Strict
approach taken.
approach taken.
Directors
of appellant company wanted to acquire two cinemas.
of appellant company wanted to acquire two cinemas.
Subsidiary
company formed for this purpose.
company formed for this purpose.
Lease
of two cinemas offered, provided subsidiary company’s share capital was paid
up.
of two cinemas offered, provided subsidiary company’s share capital was paid
up.
Directors’
intention was that applicant company would own all shares in subsidiary.
intention was that applicant company would own all shares in subsidiary.
However
applicant company could only afford to purchase 2/5 of the shares.
applicant company could only afford to purchase 2/5 of the shares.
Therefore
directors and other investors bought the rest.
directors and other investors bought the rest.
Subsequently
shares in subsidiary sold and profit made.
shares in subsidiary sold and profit made.
New
shareholders of applicant company sought to make directors liable to account
for profit.
shareholders of applicant company sought to make directors liable to account
for profit.
House
of Lords held them liable to account.
of Lords held them liable to account.
All
that was required to make this finding was that:
that was required to make this finding was that:
1. Profit was made
2. Profitable shares were acquired while they
were directors of applicant company.
were directors of applicant company.
3. In acting as directors they stood in fiduciary
relationship to applicant company.
relationship to applicant company.
(Directors
of limited company are creature of statute and not fiduciaries in every
respect.
of limited company are creature of statute and not fiduciaries in every
respect.
But
there was a fiduciary relationship here)
there was a fiduciary relationship here)
Liability not
dependent on finding of fraud, absence of bona fide, or similar.
