Director in breach of duties

The recent Court of Appeal judgment in Towers v Premier Waste Management Ltdserves as a stark warning to directors who are not strictly compliant and wholly knowledgeable of their duties.

A director of a waste management company, accepted a free of charge loan of plant and equipment to renovate his house from one of the company's customers without disclosing it to the company. He argued that the arrangement was "private, informal, ad hoc and amongst friends".

The Court of Appeal held that the director had breached his fiduciary duties (particularly the duty of loyalty and the duty to avoid conflicts of interest). The director was ordered to pay to the company an amount representing what it would have cost him to hire the equipment on the open market, along with the costs of the action. To quote para 48 of the judgement:

The applicable duties are of a director's loyalty to the Company and the duty to observe the no conflict principle, which embrace a duty not to make a secret profit for himself. The no conflict duty extends to preventing Mr Towers from disloyally depriving the Company of the ability to consider whether or not it objected to the diversion of an opportunity offered by one of its customers away from itself to the director personally.

It was irrelevant that the company did not suffer any loss, that the director did not make a valuable profit, that he did not act in bad faith or that, had the loan not been available, he would have not hired the equipment at commercial rates.

Go back

Subscribe to our RSS feed