Companies: General meetings and torts

April 9th, 2019 by James Goudie KC

In Schofield v Jones (2019) EWHC 803 (Ch) the Court exercised its power under Section 306 of the Companies Act 2006 to direct the holding of a Company General Meeting with a quorum of only one. The purpose of the Meeting was to remove one of two members as one of four Directors. That Director was alleged to be in breach of fiduciary duty and had lost the confidence of the other Directors.  That Director can and had thwarted the holding of a General Meeting by not

turning up and by refusing to agree to the Meeting taking place in his absence. The jurisdictional threshold for granting relief under Section 306 was cleared.  It was “impracticable” to hold a Meeting of the Company.  Moreover, it was appropriate for the Court to exercise its discretion to grant relief.  Where there are disputes between Directors and allegations of improper conduct a Director should not be imposed upon the Company.  Further, the existence of a concurrent Petition under Section 994 of the 2006 Act is not necessarily a bar to the grant of an Order under Section 371, especially when the relief sought was that the removing Member should buy out the to be removed Director.  It is merely a factor to be weighed in the balance.  Nor is Board deadlock a pre-requisite to the grant of relief. It was relevant to take into account the statutory right of a majority shareholder to remove a Director by Ordinary Resolution, and that the Director to be removed was playing no part in the day to day management of the Company and seemed to have no intention of doing so.

In Antuzis v D J Houghton Catching Services Ltd (2019) EWHC 843 (QB) the Court reaffirmed, at paragraph 108, that the general principle is that “directors will be liable for the torts of the company, committed at their direction”; but added, at paragraph 110, that a “somewhat different position” obtains where the unlawful act is procuring a breach of contract.  This is elaborated upon at paragraphs 111-122 inclusive. As a general matter, the fact that the breach of contract has a statutory element may point to there being a failure on the part of the director to comply with his or her duties to the company (Sections 172 and 174 of the 2006 Act) and, by extension, to the director’s liability to a third party for inducing the breach of contract.

The nature of the breach of contract is directly relevant to the determination of whether, in a particular case, a director has failed to comply with his or her duties to the company.

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