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

Friday, 27 January 2012

Would you like chips with that? s172 goes with any other breach of duty.

Arden LJ held in the case of Fassihi [2004] EWCA Civ 1244 that is it possible that a failure to disclose misconduct will be a breach of s172. Thus, it is not the failure to disclose that is a breach itself, but the failure to disclose where it would be in the interest of the company to know that breaches s172.

The recent decision in GHLM Trading Ltd v Maroo [2012] EWHC 61 (Ch) adopts the approach taken by Arden LJ stating that it breaks new ground treating a fiduciary duty as prescriptive rather than merely proscriptive.

So, does this create a situation that no matter what duty you breach you will automatically breach s172 as well? For example, under s175 the duty is to avoid a conflict of interest regardless of whether you act in good faith, which is the test under s172.

Thus, if you breach s175 albeit in good faith, will that mean you are still in breach of s172 for a failure to disclose because subjectively no one acting in good faith will believe a conflict of interest is in the interests of the company?

It certainly "muddies" the waters. However, the test under s172 is good faith and is unlikely to be moving towards a more objective standard based on whether disclosure was in the interests of the company. The case of Maroo does clearly state that a company complaining of failure to disclose 'must... establish that the fiduciary subjectively concluded that disclosure was in the company's interests, or at least, that the director would have so concluded had he been acting in good faith'.

I would imagine a court would be hard pressed to find a situation where there is a conflict interest that a fiduciary would not conclude that disclosure would be in the interest of the company or would have done if he had been acting in good faith.

The other issue that would arise would be as to what constitutes disclosure. s175 requires clear unequivocal disclosure of all the relevant facts, whereas under s177 there is a duty to disclose an interest in a proposed transaction but that duty is met where the other directors are reasonably aware of the interest in the transaction. Thus can reasonable awareness of the conflict amount to sufficient disclosure under s172? 

Maroo does discuss the issue of to whom disclosure must be made. Mention is given to the subjective nature of s172 and that it should be made to the person/body that a director believes, acting in good faith, would be interested in knowing. However, since s172 is owed to the company it is likely disclosure should be made to it. Although, since this discussion revolves around disclosure in the interests of the company it would be perfectly plausible that it may be in the interests of the company that the fiduciary discloses to another individual i.e. a shareholder or creditor, may be even an "outsider" such as a lobbying group for the environment. For example, a failure to disclose information to a lobbyist that leads to them bringing litigation against the company, it may have been in the interests of the company for the director to disclose to the outsider.

It is certainly an interesting area of development...

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