Regal (Hastings) Ltd v Gulliver
Directors who made a profit from an opportunity that came to them because of their position were liable to account for it, even though the company could not have taken the opportunity itself.
Facts
Regal owned a cinema in Hastings. Its directors wanted to buy two more cinemas through a subsidiary company, but the landlord required the subsidiary to have paid up capital of £5,000, and Regal could only afford £2,000. The directors and the company's solicitor therefore subscribed for the remaining shares themselves. Later, the shares in Regal and its subsidiary were sold, and the directors made a profit on their shares. The new owners caused Regal to sue the former directors for their profits.
Legal principle
The House of Lords held that the directors were liable to account for their profits. Lord Russell said that the rule of equity which insists on those who by use of a fiduciary position make a profit being liable to account for that profit, in no way depends on fraud, or absence of bona fides, or whether the profit would or should otherwise have gone to the beneficiary. The directors had obtained the shares by reason and in the course of their office as directors. They could have avoided liability by obtaining the approval of the company's shareholders in general meeting. The solicitor, who was not a director, was not liable.
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
- Guinness plc v Saunders [1990] 2 AC 663
- Holder v Holder [1968] Ch 353
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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.
