Facts
Pennyfeathers Ltd, a UK company, was pursuing a farm development and options over surrounding land. Its directors, Mr Bowdery and Mr Attwell, were negotiating a buy-out of the other shareholders’ interests. Before the buy-out was concluded, a Jersey company through which they were acting contracted to buy the farm and acquired options over surrounding land.
Issue
Was the buy-out agreement binding? Had the directors obtained fully informed consent to take the development opportunity through the Jersey company?
Decision
The High Court held that the agreement in principle and the manuscript note did not amount to a binding buy-out. The directors remained subject to their fiduciary duties. Limited consent to approach the landowner did not amount to informed consent to take the opportunity. The directors acted in conflict of interest and in bad faith, including by concealing their activities concerning the surrounding land.
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The court considered that a proprietary remedy was available in principle for the farm purchase and the surrounding land options. It left the precise relief for later consideration and made no declaration of trust at this stage.
Source: Full judgment
