UK: England and Wales: nominee directors + the section 996 discretion

Judgment was given yesterday by the Court of Appeal in Hawkes v Cuddy [2009] EWCA Civ 291. This is an important case concerning the duty of a nominee director towards his nominator as well as the scope of the court's discretion under Section 996 of the Companies Act (2006) in respect of unfairly prejudicial conduct under Section 994. 

The leading and only reasoned opinion was delivered by Stanley Burnton LJ (Moore-Bick LJ and Blackburne J concurring). With regard to the duty of a nominee director towards his nominator, his Lordship observed (at para. [32] and [33]):

...the fact that a director of a company has been nominated to that office by a shareholder does not, of itself, impose any duty on the director owed to his nominator. The director may owe duties to his nominator if he is an employee or officer of the nominator, or by reason of a formal or informal agreement with his nominator, but such duties do not arise out of his nomination, but out of a separate agreement or office. Such duties cannot however, detract from his duty to the company of which he is a director when he is acting as such ... an appointed director, without being in breach of his duties to the company, may take the interests of his nominator into account, provided that his decisions as a director are in what he genuinely considers to be the best interests of the company; but that is a very different thing from his being under a duty to his nominator by reason of his appointment by it"

Section 996 provides that if a petition under Section 994 is well founded the court "may make such order as it thinks fit for giving relief in respect of the matters complained of". Stanley Burnton LJ endorsed the wide scope of Section 996 through his rejection of the following arguments: [1] that only the interests of the shareholders could be considered in deciding what form of relief to provide and [2] the court could only provide the relief which had been sought by the petitioner. 

Note: the duties of nominee directors were considered last year by Warren J. in Cobden Investments Ltd. v RWM Langport Ltd & Ors [2008] EWHC 2810 (Ch).