Friday, 15 February 2019

UK: England and Wales: "some elementary principles of corporate governance"

Judgment was given today in Stobart Group Ltd v Tinkler [2019] EWHC 258 (Comm): see here or here (pdf). The litigation concerned, to quote the trial judge, HHJ Russen QC, "some elementary principles of corporate governance" (para. [4]) in respect of a company incorporated in Guernsey and listed on the London Stock Exchange. The facts were many but included the removal from office of a director (Mr Tinkler) by the board of directors the day after his election to the board at the company's annual general meeting.

What makes the decision of particular note is the discussion of directors' duties in the context of board dissent, including what is expected of individual directors in light of the proper functioning of the board of directors. Guernsey company law applied but heavy reliance was placed on English authorities, it being recognised (with reference to Carlyle Capital Corporation Limited (In Liquidation) and others v Conway and others, Royal Court of Guernsey, 38/2017) that the duties owed by directors under Guernsey law were "fundamentally the same" as those under the English common law before the introduction of the UK's Companies Act 2006.

Amongst other findings, it was held that a director, Mr Tinkler, had breached his fiduciary duties under Guernsey law where he held private discussions with shareholders in which he criticised the board's management and advocated for the removal of a fellow director. The trial judge found ample evidence for Mr Tinkler's "briefing against the board" (para. [735]). These findings were reached by the judge following earlier analysis of the law in which the "collegial function" of the board was stressed (para. [388]) and where it was stated that the director's duty to exercise independent judgment "is one that operates upon each director in the context of him operating as a member of the board of directors ... [it] exists in order to support the board's management of the company's business in an efficient and competent manner." (paras. [413] and [414], emphasis in the original).

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