that actual ratification is required, not just a likelihood that shareholders would ratify. However owning 99 shares was relevant to the court’s exercise of discretion to relieve directors for breaches of duty under section 727 of the
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 ...
(now section 1157 of the Companies Act 2006) because it ‘may be reasonable to take a risk in relation to your own money which would be unreasonable in relation to someone else’s.’ His judgment went as follows.


See also

*'' Re Cardiff Savings Bank'' 8922 Ch 100 (The "Marquess of Bute's Case") an older case on the subject *'' Re City Equitable Fire Insurance Co'' 925Ch 407 *'' Bishopsgate Investment Management Ltd v Maxwell (No 2)'' 993BCLC 814 *
English tort law English tort law concerns the compensation for harm to people's rights to health and safety, a clean environment, property, their economic interests, or their reputations. A "tort" is a wrong in civil, rather than criminal law, that usually requ ...
* Companies law


Notes

{{UK law United Kingdom company case law English tort case law 1994 in United Kingdom case law High Court of Justice cases