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Director still in breach despite dissenting

25 Apr 2019

 

Dissent in the boardroom was held not to save a director for a finding of breach of duty in the recent case of Stobart Group Ltd v Tinkler.

During 2017 and 2018, one of the company’s directors, Mr Tinkler, became unhappy with the senior management of the company.  Mr Tinkler wanted the chairman to be removed, but the board of directors responded by dismissing Mr Tinkler from both his directorship and employment.

However, that decision quickly became meaningless as at the company’s AGM the shareholders voted Mr Tinkler back onto the board.  Even quicker there still was the decision by the board to remove him the next day using a power in the company’s articles.

 

The company then initiated court proceedings seeking a declaration that Mr Tinkler’s removal was lawful and seeking compensation for alleged breaches of duty by Mr Tinkler.  Mr Tinkler cross applied for a declaration of unlawful removal and that four of the other directors were the ones in breach of duty.

 

The court sided with the company on the basis of Mr Tinkler’s behaviour in trying to remove the chairman amounting to a serious breach of duty.  The court set out various principles as to what action dissenting directors may and may not take, with particular reference to the obligation to exercise independent judgment being done so in the context of operating as a member of a board.  The court was clear that there is no “entitlement or licence for an individual director to go off and do his own thing, independently of the board, in relation to matters that fall within the sphere of management of the company’s business”.

 

The case is a useful in understanding the extent of a director’s ability to act with independent mind.  It is good guidance on how a disaffected director should act where they are unhappy with the actions of the board.

 

The team at Short Richardson & Forth is experienced in advising on director and shareholder issues and frequently acts on behalf of officeholders in bringing breach of duty claims.  Contact us on 0191 232 0283 for further assistance.

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Tel: +44 (0)191 232 0283  ·  Email: info@srflegal.co.uk

 

Short Richardson and Forth Solicitors Limited is a private limited company registered in England and Wales under company number 10572065, authorised and regulated by the Solicitors Regulation Authority No 637150.

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