Percival v Wright
Directors do not owe fiduciary duties to individual shareholders, so a director who buys shares from a shareholder without disclosing negotiations for a sale of the company is not liable.
Facts
Some shareholders of a company offered to sell their shares to the directors, who bought them at a price based on a valuation. The directors did not disclose that they were negotiating with a third party for the sale of the company's undertaking at a much higher price, although the negotiations later came to nothing. The shareholders sued to set aside the sale of their shares, claiming that the directors should have disclosed the negotiations.
Legal principle
Swinfen Eady J held that the directors were not liable. Directors owe their fiduciary duties to the company, not to individual shareholders, so they did not owe the shareholders a duty to disclose the negotiations. The shareholders had approached the directors and asked them to buy the shares, and the directors had not made any misrepresentation. Insider dealing is now a criminal offence under the Criminal Justice Act 1993.
Related cases on directors' duties: powers, judgment and care
- Bamford v Bamford [1970] Ch 212
- Re Barings plc (No 5) [1999] 1 BCLC 433
- BTI 2014 LLC v Sequana SA [2022] UKSC 25, [2024] AC 211
- Re City Equitable Fire Insurance Co Ltd [1925] Ch 407
- Re D'Jan of London Ltd [1994] 1 BCLC 561
- Dorchester Finance Co Ltd v Stebbing [1989] BCLC 498
- Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71
- Hogg v Cramphorn Ltd [1967] Ch 254
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
