Guinness plc v Saunders

A director who was paid by a committee of the board that had no power to authorise the payment held the money on constructive trust for the company, and could not claim for his services.

Citation

[1990] 2 AC 663

Court

House of Lords

Year

1990

Subject

Equity and Trusts

Topic

Fiduciary duties

Facts

During Guinness's takeover of Distillers in 1986, Mr Ward, a director of Guinness, was paid £5.2 million for his services in the takeover. The payment was approved by a committee of three directors, but the company's articles provided that directors' remuneration could only be fixed by the full board. Guinness sued to recover the money. Mr Ward argued that he was entitled to keep it, or at least to a reasonable payment for his services.

Legal principle

The House of Lords held that Mr Ward was liable to repay the money, which he held on constructive trust for the company. The committee had no power to authorise the payment, so it was made in breach of fiduciary duty. Lord Templeman said that the court has no power to award remuneration to a director for his services where the articles provide otherwise, because that would encourage conflicts of interest. The allowance made in Boardman v Phipps was distinguished, because there it did not conflict with the company's constitution.

Related cases on fiduciary duties

• Attorney General for Hong Kong v Reid [1994] 1 AC 324
• Boardman v Phipps [1967] 2 AC 46
• Bray v Ford [1896] AC 44
• Bristol and West Building Society v Mothew [1998] Ch 1
• Re Duke of Norfolk's Settlement Trusts [1982] Ch 61
• FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250
• Holder v Holder [1968] Ch 353
• Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443

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