Item Software (UK) Ltd v Fassihi
A director's duty of loyalty may require him to disclose his own misconduct to the company.
Facts
Mr Fassihi was a director and sales and marketing director of Item Software, which distributed software produced by Isograph. While Item was negotiating with Isograph for better terms, Mr Fassihi secretly set up his own company and approached Isograph to take over the distribution contract for himself. He also encouraged Item to take a hard line in the negotiations, which failed. Isograph ended the distribution contract. Item sued Mr Fassihi.
Legal principle
The Court of Appeal held that Mr Fassihi was in breach of his duty of loyalty to the company, because he had failed to disclose his own wrongdoing. Arden LJ said that the fundamental duty of a director is to act in what he in good faith considers to be the interests of the company, and that, in the circumstances, that duty required him to disclose his own misconduct to the company. There is no separate duty to disclose misconduct, but it may arise as part of the duty of good faith.
Related cases on directors' duties: conflicts of interest
- Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461
- Bhullar v Bhullar [2003] EWCA Civ 424, [2003] 2 BCLC 241
- CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704
- Cook v Deeks [1916] 1 AC 554
- Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200
- Fulham Football Club Ltd v Cabra Estates plc [1994] 1 BCLC 363
- Guinness plc v Saunders [1990] 2 AC 663
- Imageview Management Ltd v Jack [2009] EWCA Civ 63, [2009] Bus LR 1034
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