To all those reading this I am David Gibbs; I am a Lecturer in Company and Commercial Law at the University of Hertfordshire.

I created this blog as a general out-let of ideas for my research, as well as keeping those interested up-to-date on my research and general interests.

I completed my PhD thesis at the University of East Anglia in 2014. The thesis was recommended for the award of PhD with no corrections. My external examiner was Prof. Simon Deakin (Cambridge) and internal examiner was Prof. Morten Hviid.
My PhD research centred on directors' duties and company law. The thesis was titled 'Non-Executive Self-Interest: Fiduciary Duties and Corporate Governance'. It was a doctrinal and empirical study on whether self-interest was suitably controlled amongst non-executive directors.

My supervisors were Prof. Mathias Siems, Prof. Duncan Sheehan, Dr. Sara Connolly and Dr. Rob Heywood

All opinions of any existing or future blogpost are my own. They do not necessarily represent the views of any of my associated institutions.
ORCID 0000-0002-6596-8536

Thursday, 22 September 2011

Hydrodan (Corby) Ltd, Re v. Hydrodam (Corby) Ltd, Re and functions of de facto directors

Possibly one of the greatest mysteries of UK company law... or may be not I am just trying to find out the answer to whether this case should be referred to as Hydrodan or Hydrodam.

It seems in the majority of circumstances the [1994] 2 BCLC 180 citation is cited as Hydrodam; whereas the [1994] BCC 161 citation is cited as Hydrodan.

So what is the answer? Here are a number of sources I have looked at to discover the answer.

Westlaw cites both in fact. It says Hydrodan... also known as Hydrodam. Pretty useless in helping discover the answer. Clicking on the link to the BCC citation it is titled as Hydrodan however.

So I regard that as 1 for Hydrodan (1-0)

Recent cases
Holland [2010] UKSC 51. A Supreme Court decision refers to it as Hydrodam. The decision in Mumtaz, Re [2011] EWCA Civ 610, a Court of Appeal decision, also refers to it as Hydrodam

So 1 to Hydrodam (1-1)

Leading company law text books
The leading company law textbook Gower and Davies 8th edn refers to it as Hydrodan as which the litigation commenced but provides sub. nom. as Hydrodam indicating Hydrodan was incorrect at commencement of litigation or something was erroneous. Thus litigation continued under Hydrodam but started as Hydrodan.

Newer Company Law books such as Hannigan merely refer to it as Hydrodam

I would say 1 a piece for this source (2-2)

The Times
See here for report. On its report of a recent decision Gemma Ltd, Re [2008] BCC 812 they also refer to it as Hydrodam.

1 for Hydrodam (2-3)

Against by better judgment I also looked at Wikipedia. The "informed author" approves with Hydrodam and says it is often cited incorrectly as Hydrodan.

Although I have looked at Wikipedia I think support here would be more like an own goal rather than support for one or the other. So I award no points to either side.

On this assessment I would conclude that Hydrodam is to be considered the best way to cite. It appears to be in the majority of cases - two to three - to be cited as Hydrodam. The main textbook also distinguishes that litigation continued under Hydrodam although it was originally Hydrodan. Thus, unlike Wikipedia, I would not class it as incorrect to call it Hydrodan. To be on the safe side I will probably cite both - so anyone reading this that has come up against the same trivial point you could just cite the following:

Hydrodan (Corby) Ltd, Re; sub. nom. Hydrodam (Corby) Ltd, Re [1994] BCC 161

The case itself
For those wondering, the case concerned de facto directors. Millet J distinguished between shadow directors and de facto directors (however it is argued that difference has now potentially disappeared - see Holland [2010] UKSC 51 at [91]) and was one of the initial cases to recognise that an individual could be recognised as a director for certain statutory provisions, even though never appointed. Previously the doctrine of de facto directors only encompassed those appointed but there was some defect (see Canadian Land Reclaiming and Colonizing Co, Re (1880) LR 14 Ch D 660) in that appointment;  and those who had ceased to be directors (see New Par Consols Ltd, Re [1898] 1 QB 573). Since certain provisions in the Companies Act were only applicable to directors, the courts extended the concept of de facto directors to those not appointed at all to ensure people could not obtain the position of director without incurring responsibility for any misfeasance or breach of duty. What is necessary to show is that they assumed the status and functions of a director. Although what factors are to be considered in deciding whether an individual has assumed the status and functions, it is opined that one must perform the functions to assume the status. Simply holding yourself out as a director, thus assuming the status, is a test that has been rejected by the courts in determining de facto directorship of those never appointed (see for example Tjolle [1998] 2 BCC 282).

These functions can be varied and may include behaviour as well as performing tasks. Whether these functions are to be considered as those only performed by directors is open to debate. Jacobs J in the case of Tjolle [1998] 2 BCC 282 stated that there would be no justification in making someone liable over actions which they had no control over. A similar position was taken in Lo-Line, Re [1988] Ch 477 where Browne-Wilkinson VC held that based on the wording of section 300 of the Companies Act 1985 that only conduct "as director" could be considered when deciding to disqualify an individual.

The view that is only the conduct as director that should be considered is supported by academic articles by De Lacy 'The concept of a company director' (2006) JBL 267; and Watson 'The significance of the powers of boards of directors in UK company law' (2011) JBL 597. De Lacy states that poor conduct in relation to the management of the company is different from poor conduct as director. Watson also argues that if directors' and managers' functions were the same then the law would not need to distinguish between the two.

Thus in determining de facto directorship it is argued that functions only attributed to a director should be considered.

However, modern developments have looked to whether the individual had a "real influence over the corporate governance structure" (see for example Mea Corpn Ltd, Re [2006] EWHC 1846 (Ch)). Although Lord Collins in Holland at [91] believed this was just as difficult to determine as what can only be attributed to a director, it appears far more inclusive. It would seem to encompass not only functions attributable to directors, but functions directors normally perform as well, i.e. external business with third parties.

This second approach would appear to be more in keeping with the idea of preventing people assuming the position of directorship without the responsibility. However, it would still require them to perform some functions that are only attributable to directors. One cannot ignore Browne-Wilkinson VC and Jacob J who remind us that you cannot find someone responsible for actions they had no control over.

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